Dubai sued for $1 billion

The announcement of the one billion dollar deal in 2005 between Capital Partners and the Dubai government was heralded as being a major move towards a free trade agreement with the US. A move which would have seen FDI - foreign direct investment - spiral upwards. But more than two years later Capital Partners is suing the Dubai government for one billion US dollars. And of course there's still no FTA:

"The developer, Capital Partners, had in July 2005 made what was planned to be one of the largest foreign investments in the region’s business hub, when it announced plans for River Walk, a mixed-use $1bn project in the busy internet business park located on prime land near the trunk of the reclaimed Palm Island.

But the deal soon turned sour amid recriminations over the legal title of the plot on which the US developer planned to build apartments, hotels and offices.

Basically, Tecom never owned the land they tried to sell, it "belonged to another government entity". Tecom claims that the contract was cancelled because Capital Partners "failed to meet the tight payment schedule".

However obviously CP couldn't legally make the next payment once they found out there was an issue with the land ownership, as they they have investors and are bound by US financial regulations.

The case is being run in the new Dubai International Arbitration Centre. But if that fails, there's always the US courts, since the Dubai government/royal family owns billions worth of assets there that could be seized if the judgement goes against them.

Of course what's extra ridiculous about all this is that every inch of sand and every government department is owned by Sheikh Mohammed and the Maktoum family, so this whole mess never needed to happen in the first place.

The sovereign's wealth fund

Some time ago an associate working in finance in a certain Gulf state was handling a large investment being made by a supposed national institution. However when the funds transfer documentation arrived, it had no apparent connection in any way to that government institution. There was no reference to it by name anywhere.

Instead, the funds came from a private bank account in an offshore tax haven, identified not even by a name but by a string of obscure initials. The associate eventually worked them out as being the intitials of the names of the children of the ruler of that particular Gulf state.

This is why when the Economist writes that the "biggest worry " of sovereign wealth funds buying up Wall Street is "the potential backlash", they are missing the bigger and arguably more alarming picture. The Economist describes these funds as:

"...the surplus savings of developing countries, known as sovereign-wealth funds, that have proliferated in recent years thanks to bumper oil prices and surging Asian exports."

The reality is that in many Gulf states, all this "surplus savings" is rather the private wealth belonging to the royal family that runs that state, or quite likely a single individual member of that family. There is no proper transparency nor accountability. And this is why we use the term "benevolent dictator": because when a sheikh builds roads and schools and hospitals, it is effectively benevolence. It is his own personal money that he is using to benefit (or bribe) "his" people, not (what should be) their national money that he holds in trust.

Because Gulf states are not democracies, their citizens are not really stakeholders. To put it simply: the prime minister of Norway could not just walk away with all the cash in Norway's massive future fund. It is not his personal money, it belongs to the people of Norway. But in the average Gulf state, that money belongs to the ruling family or just the rule, and he can do with it as he wishes.

Which may, as in the case of Dubai, involve investing in a US gaming company. An interesting choice for the government funds of an Islamic nation where all gambling and casinos are prohibited.

Funny money

Tips and icebergs:

"Younis Al Mua'alem, Head of the Money Laundering and Crime Department at the CID department for combating organised crimes said the case went back to last year, as the network was using the UAE as a location for its operations, which were confined to a group of companies in the country and abroad to launder money related to organised crime, such as arms dealing, VAT crime and fraud.

"Al Mua'alem said CID revealed the network was operating worldwide from New Zealand to Argentina. It used bank accounts in the country and elsewhere to pass dirty money from drug dealers to buyers and then transferred the money to various accounts around the world.

"He said the network's activity included money laundering from heroin dealing in the Middle East and Iran and cocaine deals in South and Latin America and Europe, some Dh2.4 billion of money laundered related solely to illegal drugs. The network's entire capital was Dh18 billion."

In other news, four years in Al Slammer if one small dry leaf accidentally gets stuck on your dishdash. Given the amount of unpunished whoring, boozing and drugging that goes on among Gulf ruling classes, the sentence is an utter obscenity.

$33,000-a-night delight

That will be the most expensive shag he never had:

A man was robbed of $33,000 when he went into a brothel ‘by mistake’. The Sudanese man met the Azerbaijani woman in a café last month. He told her that he was paying dhs250 per day for a hotel, and he claims the woman offered him a spare room for just dhs50. When he went with her to her apartment and sat on the bed he said the woman began to harass him and demand sex, but of course he refused.

Of course.

And then in the "confusion" of trying to escape, he left behind his bag with $33,000 dollars in it. Pocket change.

Black magic

What is it with witch doctors in the sandlands? Barely a day goes by without reports of some trickster - usually African - duping gullible morons out of their cash. Today's victims are fifty-five sorry spinsters:

Around 55 women, of various Arab nationalities, each paid him Dh1,500 convinced that the man would help them meet and marry ‘Mr. Right’. But then it all went horribly wrong for all of them.

The accused also decieved many people by persuading them he had supernatural powers which enabled him to treat all kinds of illness, as well as help victims of voodoo blackmagic.

Another popular scam is money-doubling:

Dubai Court heard that Kinte conducted an experiment in front of Hussein by asking him to hand over a $100 note. Kinte spread a white powder on the note and then washed it in water. He then handed Hussein two $100 notes, claiming the chemical had somehow "cloned" them. Hussein agreed bring Kinte $20,000. When he did, Kinte put the banknotes in a bag and then covered them with the white powder. The bag was sealed after which Kinte injected it with a second chemical substance. Kinte told Hussein to keep the bag with him without opening it, but Hussein, at last suspecting he was the victim of a con, opened the bag and found his money gone.

The police have been warning about this for years but there are still plenty of desperate fools around. The problem is that many people here - particularly those from remote villages (here or in Asia) - are highly superstitious and not very well educated. They don't read newspapers, and they don't surf the internet. If they do get online, they quickly become the victims of Nigerian money scams.

Just a game

As stockmarkets collapse around the Gulf bringing despair, fury and no small amount of schadenfreude, it's heartening to see that they're still trying to encourage the young'uns to take up this halal form of gambling:

AL AIN - Ebtehal Alawthali, a student of the Al Ain Women's College (AAWC), has won the 2006 Online Stock Game Competition at the Dubai Financial Market (DFM).

Students were given a virtual million dirhams to gamble invest with. It probably felt no less real than the hundreds of millions of dirhams taken out in bankloans by so many Gulf nationals to have a flutter with. After all, that wasn't their money either, was it? It cameth from a bank vault and to a bank vault it shall not return, for most of it is gone forever.

Ebtehal added: "I wish real life was a game so I could make Dh18 million in a month."

Don't we all.

Mysterious murdered millionaire

A fatal stabbing in Naif is as absurd as it is tragic: why would anyone withdraw one million dirhams and go around with it in a plastic bag, armed only with a pair or scissors?

"A man was stabbed to death outside his apartment with his own scissors, a court heard yesterday. The victim was allegedly attacked in the Naif area in December as he walked home from a money exchange centre carrying dhs1 million in a plastic bag."

Hadn't this man heard of cheques or electronic money transfer? Or monetary transport guards?

And what kind of business counts out Dh1 million to a character who shoves it into a plastic bag, without even enquiring if he would like some sort of escort?

Indigestible wealth

Imagine rolling up a US hundred-dollar bill and shoving it in into a plastic capsule, then swallowing it. Now repeat this fifty times.

We can only hope that this is what poor Abdulla Abdul Khader attempted on his way to Dubai, because if he had drawn out single dollar bills, he must have had a stomach like an ox:

"He swallowed US $5,000 but found it tough to digest them. Abdulla Abdul Khader was detained by the Air Intelligence Unit (AIU) of customs at Sahar airport five days ago on suspicion that he was carrying foreign currency. He was then admitted to the JJ hospital when it was found he had swallowed the contraband concealed in small capsules."

Thank god he didn't try smuggling it out in Turkish lira.

Pieces of eight

An executive in the leisure boat business explains how to spot a money-launderer in the UAE:

"When your customer's 'accountant' turns up to pay for a new boat with a patch over his eye, a Russian accent and brown-paper envelopes stuffed with cash, you know something's up."

Presumably with a parrot on one shoulder, a hook for an arm and a wooden leg. Arrrr.

Very dirty laundry

Billions of dollars are laundered in Dubai every year, through organised crime such as arms smuggling, drugs smuggling and prostitution, according to Dubai police expert Laurence Al Moalim:

"Though mainly European, the offenders belong to other parts of the world too. No UAE national has so far been convicted of these crimes. Dubai and Bahrain used to be transit points for launderers," he added.

Dubai's "attractive" financial structure is partly to blame, with its tax-free status. A thriving hawala system, due to a huge population of low-wage Asian expats, also facilitates the transfer of black funds, as does the emirate's famous gold souq.

As Al Moalim and even the CIA note, Dubai and UAE Federal authorites are making efforts to fight money laundering. But the country's strategic location, and historical status as a trading hub, make it vulnerable:

But Dubai also serves as the region's criminal crossroads, a hub for smuggling, money laundering, and underground banking. There are Russian and Indian mobsters, Iranian arms traffickers, and Arab jihadists. Funds for the 9/11 hijackers and African embassy bombers were transferred through the city. It was the heart of Pakistani scientist A. Q. Khan's black market in nuclear technology and other proliferation cases. Half of all applications to buy U.S. military equipment from Dubai are from bogus front companies, officials say. "Iran," adds one U.S. official, "is building a bomb through Dubai."

Dubai authorities and the new DIFC have a tough battle ahead.

Not yet driving in my car

The lack of any of the usual brochures on car loans, or garish posters featuring smiling abayas in Pajeros, should probably have been the first significant warning sign. Seated behind a vast desk at National Bank of Dishdash, the inquiry about auto finance caused more than a flicker of alarm. In a nanosecond comes the response: "Have you perhaps tried HSBC?"

"Yes, but this is my bank, so I preferred to see what you had to offer." A flurry of action and clouds of dust swirl aound as fat folders are dug out the archives. Fingers leaf through bunches of elderly memos, their A4 whiteness dulled to parchment yellow, to find something that might remotely resemble a percentage rate.

Around a dozen phone calls are made. "Mona, do you remember if anyone has taken a car loan out recently at one of the other branches?"

That a standard procedure at any other back is a legendary novelty in these vaults is hardly encouraging.

It was finally decided that car loans were available, yes, but only to people working for Approved Companies. Not to people who have held bank accounts tens of thousands of dirhams in credit for the past three years, and had three years of regular salary cheques paid in.

"How does a company become Approved?" Ah - this is sorry-to-say a very, very lengthy procedure. The company must have a minimum number of employees (25 - ruling out 80% of TeCom firms), it must have done all its banking with National Bank of Dishdash for the past three centuries, it must burn a weekly sacrifice of twenty-four fat camels to the Moon God, and it must be headquartered in a solid gold tower on a magic floating island in the Creek.

HSBC and the Developed World, here we come.