Dubai, Money, Smuggling and Organized Crime
November 27th, 2009 by SocProf and tagged Economy, Globalization, Organized Crime
Dubai has been in the news a lot these past few days, mostly because it is near bankrupt:
But when I read this, I was reminded of something else about Dubai:
“When Dawood [Mumbai organized crime hotshot] skipped India for Dubai in 1984, few Westerners could have located the city-state on a map, let alone talk authoritatively about the place and its people. Arabs, Iranians, Baluchis, East Africans, Pakistanis and West Coast Indians, by contrast, had a deep historical acquaintance with Dubai. At the end of World War II, it was barely more than a coastal village that had survived largely on its wits, since its only indigenous industry, pearl fishing, had been wiped out by the war and by the Japanese development of cultured pearls.
In the barren years between pearls and petrodollars, Dubai quietly resurrected its trading links across the Strait of Hormuz with Iran and across the Arabian Sea to Bombay. Because of both Iran and India pursued policies of severe protectionism to build up their domestic industries, Dubai’s traders found they could exploit their own light taxation regime by importing all manners of material into Dubai and then exporting it to Iran and the subcontinent. “The bottomless pit that is Indian demand for gold funded many, many people here in those years,” explained Francis Matthew, an ex-pat for decades and editor of Dubai’s largest publishing company. “Almost every Indian woman needs it for her trousseau and her dowry; different kinds of gold, different kinds of plate for the various areas of India.”
This goes back to Rashid, the legendary founder of Dubai, who revived its dormant tradition of trading, including the sector of “independent trading,” as it is known in the Emirates, or “smuggling,” as the rest of us call it. Sheikh Rashid, the early visionary of Dubai, was on Indira Gandhi’s personal list of wanted smugglers for many years. But although he could not step a toe in India, he took a cut from the profits of every trinket or gold bar sold into the country. This is when the big trading families in Dubai made friends with the big trading families in Bombay, and in Karachi. These friendships lasted.
In terms of influence, Dubai’s ruling Al-Maktoum family ranked second only to the Al-Nahyans of Abu Dhabi. The discovery of huge oil reserves on Abu Dhabi territory proved a godsend to Dubai and the other five emirates that formed the new state of the United Arab Emirates (UAE) in 1973 after the British decided to withdraw all its forces east of Suez. (…) Dubai itself has modest oil reserves, which even so account for 15% of the city-state’s income. But thse will dry up within the next decade. In the 1980s, the al-Maktoums decided to diversify (…). Thus they did conceive the plan to build the Jebel Ali port, its sixty-six berths making it the largest marine facility in the Middle East.
While critics scoffed at the grandiose project, the decision to create the new port was quickly vindicated. In 1979, Dubai had learned a valuable lesson from the Iranian Revolution and the Soviet Invasion of Afghanistan: trouble has its bright side. Frightened by the instability of their own countries, Iranian and Afghan traders moved to Dubai, bringing with them their businesses, thereby bolstering the local economy. With neither income nor sales tax, Dubai steadily developed a reputation for being a safe place in the Middle East to stash your money. Since then Dubai has always boomed during a regional crisis.
For Dawood Ibrahim, Dubai was the perfect retreat. The city welcomes the wealthy; it welcomes Muslims; and it was not the least bit interested in how people had acquired their money or what they intended to do with it. Dubai also had long-standing contacts with Bombay, and a large part of its elite were involved in the trade that Dawood wanted to make his core business activity – gold smuggling. Furthermore, thanks to their strategic vision, the al-Maktoums were making the city-state a very comfortable place to live. Before long, Dawood’s house had become a place of pilgrimage for Bollywood celebrities and the stars of Indian and Pakistani cricket, two of Dawood’s abiding passions. Stil, he had to be circumspect. Dubai had proved to be a civil host to many gangsters in the past two decades, provided they behave with discretion. (…) And the fact that Dawood and his people thrived and prospered in Dubai, well, it could not have happened without the knowledge and – in a sense – the complicity of the ruling family.”
Misha Glenny (2008), McMafia – A Journey through The Global Criminal Underworld, New York: Knopf, 131-3.
Needless to say, the presence of extremely wealthy “businessmen” in Dubai contributed to funding these humongous real estate projects that the city-state is known for as it provided them an outlet to launder smuggling money out of India into legitimate projects in Dubai. I would be interested to know what these investors think now.
See also Ian Welsh:
And Apparently, everyone expects a bailout ofrm Abu Dhabi so the investors can start playing again. And again, let’s rescue rich people from their own crazy ambitions while talking moral hazard when it comes to normal folks. And does anyone think a bailout would include strings attached regarding human and labor rights? Yeah, me neither.
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