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Karzai's Corrupt Elite - A Dubai-Based Empire.

The Dubai-based Afghan elite related to the Karzais include the Safi clan which controls Safi Airways, the country's second-largest carrier after the state-owned Ariana Afghan Airlines. Dubai has become a magnet for a smattering of nouveaux riches. Many invested heavily in Dubai's never-ending real estate fairy-tale. But the financial crisis abruptly ended Dubai's property boom. The Kabul Bank scandal has highlighted the close but opaque ties between Dubai's commercial entrepot and the Afghan elite.

The bank's crisis has involved President Karzai's blood relatives and political allies. His corrupt record has invited criticism from rivals and Western powers - much promised reconstruction of his country has not taken place, an insurgency rages in Helmand and Kandahar and many of those around him are suspected of corruption. His opponents have accused him of favouring a network of wealthy merchants. Mahmoud Karzai, the president's elder brother, is a US citizen living in Dubai. He is president of Afghanistan Investment Co. and a prominent businessman. Before his brother's rise to the presidency, he was better known for running Afghan restaurants in the US. Today he has big financial interests in Kabul Bank, a cement producer, the Toyota dealership in Afghanistan, mining and real estate. He has developed a pivotal role as an intermediary between private investment and the government. He denies his wealth is connected to his brother's presidency. Ahmad Wali Karzai, Hamid's powerful half-brother, is the chairman of Kandahar's provincial legislative council; he has emerged as one of the most influential men in Afghanistan, forming a pillar of the personal alliances the president uses to project influence from Kabul; he has faced down media reports accusing him of profiting from the drugs trade and cutting dubious land deals.

It recently emerged that Farnood, then chairman of Kabul Bank and a key supporter of Karzai's government, had used the bank's money to invest in Dubai real estate, including villas on the Palm Jumeirah artificial island. This helped trigger panic among depositors and his ousting from the bank by the regulator.

Mahmoud Karzai, with a 7.4% stake in Kabul bank, lives in a beach-side villa in Dubai. He was on Sept. 9 quoted as saying: "When the Taliban took over, anyone with money moved away, mostly to Dubai. It's a very easy business environment. Afghanistan was dead business-wise. Some moved to Europe or the US, but most went here [in Dubai]. It's become a re-export centre for Afghanistan. People are uncertain about life in Afghanistan, so they bring money here. Corrupt people also bring money here, in case they are caught. Then there are legitimate business reasons for bringing money here". He bought his stake in Kabul Bank through a loan from the same bank and says he was a "silent partner" in it. He will soon move out of the villa bought by Farnood and rent another house nearby to avoid any impression of impropriety. He will lease the new villa for $5,000 a month from a "friend".

The owners of Kabul Bank are not the only members of the Afghan elite to have been burnt by risky investments in Dubai. The FT on Sept. 9 quoted an un-named "businessman who has lived in Kabul for almost a decade and is close to the Afghans in Dubai" as saying: "Kabul Bank is the tip of the iceberg. Afghans got very involved in the real estate market. They wanted to prove their wealth". The paper quoted a "real estate agent who worked closely with Afghan emigres" as saying Nakheel, Dubai's troubled state-owned developer responsible for building the Palm Jumeirah, was a major recipient of Afghan investment.

Azizi Investments, owned by Mirwais Azizi, another prominent Dubai-based Afghan businessman, is involved in Nakheel's Jebel Ali Palm island development, where progress has stalled because of the financial crisis. The Azizi Hotak Trading Group also owns Azizi Bank in Afghanistan and is a big importer of fuels into the country.

Despite Dubai's property crash, the Afghan business council estimates about $10bn flows between Dubai and Afghanistan every year. The FT adds: "Analysts and Afghans say most of it leaves the country and some of it is derived from corruption and shady business deals". The FT quoted Theodore Karasik, a director of the Institute for Near East and Gulf Military Analysis (Inegma) in Dubai, as saying: "The closest functioning banking system is here, so a lot of the money coming in could be legitimate but a lot of it is not. It's drug money, graft money, extortion money".

Some longer-established Afghan businessmen in the UAE, such as the Safis and Azizis, are reviving their business interests in their home country. But corruption in Afghanistan and the Kabul Bank crisis could sour their appetite for further investments and send even more money out of the country. The FT quoted an un-named businessman as saying: "The second they set foot in Kabul, they get embroiled in Afghan politics. A lot have got fingers in Afghan businesses but are getting fed up by the graft? It's not even baksheesh any more, it's intimidation".
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Publication:APS Diplomat News Service
Geographic Code:7UNIT
Date:Sep 13, 2010
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