US moves on foreign takeovers

WASHINGTON - The US Senate Banking Committee voted unanimously yesterday to tighten rules on foreign takeovers of American companies.

But it watered down some provisions amid pressure from Wall Street , the Bush Administration and US allies.

Trying to steer a middle path between national security and maintaining foreign investment, the committee's bill would require the US Government to spend an extra 45 days examining deals with state-owned companies for national security concerns.

The recent purchase of US port facilities by state-owned Dubai Ports World caused an outcry in Congress.

The Senate bill would force the executive branch of Government to notify Congress about pending acquisitions. It would also make the Government take more time examining deals involving "critical" infrastructure, such as airports or bridges, even if the buyer is not state-owned.

But in a concession to Wall Street and corporate lobbyists, it mandates the delay for critical infrastructure contracts only if there is a demonstrated national security concern.

The panel acted the same day Treasury Secretary John Snow warned that foreign investment - linked to more than five million US jobs - was threatened by legislation.

"We need foreign investment in the United States, but it's being put in jeopardy now by legislation that is well intended," he said.

The bill was drafted by Alabama Republican Richard Shelby, the panel's head. He rejected charges of economic nationalism.

"As critical as foreign investment is, our national security is paramount," Shelby told the committee.

The bill would require the executive branch to notify key lawmakers of proposed deals within 10 days of the start of a Government review. It also requires state governors to be notified of deals that could have security implications.

But Shelby stopped short of proposing a congressional veto of deals.

The Senate banking panel approved the legislation 20-0. However, it is unclear how quickly it will be taken up on the Senate floor, and the House has yet to start work on similar reforms. The chairman of the relevant House committee, Ohio Republican Mike Oxley, is sceptical of the need for changes.

Congress was in an uproar when it found out that the Bush Administration had approved the Dubai Ports World purchase of terminal operations at major US ports without consulting lawmakers or officials. Earlier last month, the company agreed to unwind the contract.

The Senate legislation is in part a result of this outcry. It revamps the rules under which the inter-agency panel of the executive branch, the Committee on Foreign Investment, in the United States reviews foreign acquisitions. The committee now takes 30 days to examine a proposed deal, and can extend that by 45 days if needed.

The bill also would allow an interim step of a second 30-day review in some cases, and it sets up a ranking system that would be used for reviews, listing countries according to their ties to the US and stance on arms control.

Some members of the business community expressed relief with the outcome.

The bill "goes a long way toward restoring confidence in the Foreign Investment Committee process while not raising undue burdens to foreign investment and its economic benefits to Americans", said Todd Malan, head of the Organisation for International Investment.

- REUTERS