I am writing this because I feel that I probably neglected Dubai in Treasure Islands. At the end of the day, the list of tax havens I chose to focus on is fairly subjective: the aim was to describe a system, by looking at it through some of its participants. I have no regrets in making my selection, but of course I’d also not want to give the impression that a number of other tax havens aren’t incredibly important.
Dubai is a case in point.
I am writing this now because I have only now (finally!) read Misha Glenny’s excellent book McMafia, and have found my eyebrows rising up almost to the top of my head on a couple of sections involving Dubai. And also I’m posting today because there’s this, in the Financial Times:
“Afghanistan has taken new steps to combat rampant capital flight after the central bank found that the amount of dollars flown out of Kabul doubled to $4.6bn last year.
Afghan officials believe many of the brick-sized stacks of $100 bills stuffed into boxes, bags and suitcases by Dubai-bound passengers belong to drug lords or criminal cartels.”
This, of course, is a national security issue for the Western democracies and others:
“Western allies, who have spent billions shoring up the Afghan state, fear such flows will encourage the kind of grand-scale corruption that has alienated people from the government of Hamid Karzai, the president, and boosted support for the Taliban.
. . .
A new class of war entrepreneurs enriched by an economic bubble fuelled by Nato contracts and aid money have become accustomed to stashing their cash in foreign accounts and real estate in Dubai.
. . .
Officials fear much of the money flowing out of the country is linked to the burgeoning heroin industry.”
(The Ibrahim Dawood story described in McMafia gives another fascinating and troubling insight into the national security issue presented by Dubai.)
The quantities noted in the FT story about Afghanistan are likely the tip of a bigger iceberg:
“The $4.6bn of declared dollar exports via Kabul airport last year was almost equivalent to Afghanistan’s 2010-11 state budget of $4.8bn.
Officials suspect that large quantities of cash also leave the country without being recorded.”
You don’t say. If you want to understand one of the powerful reasons for Afghanistan being a failed state, you don’t need to look much much further than Dubai.
And, if any other indication were needed as to how hopeless the standards set by the OECD are, look at this. Dubai, according to the official version, is clean!
In fact, every tax haven in the world, except the global financial giants of Nauru, Niue and Guatemala, are whiter than white!
“I am in Dubai. If there be hell on earth, it is here, it is here, it is here. Dubai. The land that taste forgot. Apparently designed to gather together as many as possible of the nastiest people from all continents, and give them anything their heart desires. I am sure, if you could just find the right person to chuck a spare million, you could make a snuff movie starring one of the unfortunate little Sri Lankans or Central Asians who are everywhere, doing all the work, but apparently invisible. Then you could go to a Spa.
It is as though someone had given Jordan a trillion dollars and a million slaves and invited her to construct the city of her dreams. For those who believe that consumption is the purpose of life, this is the new Mecca. I think I can sum it up best by saying that I am continually expecting to see Tony and Cherie come round the corner, followed by Mandy, Nat Rothschild, Deripaska and Gulnara. I met nicer people and my soul was less disturbed up country in the middle of the Sierra Leone civil war. My God, I want to get out of here, burn all my clothes and shower for a week.”
Update 2: from another commenter who pointed out another story, citing a Canadian in Dubai with a horrible story
“It was an adult Disneyland, where Sheikh Mohammed is the mouse,” she says. “Life was fantastic. . .They lure you in telling you it’s one thing – a modern kind of place – but beneath the surface it’s a medieval dictatorship.”