Money mirage

The Dubai bust should hold a lesson for all our leaders. Money doesn't grow in deserts. You can only build an economy the old fashioned way. That is, by saving and investing in industrialisation
Mohan Guruswamy Dubai

There is a delicious irony in the Dubai bust. From November 20-22 this year, it played host to the World Economic Forum's (WEF) Summit on the Global Agenda where the so-called Dubai model was lauded and touted as a recipe for emulation by others. The WEF meeting in Dubai was supposed to do for it what the summer Olympics last year did for China! While the Olympics were real as were China's many achievements, the Dubai model and the WEF, both, have a fraudulent ring to them.

The WEF is really a Swiss NGO started and run by Klaus Schwab, a former business management professor at a small-time college. He managed to parlay an official sounding name and some plain old huckstering into a global movement that propagated a freewheeling capitalism and fostered boundless optimism on the ability of private sector managers to solve the world's problems.

Many of the WEF's early stars like Percy Barnevik of ABB have fallen by the wayside after being exposed as highly paid frauds with till dipping proclivities. But the WEF has just kept growing by being one step ahead, as it did in Dubai last month.

Today the fading and tattered posters of Sheikh Mohammed bin Rashid al-Makhtoum and airports choked with departing workers and managers tell the story of the economic mirage in the Arabian desert. Till the money ran dry, Dubai's $582 billion construction boom was financed by lenders flush with oil money and by black money seeking safe havens. (How many Indian leaders have lost their money in Dubai is anybody's guess. One former CM is supposed to have taken a particularly bad beating.)

With the USA's economy burdened with trade and budgetary deficits finally giving way, the flow of money tightened - first into a trickle and then into a dribble, and the noose tightened around Dubai's neck. Finally, matters came to a head over Dubai's request to reschedule $26 billion of its debt. This would have been easily accomplished if lenders had any more appetite left for debt. But Wall Street lenders were badly haemorrhaging as it is and old friends looked the other way when Dubai beseeched and went into default.

From the very beginning, Dubai was a house of cards built on the shifting desert sands of the Arabian Peninsula. The first fortunes in Dubai were made by gold smugglers like Abdul Wahab Galadhari. He plied chartered dhows to India's western coasts where landing agents like Sukur Narayan Bakhia and Haji Mastan took delivery of them to satiate India's inordinate hunger for the yellow metal.

The ruling house of Dubai found a vocation in financing the purchase of gold and made its initial fortunes in it. Dubai is endowed with the region's best natural harbour. So, making it a safe haven for smugglers worked like magic for it. The Galadharis today are amongst Dubai's biggest business houses and the smuggler's sons are nowadays honoured guests of the Indian consul general's official reception to celebrate Republic Day! A former SBI chairman even went to work for Abdul Wahab. In fact, Wahab's relationship with Dawood Ibrahim is widely known. The two even shared the two Dossa brothers as their bodyguards. It was Mohammed Ali Dossa's dhows, Bismillah and Sada-al-bahar, which landed the RDX used in the 1993 Mumbai attacks.