A Small Emirate With Big Ambitions

The Dubai company that has raised security concerns in Washington with its deal to manage ports in six U.S. cities epitomizes the global economic ambitions of this small emirate, which seems to daily send another glittering bank or post-modern financial tower racing skyward.

Lacking the large oil reserves of many of its neighbors, the ruling Maktoum family began working three decades ago to turn Dubai into a crossroads of commerce and the economic power of the seven sheikdoms that form the United Arab Emirates.

Dubai’s growing prominence as an investment capital has allowed state-owned Dubai Ports World to spend billions of dollars on building and acquiring terminals in more than 15 countries. The company’s success mirrors Dubai’s urge to become the best and build the highest. But alongside the emirate’s quick ascent, there have been revelations that its loosely regulated markets and banks have attracted Al Qaeda militants, drug smugglers and nuclear black marketeers.

Government and business leaders here say such characterizations are exaggerated and note that the emirate is a proven ally in the U.S.-declared war on terrorism.

The Dubai Ports World controversy was sparked by its $6.8-billion deal to acquire Britain’s Peninsular & Oriental Steam Navigation Co., which would give it control over port operations in six U.S. cities. Seeking to allay concerns, DP World formally requested Sunday that the U.S. committee that approved the deal in January conduct a more intensive, 45-day review. In addition, the company said that it would maintain the U.S. operations as a separate business unit until May 1 or the end of the review, whichever comes first.

“Security should not be an issue. I don’t know of any other country cooperating more with Washington on terrorism more than the UAE,” said Mustafa Alani, a senior security consultant at the Gulf Research Center, a regional think tank based in Dubai. “A lot of Arab money left the U.S. after Sept. 11 because people were scared for their investments. This was a way to turn a new page and reopen things. But now it’s blocked for unjustified reasons.”

Another analyst, who spoke on condition of anonymity because of government sensitivity, said the controversy was a reflection of Dubai’s business style.

“This is not exactly an innocent place,” the analyst said. “There are financial irregularities and no transparency. Once you step onto the world economy, the world has a right to ask questions about who you are.”

Dubai and the other emirates emerged from British control in 1971. The ruling family sought prosperity through commerce. Dubai opened the Jebel Ali port, which is used by the U.S. Navy, and began reaching into regional markets.

The rise in oil prices brought billions of dollars into Dubai’s financial centers, helping pave the way for DP World’s rise. In late 2004, DP World paid more than $1 billion to acquire CSX World Terminals. The purchase widened the company’s interests in Europe, Asia and Africa.

DP World outflanked other investors to clinch the deal for Peninsular & Oriental. P&O; holdings included ports and terminals in New York, New Jersey, Philadelphia, Baltimore, Miami and New Orleans. The deal would make DP World the globe’s third largest ports operator. To many in Dubai, it is another indication that the emirate’s international aspirations are being realized.

Dubai is a dizzying blueprint of man-made islands and sharp-angled high-rises with tinted glass that seem to billow along the coast. One of the most discussed ventures these days is Burj Dubai, a mixed-use tower that is expected to be more than 2,300 feet high, which would make it the tallest in the world.

Hotel lobbies are full of men in Western suits and Arab headdress, whispering over briefcases and thick binders. The language of commerce is English, but the accents come from across the world. About 80% of the residents are foreign-born.

“Was Dubai planned this way or were the organizers behind it even surprised?” Sulaiman al-Hattlan, editor-in-chief of Forbes Arabia, asked. “Traffic is getting worse by the day, but on the other hand look at the region around Dubai with its lack of reform on social and economic issues. You can look at Dubai as a serious improvement. It’s a positive sign for globalization. Everyone comes to Dubai.”

The emirate’s loose financial regulations and lack of red tape mean projects like Business Bay, a plan for 230 commercial and residential towers, many hovering above water, can move along quickly. But that same lack of oversight attracted sinister investments too.

Al Qaeda and the former Taliban government in Afghanistan used Dubai for money laundering and arms trading. U.S. investigators found that more than $120,000 was funneled through UAE bank accounts to Mohamed Atta and other Sept. 11 hijackers.

In 2004, UAE authorities arrested Qari Saifullah Akhtar, a Pakistani suspected of training thousands of Al Qaeda fighters in Afghanistan. The alleged plotter of the 2000 bombing of the U.S. destroyer Cole in Yemen, Abd al Rahim al Nashiri, a Saudi, was arrested here and turned over to the United States. A Yemen court sentenced him to death in 2004 for his role. A Dubai company has been linked to a secret group run by Pakistani scientist Abdul Qadeer Khan that supplied nuclear technology to Libya, Iran and North Korea.

A recent CIA assessment says that Dubai, like other emirates, “is a drug trans-shipment point for traffickers given its proximity to Asian drug-producing countries; the UAE’s position as a major financial center makes it vulnerable to money laundering.”

The agency noted that the country’s anti-money-laundering controls were improving. Businesspeople and government officials say that financial regulators are quicker now to act against suspicious bank accounts or wire transfers. ID cards are required for many transactions, and the UAE has been cooperating with the United States on tracking terrorists’ financial networks.

Last week, President Bush praised the UAE as a “valuable ally” in fighting global terrorism.

“There was great international pressure on the region after Sept. 11, and Dubai went through that pressure, and things are different than they were five years ago,” said Al-Hattlan of Forbes Arabia. “There’s more oversight. But still you hear perceptions that Dubai is a center for terrorism money going through the region and into Pakistan and other places.”

Investment banker Ali Samir al Shihabi said suggestions today of widespread money laundering by terrorist and militant groups were unfounded. He and others here said the DP World case was an example of anti-Muslim sentiment threatening to segregate globalization.

Shihabi, who is chief executive of Rasmala Investments, said he moved here five years ago, attracted by what he described as Dubai’s open society and “clear and simple business laws.”

He said it was nearly impossible to track all transactions and that “one hundred thousand dollars or a million dollars” may occasionally be siphoned to an illicit destination. “But,” he said, “you could say the same about New York or other financial centers.”

Shihabi said high oil prices and Dubai’s economic tenacity are drawing more investment and professionals to the emirate.

“Dubai is sucking in talent because of its relaxed lifestyle,” he said. “Since 9/11, American Arabs and Iranians are feeling isolated in America. They’re returning to the Middle East, and they’re coming here. I recently recruited a guy from IBM Consulting in the U.S. I would have never been able to do that a few years ago.

“DP World is a big symbol because it’s high profile. I don’t see any Arab now going out to make a high-profile investment in the U.S. Why should he?”