City of Gold: Dubai and the Dream of Capitalism (13 page)

One night in 1960, a hot
shamal
, a summer wind, blew down from Iran, kicking up booming surf that filled the mouth of the Sharjah creek with sand. Sharjah’s port was sealed shut. Overnight the tidal creek became a saltwater lake. Chapman had a barge in Sharjah and it was now stranded, like every other vessel in port. He only reclaimed it during a high spring tide with twenty men digging and pushing on their hands and knees. The closure of Sharjah port lasted a decade, devastating the commercial viability of Dubai’s closest rival. Sharjah merchant families, including the powerful al-Yousuf clan, shifted their businesses to Dubai. Sheikh Rashid welcomed them with land grants. Even the British decamped, moving their political agent’s office from Sharjah to Dubai. A few years later, the British decided Dubai was best suited to host its development offices for the Trucial States.
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To this day, Sharjah is a poor city, playing Tijuana to Dubai’s San Diego.

Dubai’s economic tussle with Sharjah didn’t end there. It was in Sharjah that the British built their airbase in 1932, paving a runway that grew more valuable as aviation progressed. Dubai had backed the wrong technology in 1937 by giving the British permission to land flying boats on the creek. Sea-based aircraft were being phased out. Sheikh Rashid, who began flying from Sharjah on his own travels, knew Dubai needed an airport. He knew it would be a moneymaker, too, even if it was only a refueling stop.

“If a person lands in Dubai, he will take a taxi, buy a pack of cigarettes, have a meal, and we will all benefit,” he said.
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But when he sought permission from the British political agent, Rashid got nowhere. The agent said Dubai didn’t need an airport with Sharjah’s just a few miles away. At the time, Dubai had developed into a major smuggling port. Merchants imported gold from England and the United States at market prices around $35 an ounce, and then smuggled it into India where its import was banned, so it sold for more than $70 an ounce.

There was one hitch. The gold flights landed in Sharjah, where the ruler imposed duty on air cargo, effectively taking a chunk of Dubai’s business. Sheikh Rashid knew he could pay for an airport of his own with the money he would save in taxes to Sharjah. In 1959, he hired a British aviation consultancy, International Aeradio Ltd., to design an airport. In the meantime, a British pilot named Freddie Bosworth began flying gold-laden planes onto a makeshift airstrip on a Dubai salt flat.

Dubai’s wily sheikh brought Bosworth in on his plan to circumvent the agent’s restrictions. One day he handed Bosworth a Rolex watch. Then he asked the daring flier for a favor: fly to Bahrain and charm the British political resident, who was the Dubai agent’s superior, into supporting an airport. To the consternation of the Dubai agent, the plan worked.
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Sheikh Rashid’s airport opened in 1960, and Dubai has expanded it relentlessly ever since. By 1968, it could handle Boeing 747s.
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By contrast, Sharjah’s airport slipped into anonymity as a hub for cargo flights, arms merchants, and budget airlines.

Dubai has always been a freewheeling place where bureaucrats and inspectors get little traction because they slow commerce. Smugglers ran guns, gold, slaves, diamonds, and drugs through Dubai in the past and still do today.
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“Dubai, city of merchants. Anything goes. They smuggled gold into India and silver out. That’s how it survived,” says Charley Kestenbaum, a retired U.S. diplomat who was based in Dubai and Abu Dhabi. “Its whole economic function was aimed at evading the rules and regulations of other countries in the region.”

Venerable merchants swap stories about their smuggling escapades. Saif al-Ghurair, head of one of Dubai’s banking and shipping families, piloted a smuggling dhow in the 1940s and 1950s. He tells of buying forty cases of stolen British ammunition in Mombasa, Kenya, “for almost nothing” and smuggling it into Dubai, where he sold each bullet for 5 rupees.
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After Indian independence, al-Ghurair and other dhow owners smuggled Dubai gold into India, where it is prized as a holiday gift and store of value. Al-Ghurair said he and others would sew gold pieces into vests
they wore under their jackets. When they rendezvoused with Indian mobsters in boats off Bombay, the Indians would make their payments and don the vests.
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Dubai’s exploits grew infamous in 1976, when the American novel
Dubai
appeared, written by
French Connection
author Robin Moore. The novel’s fictitious smugglers ferried tons of gold into India while fighting off the Indian navy with stolen U.S. military gear.
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Sheikh Rashid himself, meeting with British Foreign Office officials in London in 1958, acknowledged that the city supported itself on “uncertain smuggling.”
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Dubai and Sharjah were then major import-export destinations for hashish and opium from Afghanistan and Iran, and still are today, with seizures of Afghan heroin still common.
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Sheikh Rashid’s first trip outside the Gulf was a grand tour. He brought two sons, Maktoum, seventeen, and Hamdan, fourteen, along with customs chief Mahdi Tajer and banker Easa Al-Gurg. The arrangements called for the British government and the Iraq Petroleum Co. to split the costs of putting up the entourage at the Savoy Hotel for two weeks.

The royal party made the trip in hops, stopping at Bahrain, Amman, Jerusalem, Damascus, and Beirut, then flying across to Rome. There, the entourage rented cars and drove across the heart of Europe, finally reaching London on June 8, 1959. It had been a grueling trip, but Rashid wasn’t one to relax. The very next day, he met Queen Elizabeth II for the first time. He greeted her in her box at the Royal Tournament, a military pageant steeped in empire nostalgia. In keeping with the occasion, Rashid handed the queen, her prime minister, and several other top officials a collection of Arab swords and curved
khanjar
daggers. In return, he was given a few photographs in silver frames and an umbrella, a novelty for a desert sheikh.

London made a big impression on Sheikh Rashid. He enjoyed the Royal Tournament’s pomp, but was more taken by the London Underground, which he boarded for a ride at St. James’s Park. He admired the sense of order, the magnitude of the buildings and elevated sense of politeness that seemed to stem from the British pride of accomplishment.

The only dim spot was his son, Sheikh Hamdan, who, according to Foreign Office intelligence reports, assumed a teenager’s typical surliness for most of the visit.

But Sheikh Rashid wasn’t just sightseeing. He also wanted to light a fire under oil exploration in Dubai. In one closed session with Minister of State for Foreign Affairs John Profumo, Rashid expressed “extreme frustration” that the British oil company refused to act on its exploration rights or reveal the extent of the sheikhdom’s oil prospects. The Dubai leader complained that he was locked into the 1937 deal signed by his late father. The contract prevented him from bringing in American oil firms working across the Saudi border which were eager to extend their string of big strikes.

In the meantime, Rashid worried that Abu Dhabi, which had struck oil the previous year, would soon challenge Dubai’s newfound maritime supremacy, taking away his chief source of income. Dubai, he told Profumo, would again be impoverished.

“Sheikh Rashid pleaded again and again that we should not treat his country as a little state in the back of beyond, but that we should regard him as part of our own country. (I think he really meant that he wanted a larger slice of cake!) He used the word ‘guardian’ to describe our relationship and said he had no other friends to which he could turn. He said anything we wanted from him would be granted,” states a Foreign Office memo.
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Sheikh Rashid got no satisfaction from the British. So he took action on his own. Perhaps he was pushed by Abu Dhabi’s challenge, or maybe it was the success of his dredging bid. But as soon as his plane touched down at home, Sheikh Rashid embarked on a remarkable string of gambles. Dubai’s desert was an empty palette. He was going to start painting.

Sheikh Rashid’s motto is famous in Dubai: “What’s good for the merchants is good for Dubai.” But he had another unstated philosophy: Move first and outrun the competition. He did this even after Dubai struck oil in 1966. The current ruler, Sheikh Mohammed, has taken these mantras to new heights. But Rashid knew Dubai’s prosperity meant
keeping ahead of Abu Dhabi, a neighbor with more resources than Dubai could hope for. To do this, Dubai jumped at every opportunity, cornering industries and economic sectors.

The curving creek remained Dubai’s chief port for only a decade. Even dredged, it was too small for the ships that dominated international trade in the 1960s. Dubai’s growth was hurtling and vessels again sat at anchor a mile off Dubai and transshipped cargo in barges.

In 1967, Sheikh Rashid vowed to fix this problem. He hired Halcrow, the British planners that handled the dredging, and asked them to design a deepwater port named after himself: Port Rashid. It was the biggest earthmoving project in Dubai’s history, but, with the oil discovery, Dubai had the cash to make it happen. The sheikh wanted to press his advantage in infrastructure. The first port designs, built by digging away the beach of his ancestral neighborhood in Shindagha, called for four berths. Sheikh Rashid tore up those plans, quadrupling it to sixteen berths. By the time those drawings were done, Rashid ordered the port doubled again, to thirty-five berths.

In 1971, when Port Rashid’s first berth opened, it brought immediate relief. The first of 120 ships anchored off Dubai began to discharge cargo.
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The state-run operator that ran the port would eventually grow into the world’s fourth largest.

Queen Elizabeth II arrived to inaugurate the port in 1972. Her arrival was a bit of serendipity. She happened to be flying across the region and planned to refuel in Bahrain, but she had heard about Sheikh Rashid’s new airport terminal in Dubai. Recalling her meeting with the Dubai leader in London three years earlier, she ordered her pilot to stop at Dubai instead.
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Dubai in the 1970s was a city erupting onto the earth. Foreigners poured in: businessmen, laborers, investors, and fast-buck chasers. The city spread over the desert like an oil stain. In 1960, Dubai’s 60,000 residents lived in an area of just two square miles, the size of a few city blocks. By 1970, the city held 100,000 people in a seven-square-mile area—roughly the size and density of present-day Cambridge, Massachusetts. Five years later, Dubai more than doubled in size again, reaching eighteen square miles, with 183,000 people—about like Providence, Rhode Island. By
1980, it doubled again, to thirty-two square miles and 276,000 people, nearly the size of Buffalo, New York. In those two decades, Dubai’s area grew sixteen-fold and its population nearly quintupled.
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Dubai’s first big hotel, the Intercontinental, coped with occupancy rates approaching 200 percent. Staff housed strangers together as a matter of policy. Businesses imported laborers from India and Pakistan to cope with the work. Hendrik Bosch, a thirty-three-year-old Dutchman overseeing construction of the five hundred-room Dubai International Hotel, tried a different tack. He toured Southeast Asia looking for six hundred workers. He liked those in Thailand, except few Thais spoke English. His next stop was Manila. In the Philippines, Bosch found a veritable mine of service-oriented people willing to live in Dubai. And, as citizens of a former American colony, they spoke English. Bosch worked out a deal with the Philippine government and in 1978 imported six hundred workers in three planeloads.

Bosch was the first major recruiter of Filipinos, a group that soon came to dominate jobs in hospitality, retail, and nursing. Filipina women also took jobs once held by slaves: as housemaids and nannies.

Sheikh Rashid wanted Dubai to be more than a port. He wanted it to be a center for the shipping industry. In 1971 he commissioned a feasibility study on building a dry dock, a yard where the largest vessels could be hauled out of the sea and repaired. But nearby Bahrain also had dry dock ambitions, and it got backing of the chief Arab oil exporters’ group.

Rashid bulldogged ahead. Dubai’s British advisers said the project was ridiculous. Global shipbuilding was in recession. Dubai was too small to absorb such a huge industrial investment. And there was simply no call for two dry docks within a few hundred miles of one another.
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“Everyone told him this was too big. Why were we spending all this money? Why didn’t we make a joint venture with the dry docks in Bahrain?” says Qassim Sultan, the longtime head of Dubai Municipality.

Sheikh Rashid wasn’t going to invest $500 million of Dubai’s oil revenues in Bahrain, Dubai’s main competitor. He was intent on diversifying his own economy. His answer: “Why don’t we compete with them instead?”
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The Dubai Dry Docks exhibited ambition that bordered on folly. But
Sheikh Rashid’s next three announcements made people think he was a bit crazy. In 1979 he commissioned the mammoth Dubai Aluminum smelter—which recycled the plant’s heat to distill fresh water from the sea. He launched the Dubai World Trade Centre, a skyscraper in the empty desert. The building was so tall that some Dubaians felt a frisson of fright when their gaze fell upon it. They thought the bone-white building would bring the evil eye upon Dubai, in the form of envious attention from those who thought Dubai was overinflating its profile.

“Everybody told Sheikh Rashid that the Trade Centre was a waste of time. Nobody would ever use it,” says George Chapman. “I never said that. But I did query him. I would say, ‘Have you costed it out? Have you thought it all out?’ But you see he was very wise. He built things when they were cheap. That’s the way Sheikh Mohammed thinks. ‘Let’s get it while the money’s around.’”