The fact that Dubai can’t pay its bills should come as no great shock to anyone, because there’s no good reason for Dubai to be such a big trading Mecca, when it offers no real value:
The Discovery and Travel channels paint a picture of a Disneyesque place, and it is true that there is a staggering amount of money in Dubai. The real economy of Dubai, however, is built on what amounts to non-violent piracy.Want to get around prohibitions against selling your US-made products into Iran or Syria? Sell to a broker in Dubai.
Think the 35% import tariff into India is too high? Your Indian customer has a cousin in Dubai who will buy your product for $20 each, then sell them into India for an invoice price of $10 each, thereby cutting the tariff paid to the Indian government by half.
Got a couple of containers of counterfeit name brand goods from China you want to unload — the brokers in Dubai are open for business.
Need to buy a couple of containers of legitimate goods from a US or European manufacturer in order to keep your franchise even though you have no market for them? No problem — the diverters in Dubai will take them off your hands and sell them into someone else’s territory at a bargain price.
Have some product with Israeli content you want to sell into Saudi Arabia in violation of their laws? The country of origin will disappear when the paperwork comes out of Dubai.
Dubai is a lousy location logistically, but it works just fine for breaking trade laws.