City of Gold: Dubai and the Dream of Capitalism (5 page)

The three Maktoum men who ran the city from 1912 until 2006—sheikhs Saeed bin Maktoum, Rashid bin Saeed, and Maktoum bin Rashid—all died natural deaths while on the job. In 2006, the city anointed its eleventh Maktoum ruler, Sheikh Mohammed bin Rashid. Not one of the sheikhs who governed Dubai since 1833 was overthrown or murdered. By the chaotic standards of the region, 175 years of uninterrupted succession is probably unprecedented. Dubai’s immediate neighbors are more typical. In Abu Dhabi, it was rare for a ruling sheikh to die in office. Fratricidists and coup plotters took out most of them. And Sharjah has been fraught with palace murders and coup attempts right into the 1980s. Much of the Gulf is the same.

In fact, Dubai’s record of peaceful transition even puts America’s
to shame. Assassins gunned down four U.S. presidents in that period: Abraham Lincoln in 1865, James Garfield in 1881, William McKinley in 1901, and John F. Kennedy in 1963.

Stable rule and predictable succession is one of the fundamentals of Dubai’s commercial success. Stability is the bedrock of commerce, of course, but so are laws and incentives. And Dubai’s sheikhs, who had been living in rags in the deepest desert, were somehow shrewd enough to build an environment conducive to business. A few decades after the Maktoum takeover, the lonely outpost got its first chance to show what it could do.

A FREE PORT GROWS IN THE DESERT

DUBAI’S LEADERS HAVE
a knack for hitting risky bets. The city’s airline, ports, sail-shaped hotel, and man-made islands confounded common sense and prevailing advice. Even in a place where politics is nonexistent, they kicked up gales of protest. The leaders wisely ignored the dissenters and went ahead with their gambles. All of them have created value that has soared beyond best-case predictions. But not all of Dubai’s winnings come from mortgaging the city’s future. On a few occasions there was low-hanging fruit to be picked, and all Dubai had to do was spot it, reach, and pluck.

Around 1900, an opening presented itself like a purse drifting in on a cloud. Dubai was able to turn an evolutionary corner, moving from an insular fishing and trading village to an international port, albeit a small one. The town won healthy boosts in population, wealth, and industrial capacity. All it took was a few policy moves from a ruler named Sheikh Maktoum bin Hasher.

And, like so many of Dubai’s gains, it came at the expense of the stumbling giant across the Gulf, Iran.

A few decades earlier, a cash-strapped Iranian administration began collecting taxes in the Arab-run ports along its coast. One of those cities,
the thriving port of Bandar Lengeh, then known as Lingah, was a haven for Qawasim merchants. This especially rankled the Persians because the Qawasim paid no allegiance to the Persian regime in Tehran. Their metropoles were Ras Al-Khaimah and Sharjah, on the Arab side of the Gulf.

The situation in Bandar Lengeh looked like Havana in 1959. Dubai, like Miami, sat just ninety miles across the water. Lengeh was a vibrant port with smart people who knew how to make money. But the freewheeling environment that attracted them was slipping away as the government tightened the screws. Around 1887, the Persians began to forcibly kick out the Qawasim merchants and brought Bandar Lengeh under direct rule.
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Disgruntled Qawasim began moving across the Gulf. But unlike the case with those fleeing Havana, Dubai wasn’t as obvious a destination as Miami. Many of the merchants returned to their tribal homelands, Ras Al-Khaimah and Sharjah. The Dubai leader at the time, Sheikh Rashid bin Maktoum, understood the value of the capitalist brain trust that was looking for a new home. He did his best to divert the refugee merchants to Dubai, and lured a few dozen.
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In 1894, Sheikh Maktoum bin Hasher took over in Dubai. He wanted to do more to coax merchants from Iran. In 1900, the Persians made his job easier. They raised taxes in Lengeh and another Iranian port, Bushehr. The exodus intensified and included Arabs as well as Iranians.

Sheikh Maktoum saw the low-hanging fruit. He launched a plan to make Dubai the most business-friendly port in the lower Gulf. He abolished the 5 percent customs duty and slashed fees, turning Dubai into a free port. At the same time, Sheikh Maktoum sent his agents across the water to sweet-talk the biggest merchants, whether Arab or Persian, into moving to Dubai. The agents offered free land, guarantees of a friendly ear in the leader’s
majlis
, and a hands-off government policy.

The incentives worked. The heads of a few of the biggest Iranian businesses agreed to relocate, and as the Dubai sheikh planned, their business partners and customers followed. By 1901, a census found five hundred Persians in Dubai.
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Within a few years it was clear that most of the Iranian traders who’d packed up and left Lengeh were unpacking in Dubai.

The Dubai ruler gave each a plot of land on the south bank of the creek, and the Iranians built the Bastakiya neighborhood, named for the ancestral town of Bastak in south-central Iran. Besides their businesses,
the Persian migrants brought their language, their pomegranate-laced food, their melancholic music, and social customs like enormous weddings that raged for days. The Iranian influx was the second massmigration to transform Dubai after the 1833 arrival of the Al Bu Falasah. There would be many more.

Free trade was mother’s milk for Dubai. Wharves now lined the creek, and the newly built Iranian souk was crammed with goods from British-run India. Cargo was reexported to ports nearby or strapped onto camels bound for inland bazaars like the Buraimi Oasis. Within a few years, Dubai was closing in on larger ports like Sharjah, Ras Al-Khaimah, and Bandar Lengeh to become the chief trade center between the Strait of Hormuz and Qatar.
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Links with the outside world began to mount. Prior to 1901, British cargo and passenger vessels visited Dubai no more than five times a year. Two years later, Dubai was a scheduled destination. Steamships stopped twice a month. By 1908, Dubai was home to 10,000 Arabs, Persians, Indians, and Baluchis—as well as 1,650 camels, 400 shops in two bazaars, and more than 400 ships and boats. The town had long since burst out of its mud walls, which lay in ruins. Sheikh Maktoum ruled from his palace in the beachfront Shindagha neighborhood, backed by a hundred tribesmen who roamed the town with Martini rifles.
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Like the Cubans who fled to Miami, the Iranians who settled in Dubai dreamed of returning home. They hoped the Persian government’s clampdown on commerce was a temporary move. Many of the merchants had left their families in Iran and commuted across the Gulf for holidays. But the reforms never came and the Persian ports slipped into an idle torpor.

By the 1920s, most Iranians accepted Dubai’s invitation to settle permanently. They brought their families across and adopted the customs and dress of the local Arabs. Dubai was happy to have them. The Iranians brought their entrepreneurial savvy and trading links with Africa and Asia, and removed those assets from Iran, a competitor.

Iranians brought prosperity and worldliness to a town that had known little of either. Most Dubaians still lived in thatch huts and gathered their water at a communal well. But the town had a modern quarter now, Bastakiya, which showed off the latest imported cooling technology: the wind tower. Most of the big new homes had at least one of the square towers that rose a story or two above the roof, with openings on
all sides to catch the breeze—whether blowing off the sea or from the desert. The wind towers funneled the breezes indoors and, sometimes, directly onto the hammock of a merchant taking his midafternoon nap. The fresh air might be hot, but the Bastakis called the indoor relief “God’s breeze.”
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Bastakiya is now an historic district, and some of the old Iranian merchant homes still stand, rescued from wholesale bulldozing in the 1980s. Unfortunately, the government’s heavy-handed restoration of the once elegant neighborhood has destroyed most of its charms.

The best place to see wind towers is across the Gulf in Bandar Lengeh, where the old port has been frozen in time. Lengeh’s coral homes are still in use, and the town retains a bygone air of another century, thanks to the exodus of its merchant class and the drying up of the economy. The Lonely Planet travel guide to Iran describes Bandar Lengeh as “an infectiously lethargic place” that shuts down for a five-hour siesta every afternoon. Dubai, in effect, siphoned away Lengeh’s lifeblood.

Dubai’s leaders took a lesson from Sheikh Maktoum bin Hasher’s free trade and business incentives. They know that, but for a few changes in circumstance and wisdom, the fortunes of Bandar Lengeh and Dubai could have been reversed.

Since the 1920s, Iran’s cascading missteps have showered Dubai with wave upon wave of Iranian entrepreneurs and their savings. In the 1970s Iran raised import tariffs to nearly 40 percent on some goods, triggering another exodus. In the 1980s and since, the Islamic revolution pushed liberal-minded Iranians and much of its academia across the Gulf. Dubai’s free ports have even cut into Iran’s retail sector. Iranian importers learned it was easier to serve their customers from tax-free Dubai, so Dubai now takes a profit on reexported goods sold in the Islamic Republic.

Much of Dubai’s Iran-bound cargo gets ferried across the Gulf in colorful wooden sailing dhows, now chugging under greasy diesel smoke. Hundreds of these old ships with their jutting prows and grizzled sailors glide into the Dubai creek every day, loaded with pistachios, watermelons, raisins, and zucchini from Iran. They return home with televisions, Colgate toothpaste, Clairol shampoo, and Teflon-coated frying pans.
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Nearly half a million Iranians have fled to the good life in the UAE. In Dubai, Iranians outnumber local Emiratis by around three to one.
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Iranian parliamentarian Hadi Haqshenas blames the exodus on Tehran’s failed social and economic controls. “Since these wrongheaded policies won’t be reversed any time soon, we can expect the UAE to attract many of our specialists, medical doctors, engineers and other experts,” Haqshenas said in 2006.
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Iranians are a key cog in the machinery that has created this marvel in the desert. Dubai now hosts nearly ten thousand Iranian-run businesses
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that have diversified beyond the Iranian market and now ship anywhere in the world. Iranians are among the city’s largest developers and merchants, its top buyers of homes, and one of its biggest sources of investment.

All of this comes at huge cost to the Iranian economy, which has seen its citizens investing tens of billions of dollars in the UAE rather than at home. Some $15 billion flowed out of Iran and into Dubai in 2007 alone, estimates Jean-François Seznec, of Georgetown University, who has researched the links.
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Dubai is also Iran’s largest trading partner. Iranians spent some $14 billion importing goods that sailed across the Gulf from Dubai that same year, Seznec believes, rather than the $10 billion tallied in official figures.
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“Prosperity in Dubai is based squarely on trade with Iran,” says Anthony Harris, a former British ambassador to the UAE, now a Dubai-based insurance broker. “Dubai merchants speak Farsi to this day. They feel totally at home doing business with Iranians.”
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The mighty Persian Gulf curves like a fat banana for six hundred miles, from the Iraqi port of Umm Qasr in the west to the Gibraltar-like narrows in the Strait of Hormuz. There, the Gulf empties into the Arabian Sea and the broader Indian Ocean.

The Gulf is a gentle and shallow sea, never more than three hundred feet deep. Hot sunshine makes it one of the world’s warmest, with surface temperatures between 75 and 90 degrees Fahrenheit.
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High rates of evaporation make it one of the saltiest. It is so salty, in fact, that before air-conditioning, Dubaians used to take advantage of the extra buoyancy by taking cool naps while floating in the sea.
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