Hutchison Whampoa

Indian fears over Hutchison port dream don't hold water

PUBLISHED : Friday, 01 September, 2006, 12:00am
UPDATED : Friday, 01 September, 2006, 12:00am

Hutchison Whampoa, which has struggled for 10 years to gain a foothold in India's ports sector, has suffered another rebuff.

Li Ka-shing's otherwise hugely successful ports division, Hutchison Port Holdings, was shut out of projects in Mumbai and Chennai by India's Ministry of Defence ostensibly for 'security' reasons.

The chairmen of the port trusts in those cities, where project tenders had been put on hold pending security evaluations, received confidential notes saying Hutchison and at least two other Chinese firms had failed to qualify, the Times of India reported on Wednesday.

A spokesman for the Mumbai Port Trust confirmed the content of those letters yesterday. Official sources at Hutchison in Hong Kong prefer to say that the company has never been prevented from bidding for a port project in India. Rather, they say it has never found a project that met its 'investment criteria'.

This belies an internal memo sent out three days ago by the firm's group communications office which, according to a Hutchison executive based in southern China, said the ports unit had failed to enter India again.

Other private firms have come to realise that partnering Mr Li's firm to bid for any terminal project in the world's biggest democracy is the kiss of death.

Moreover, India's port trusts have begun to dread receiving an 'expression of interest' from Hutchison as it means the project will be delayed for a lengthy security evaluation that the company will inevitably fail.

The call for bids for Mumbai's US$260 million two-berth terminal project was delayed nine times in the past year until Hutchison's elimination this week. The project now has the green light, according to a Mumbai-based veteran of the Indian port scene.

'Mumbai and Chennai were kept in abeyance until the Hutchison evaluation was decided,' he said.

'Now that Hutchison has been rejected, the Mumbai bidding process has been restarted and Chennai will follow shortly.'

A rejection of Hutchison based on security concerns doesn't hold water, especially as it already has huge interests in its telecommunications - a sector that most experts agree is more critical to security than port infrastructure.

Hutchison's problems are apparently exacerbated by Indian defence ministry fears about it being too close to the People's Liberation Army - allegations that were voiced by American politicians of the right a decade ago at the time the group was acquiring container terminals on the Panama Canal, often outbidding US firms. Although it overcame that opposition in Panama, it remains shut out of the United States.

There are, of course, political channels in the US through which grievances can be aired: making your case in front of the House Select Committee on Intelligence is one such avenue and there are others depending on where the domestic concerns originate.

These channels often require an uncomfortable degree of transparency so most foreign firms choose the commercially expedient course of withdrawing their bid rather than exposing themselves to more scrutiny.

According to an American port executive, senior Hutchison officials have never pursued those avenues in the US.

And, given the penchant for secrecy of Asia's corporate leaders, it's extremely doubtful they ever will.