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Ibrahim: Dubai May Benefit From 45-Day Study of U.S. Ports Deal

Interviewee: Youssef Michel Ibrahim
Interviewer: Bernard Gwertzman, Consulting Editor
March 7, 2006

Youssef Ibrahim, managing director of Dubai-based Strategic Energy Investment Group and a former Middle East correspondent for the New York Times, says the pending deal for Dubai Ports World to administer the ports in major U.S. cities is not a security concern in a technical sense. But he says it is worthwhile for the 45-day study to go ahead. "Some good will come out of this. It may even be good for Dubai," says Ibrahim, who is also a former senior fellow in Middle Eastern studies at CFR.

"Dubai in many ways is on the cutting edge of modernizing an area where Saudi Arabia next door is basically the kingdom of darkness. Saudis come here to take time off, to have a good time, to abandon this immersion in fundamentalism and Wahabism. This is the deal for them. But by the same token, we have asked Dubai to cut its ties completely with this ideology, which is not part of what we take as the free world."

He says the changes that have occurred in Dubai in recent years are "nothing less than revolutionary." But its recent big foreign investments carry new responsibilities for the Gulf state.

"They are stepping into a globalized economy, and the rules of the game there are different," Ibrahim says. "You have to have a measure of shared values with the country in which you are buying: This includes transparency and some kind of comparable systems in banking, democracy, and how you are ruled."

Are the concerns about the pending deal for the Dubai-owned company, Dubai Ports World, to take over the administration of ports in major U.S. cities unfounded?

In a strictly technical sense, it is. As we are learning now, the actual administration of what comes in and goes out of U.S. ports will be overseen by the U.S. Coast Guard and U.S. immigration. But in the larger picture, this is the first time Dubai has stepped onto the global economy in a big way. It's very easy to buy the Essex Hotel [in New York] and Madame Tussaud's [group] and [investments in] Mercedes-Chrysler, as they did last year. Last year, in 2005, Dubai invested overseas to the tune of five or five-and-a-half billion dollars. But this is biting a big piece and having trouble chewing on it. They are stepping into a globalized economy, and the rules of the game there are different. You have to have a measure of shared values with the country in which you are buying: This includes transparency and some kind of comparable systems in banking, democracy, and how you are ruled. After all, at the end of the day, Dubai is a place ruled by one man. And the person who's buying all this stuff, including all the stuff last year, is one man—Sheikh Mohammed bin Rashid who is known as Sheikh Mo, the prime minister of the United Arab Emirates [U.A.E.] and the emir of Dubai.

People have the right to ask questions. You have to remember, Dubai has an immense trade with Iran, not to mention a substantial Iranian community. Of the 1.6 million people presumed to live in Dubai, ninety percent are expatriates, and perhaps as many as 100,000 of those are Iranians, either permanent residents or citizens who got their citizenship just a few years ago.

Is there much political activity in Dubai?

No, there's a red line here. Technically there is no political activity. You are here for one reason and one reason alone, and that is to make money. If you play politics, you play politics across a big red line. Sheikh Mohammed wants this place to be a business haven. There are no political parties, there is no representation of any kind, there is no parliament, and there is no movement of any kind allowed in the political arena.

One of the issues that is raised here by the critics is that two of the hijackers of the planes that crashed into the World Trade Center were from Dubai. Do we know much about those people?

I think they are from the U.A.E., I'm not sure if they were from Dubai. But the fact that they are from the U.A.E. is the result of the kind of laissez-faire attitude that exists here towards Islamic groups, including militant Islamic groups. They are not allowed to operate here, but if you go and listen to the Friday mosques you will hear some pretty militant stuff, occasionally.

Dubai, in a way, is playing a schizophrenic role. It is in one of the most conservative parts of the Arab world, which is the Arabian Gulf. Of course, there is the Iranian influence, but it pays lip service to this in order to realize its dream of becoming the most modernized, most liberal, most globalized economy of the region. And it does have the money, and it has been a success in modernizing the place. But this is a little precarious. So in the sense of, are they going to manage U.S. ports? No, they're not going to manage U.S. ports. But, are there influences here that could be in any way detrimental to the United States in terms of acquiring intelligence, information, access to logistical information? I think that merits the forty-five days, at least, of inquiry.

You have to talk about money-laundering, which is prevalent here. You need to talk about the banking system—is it really transparent or not? You need to talk about labor laws, which are non-existent. People have no rights whatsoever here. And you need to talk also about whether you can have a rich banana republic as part of an international system.

So I take it you're not that enthusiastic about the deal?

I'm not unenthusiastic about it. I do think if you're going to play with the big boys, you have to play by recognizable rules. It is time for the world to demand that Dubai joins the big-boys club and comes clean on the issues I've just mentioned to you.

Some good will come out of this. It may even be good for Dubai. Dubai in many ways is on the cutting edge of modernizing an area where Saudi Arabia next door is basically the kingdom of darkness. Saudis come here to take time off, to have a good time, to abandon this immersion in fundamentalism and Wahabism. This is the deal for them. But by the same token, we have asked Dubai to cut its ties completely with this ideology that is not part of what we take as the free world.

You've obviously been visiting Dubai for years. Has there been a tremendous change there?

Well, the change is nothing less than revolutionary. In the two years I've been here, a whole new city has come out of the sand and come out of the sea. They're building the so-called Palm Islands, which are literally the equivalent of Manhattan in the water. In addition to this, they are bringing in water inside the desert, so that, in fact, the natural shoreline of Dubai, which was forty-five kilometers, is being stretched to 1,600 kilometers. So it's a massive endeavor. And in a big hurry. They are building the tallest building on the face of the earth here. They have the largest shopping malls in the world here, and all this is air-conditioned and watered with desalinated waters, which requires, you know, massive amounts of electricity and a huge environmental adjustment.

So the question everybody is asking is, now that this has been started, the dream is wonderful, but is it wise? It may be. Or you may be building a bubble. After all, it is a fragile area in a fragile region. It really survives on the goodwill of everybody. The Iranians are the biggest protectors of Dubai, because it is in their interest. So are the Americans. A lot of warships dock here, and a lot of warplanes and surveillance planes take off and land here. But before everybody goes into this huge marriage, I think everybody should at least examine the premises of the marriage.

Now there's a company, Dubai Ports World. They've had this chief operating officer on American television, this guy named Edward H. Bilkey, who's a gray-haired, distinguished-looking American. Are a lot of Americans running these companies as executives?

Dubai Ports World is acquiring companies, it is not creating companies. By acquiring companies, it is becoming the world's largest ports operator. This is the philosophy of Dubai, basically. There are not enough people to create global companies here and run them, so what you do is you just acquire existing companies. Last year, I told you, for example, they bought the entire Madame Tussaud's group. And they bought a billion and a half dollars worth of [Daimler] Chrysler stock, so they become part of a major company. And they bought enough of the Essex House hotel and other major real estate in the U.S. This projects Dubai as a major operator of real estate, of tourism. Of course, the Emirates airlines, which has its hub here, is one of the world's fastest-growing airlines. Last year, they bought fifty Airbus 385s, the giant new airplane, and about forty Boeing 777s. So this is really a major stretch for a tiny emirate that has 1.6 million people, of whom ninety percent are expatriates. And they have many Americans and British as executives.

So tell me a bit about Sheikh Mo, as he's called. What do we know about him?

Well, he's never given an interview, but he's given a lot of speeches, and his picture is in the paper every day. He is a very smart and ambitious man. He has continued the dream of his father, Sheikh Maktoum, who died a few months ago. And, you know, Dubai, when you cut right down to it, is an idea, not really a place. It was a spot in the desert, and the father built one of the largest free ports in the region, Jebel Ali, or Mountain of Ali. Back then when we were writing about it, I wrote about it for the New York Times, we thought it might be a white elephant. The fact of the matter is it was a tremendous success. It's a huge stretch on the water, it is completely tax-free, and it is a free port.

In other words, many companies came and took facilities there, and now it's one of the largest re-export ports. In other words, a lot of cars would come from Europe, get stored there, and then get reloaded on smaller ships and sent to Lebanon or to Iraq. They produce 1 percent of the world's aluminum; they have a huge aluminum smelter. And Jebel Ali has grown into a giant entity, and planted the idea that you can have a schizophrenic existence in Dubai. So you have the real Dubai, where you cannot do business unless you're a native person, but then you have Jebel Ali where anybody can do business. In the tax-free areas, you are not subject to the rule of law, to the degree that it exists, in Dubai.

Then Sheikh Mo built on his father's accomplishment and created a string of tax-free areas. There is Media City, there is Financial City, there is Medical City, there is Internet City, and all of these have attracted thousands of businesses. You know, Microsoft is here, CNN, AP, you name it, everybody who's a big name in the business has taken an outpost in those tax-free areas, because they are liberated from the need of having a local sponsor or to have a need for the old rules, which were confining.

What is social life like? Can women walk around?

When you come right down to it, this is a country under foreign occupation, although it is a benign foreign occupation. The ninety percent of foreign expatriates who live here are here to work. They have work contracts. They rule, after a fashion. The country is an expression of their existence, and they make the country survive. We are the ones who buy in the supermarkets, who buy the BMWs, et cetera, et cetera. So by definition this is a completely different social atmosphere from countries where the natives are a majority, like Bahrain or Kuwait or Saudi Arabia. There are twenty-two million in Saudi Arabia, of whom eight million are expatriates, but the others are Saudis. Here, it's the other way around, exactly, and this applies to the entire United Arab Emirates, which has a population of five and a half million, but only one million of those are native UAE citizens. The other four and a half [million] are foreigners, making the place work, running the ports, running the airlines, running the supremely luxurious hotels. Last year, Dubai had five million tourists. That's more than Egypt, [with] the pyramids and the Sphinx, and the Valley of the Kings, and the Valley of the Queens, and the Red Sea.