| | Why shouldn't wealthy Afghans own property in Dubai? Telegraph
09/10/2010
By Richard Spencer
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There is, reportedly, outrage across Washington and Whitehall about the revelations which I have been looking into this week: namely that wealthy Afghan businessmen have been funnelling money out of the country to buy property in Dubai.
There are indeed a lot of outrageous things about this story. But I’m not sure any of them are as outrageous as Washington and Whitehall’s outrage.
There’s two stories here. There have been lots of reports that corrupt businessmen close to the government of Hamid Karzai have been shuffling corruptly gotten gains out of the country. The implication – and I’m sure there’s truth behind it – is that aid money, supposed to build hospitals, roads and whatnot, has instead gone straight into cronies’ pockets.
Trouble is, despite the rumours, they haven’t managed to pin anything on anybody.
What they have managed to prove is that Kabul Bank, Afghanistan’s biggest privately owned bank, and into which the Afghan government pays its salaries, has bought a large property portfolio, in its chairman’s name, in Dubai. The chairman and various other shareholders live in some of these villas on Palm Jumeirah.
Looks shocking, does it not, and viewed from the viewpoint of a high-minded socialist like myself it is. The extremes of wealth, the failure to invest in Afghanistan’s future…
But, from the point of view of Americans and the British Conservative Party, who as we know oppose socialism, what have Sher Khan Farnood, the chairman, and Khalilullah Ferozi, the chief executive, done wrong exactly?
It is a private bank. They own it – these two men, along with Mrs Farnood, own 65 per cent of the shares. They have invested some of their depositors’ cash in property abroad. Well, I hate to break it to you, but in 2006 putting money into property in one form or another was what banks pretty much everywhere did, led by Wall Street.
They invested it in Dubai, where property prices were booming. Would it have been wise for them to invest it in Kabul? How much is property worth in Kabul or Kunduz right now?
They haven’t ripped off their depositors – who queued for the last two weeks to withdraw money and, in fact, managed to do so, 300 million dollars, all told, without the bank running out.
The people who have a right to complain are the other shareholders, particularly about the fact that the properties were registered in Mr Farnood’s own name, rather than the bank’s. But according to the American “outrage”, they are equally culpable, because they all seem to have known about this arrangement. Under American pressure, the Central Bank in Kabul has frozen their assets.
The Americans in the last ten years have promoted around the world a purist form of free market ideology, one which, if truth be told, America itself has rarely if ever followed. The establishment of Kabul Bank, privately invested and owned, is a perfect example of that. America cannot now complain that the entrepreneurs who set it up speculated with the company to their own advantage – that, after all, is what the free market is for.
It would, I fully agree, have been better for Afghanistan, and more in line with the original intentions of the international donors whose money by and large paid the depositors their wages, if the money had been reinvested at home. But there was a simple solution to that – to do what many developing countries have done, in the capitalist and non-capitalist world, and China still does, and run the financial system through state-operated banks and imposed currency controls. But that, as China knows, would have brought another branch of the US Treasury knocking angrily at their doors. That would not have been market economics.
One other charge remains – and here is the real nub of the complaints. Many of these wealthy businessmen seem to be in a circle around the president, the vice-president and other leading political figures. Again, to a socialist, that’s terrible. But in the real world of which free marketeering absolutists boast, what’s new?
I could make jibes about Vice-President Cheney and Halliburton, and Treasury Secretary Hank Paulson and Goldman Sachs, but I don’t really need to go there. In many if not most American allies in the Middle East, the link between government, family and business is far closer than it is in Afghanistan. Here in Dubai, the ruler owns the biggest and most successful companies himself: his friends run them. Ditto, Abu Dhabi, emerging as America’s key Gulf ally. Do the Americans complain, or launch inquiries? In Saudi Arabia, there is, famously, no distinction between the government and royal family budget, or at least not one that’s made public. And there’s a country where, even today, many people live in poverty, despite its relative stability and huge oil wealth.
Perhaps if Britain forced Arab royal families to sell their Knightsbridge town houses and country estates, and invest the money in rebuilding Yemen and southern Saudi Arabia and a few other places I could mention, it would have more credibility in telling Mr Farnood he’s not allowed a villa in Dubai. Otherwise, why pick on Afghanistan?
Richard Spencer is one of the Daily Telegraph's Middle East correspondents. He was China correspondent for six years before moving to Dubai, where he lives with his wife and children, last year.
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