Geopolitics and the Genealogy of Free Trade Zones in the Persian Gulf

Abstract

Free trade zones have been championed by policy makers as important mechanisms for the “economic liberalisation” and “globalisation” of the Middle East. While a growing number of political economists have begun to investigate the performance of these projects, few have considered why states voluntarily limit their sovereign powers by establishing these liberalised territories. To address this question, this paper studies the Jebel Ali free trade zone in Dubai (UAE) and the Kish free trade zone in Iran, two of the earliest such projects in the region. Rather than being products of neoliberal ideology or pressure from advanced industrial economies, the essay argues that paradoxically these zones were developed by the Iranian state and Dubai emirate to project territorial sovereignty in turbulent geostrategic settings and moments as well as nodes to circulate rent to domestic and international members of ruling coalitions. The geostrategic and state-building logics informed when, where, and how these projects were developed. More generally, this analysis illustrates that the Middle East is neither absent from the process of globalisation, nor does it simply respond passively and reactively to this complex process. Free trade zones are an example of local strategies working in consort with international processes to fashion new forms of economic and political interconnectedness.

ACKNOWLEDGMENTS

I am grateful to Aslı Bâli, Mona El-Ghobashy, Waleed Hazbun, Najib Hourani, Amaney Jamal, Tolga Kokor, Mirjam Künkler, Heather McKibben, Pete Moore, Jillian Schwedler, Jeannie Sowers, and Matthew Winters for their comments on earlier drafts of this essay. I also thank Ahmad Ashraf and Houchang Chehabi for directing me to useful sources.

Notes

1. The development of commodity markets and developments in transportation have allowed movement of agricultural produce and a degree of compensation for variations in geographic and climate.

2. David Harvey, The Limits of Capital (Chicago: The University of Chicago 1982); and Saskia Sassen, The Global City (Princeton: Princeton University Press 2001). Territorial organisation is necessary for production and exchange, because it provides the coordination and integration of technologies, human capital, and legal and coercive frameworks for protection of private property. Territorialised economies “may be defined as something quite different from mere location or localisation of economic activity. It consists [of] … economic activity which is dependent on resources that are territorially specific.” (Michael Stroper, ‘Territories, Flows, and Hierarchies in the Global Economy’, in Kevin R. Cox (ed.), Reasserting the Power of the Local (New York: Gilford Press 1997) p. 20). These resources are assets generated by geographic proximity in addition to assets specific to a particular location, which result in efficiencies and market advantages over other locales.

3. Anna Lowenhaupt Tsing, Friction: An Ethnography of Global Connection (Princeton: Princeton University Press 2005).

4. Ronen Palan, The Offshore World: Sovereign Markets, Virtual Places, and Nomad Millionaires (Ithaca: Cornell University Press 2003).

5. It is tempting to think of these economic zones as territorially capturing Agamben's notion of state of exemption, in which citizenship rights are unbundled in order to ultimately enhance the powers of the sovereign (Gigorgio Agamben, State of Exception, trans. by Kevin Attell (Chicago: The University of Chicago 2005)).

6. Aihwa Ong, Neoliberalism as Exception: Mutations in Citizenship and Sovereignty (Durham: Duke University Press 2006) p. 103.

7. Ibid.

8. For a international relations examination of the forces behind simultaneous de-territorialisation and re-territorialisation see Waleed Hazbun, Beaches, Ruins, and Resorts: The Politics of Tourism in the Arab World (University of Minnesota Press 2008).

9. Dubai is one the seven emirates that makes up the confederation of the United Arab Emirates (UAE).

10. Gregory W. White, ‘Sovereignty and International Labor Migration: The “Security Mentality” in Spanish-Moroccan Relations as an Assertion of Sovereignty’, Review of International Political Economy 14/4 (Oct. 2007) pp. 690–718.

11. I thank Najib Hourani for this formulation.

12. Suzanne Berger and Ronald Dore (eds.), National Diversity and Global Capitalism (Ithaca: Cornell University Press 1996); Neil Brenner, ‘Beyond State-Centrism? Space, Territory, and Geographical Scale in Globalization Studies’, Theory and Society 28/1 (Feb. 1999) pp. 39–78; Robert Gilpin, Challenges of Global Capitalism: The World Economy in the Twenty First Century (Princeton University Press 2002); Saskia Sassen, Globalization and its Discontents (New York: New Press 1998); and Michael Peter Smith and Luis Eduardo Guarnizo (eds.), Transnationalism from Below (New Brunswick, NJ: Transaction Publishers 1998).

13. James Ferguson, Global Shadows: Africa in the Neoliberal World Order (Durham: Duke University Press 2006) p. 38. See also Tsing (note 3).

14. Arang Keshavarzian, Bazaar and State in Iran: the Politics of the Tehran Marketplace (Cambridge: Cambridge University Press 2007).

15. Ali Parsa and Ramin Keivani, ‘The Hormuz Corridor: Building a Cross-Border Region between Iran and the UAE’, in Saskia Sassen (ed.), Global Networks, Linked Cities (New York: Routledge 2002); Keshavarzian (note 14) pp. 106–111 and 170–185.

16. Jamil Tahir, ‘An Assessment of Free Economic Zones in Arab Countries: Performance and Main Features’, Working Paper 9926, Economic Research Forum for the Arab Countries, 1999.

17. Andrew Schrank, ‘Export Processing Zones: Free Market Island or Bridges to Structural Transformation?’, Development Policy Review 19/2 (2001) pp. 223–242.

18. Kishore Rao mentions that free trade zones are important in the contemporary US economy, ‘Free Zones in the Middle East: Development Patterns and Future Potential’, in Bernard Hoekman and Hanaa Kheir el-Din (eds.), Trade Policy Developments in the Middle East and North Africa (Washington DC: The World Bank 2000) p. 246.

19. Martin, Josh. ‘Gateways for The Global Economy’, Management Review 87/11 (Dec. 1998) p. 22.

20. Additionally, the neo-Keynesian and regulatory turn in the post-financial crisis of 2008 politicians and international organisations have more readily turned their attention to dismantling “tax havens” than regulating the “mainland.”

21. David Harvey, Spaces for Global Capitalism (London: Verso 2006) p. 107.

22. Ibid.

23. David Harvey, New Imperialism (Oxford University Press 2005) p. 99.

24. Ibid., p. 105.

25. The prominence of economic interests is most clearly stated in Harvey's discussion of the US invasion of Iraq in New Imperialism.

26. David Harvey, Spaces for Global Capitalism (London: Verso 2006) p. 35, emphasis added. Harvey mentions China's special economic zones and “open costal cities” (pp. 36–37), but does not analyse them in relation to his spatial theory of capitalism.

27. James A. Bill, ‘The Geometry of Instability in the Gulf: The Rectangle of Tension’, in Jamal S. al-Suwaidi (ed.), Iran and the Gulf: A Search for Stability (Dubai: The Emirates Center for Strategic Studies and Research 1996) p. 106.

28. Shahram Chubin and Charles Tripp, ‘Domestic Politics and Territorial Disputes in the Persian Gulf and the Arabian Peninsula’, Survival 35/4 (Winter 1993) p. 3.

29. Madawi Al-Rasheed (ed.), Transnational Connections and the Arab Gulf (London: Routledge 2005).

30. Ellis Goldberg and Robert Vitalis, ‘The Arabian Peninsula: Crucible of Globalization’, European University Institute Working Papers, RSC No. 2002/9.

31. Rao (note 17) p. 247. See also Sophia Qasrawi, ‘Foreign Direct Investment in the UAE: Determinants and Recommendations’, The Emirates Occasional Papers, No. 57, The Emirates Center for Strategic Studies and Research, 2004; and Dexter Jerome Smith, ‘How Far Will the Gulf's Free Zone Go?’, Middle East 276 (March 1998) pp. 37–38.

32. Zainab Fattah, ‘DP World Profit May Double on Expanded Port Network’, Bloomberg, 24 Aug. 2008, available at <http://www.bloomberg.com/apps/news?pid=20601087&sid=ao3izs4hC37w&refer=home>, accessed 28 Aug. 2008.

33. Benjamin Smith, ‘The Great Ports Panic of 2006’, Middle East Report 248 (Fall 2008) pp. 40–44.

34. ‘Barnameh-ye Towseh-ye Manateq-e Azad-e Tejari-Sanati (1379–1383): Amalkard, Arzyabi, Jahatgiri’, Dabirkhaneh-ye Showrayali-e Manateq-e Azadi-e Tejari-Sanati (Esfand 1377/March 1999), ‘Gozaresh-e Budjeh-ye Sal-e 1384 –e Sazmanha-ye Manatq-e Azad’, m.s.

35. This essay was written and submitted for publication before the 2009 economic downturn in Dubai.

36. Graeme Wilson, Rashid's Legacy: The Genesis of the Maktoum Family and the History of Dubai (Dubai: Media Prima 2006) p. 368.

37. As early as 1974, the British consulate in Dubai reported discussions of creating a free trade zone. The National Archive, FCO 8/2362/NBT 6/548/1, Part B, ‘Commercial and Economic Relations between United Kingdom and United Arab Emirates (UAE)’, 1974, folio 192.

38. A manager at a business consulting firm quite matter-of-factly comments, “It makes more sense to bring products here and then re-export rather than producing here. It is cheaper if the goods are produced in other countries.” ‘Dubai Exports Continue to Accelerate’, Gulf News, 10 Aug. 2008, available at <http://www.gulfnews.com/business/Trade/10236134.html>, accessed 28 Aug. 2008.

39. Inter alia Jeffrey Sampler and Saeb Eigner, From Sand and Silicon: Achieving Rapid Economic Growth, Lessons from Dubai (London: Profile Books 2003); Thomas Friedman, ‘Holding Up Arab Reform’, New York Times, 16 Dec. 2004; Afshin Molavi, ‘Dubai Rising’, Brown Journal of World Affairs 12/1 (Summer/Fall 2005) pp. 103–110.

40. Fatma al-Sayegh, ‘Merchants’ Role in a Changing Society: The Case of Dubai, 1900–90’, Middle Eastern Studies 34/1 (Jan. 1998) p. 88. Al-Sayegh probably is adopting this language from Frauke Heard-Bey, From Trucial States to United Arab Emirates: A Society in Transition (London: Longman 1982) pp. 243–244.

41. Sulayman Khalad, ‘The Evolution of the Gulf City Type, Oil, and Globalization’, in John W. Fox, Nada Mourtada-Sabbah, and Mohammed al-Mutawa (eds.), Globalization and the Gulf (London: Routledge 2006).

42. Al-Sayegh (note 38) pp. 87–102; Heard-Bey (note 38) pp. 255–258; and John Duke Anthony, Arab States of the Lower Gulf: People, Politics, Petroleum (Washington DC: The Middle East Institute 1975) pp. 159–162.

43. On the vague legal standing of Dubai and the other Trucial states see Glen Balfour-Paul, The End of Empire in the Middle East: Britain's Relinquishment of Power in Her Last Three Arab Dependencies (Cambridge: Cambridge University Press 1991) pp. 100–103.

44. Heard-Bey (note 38) pp. 259–260.

45. Ole Bouman, Mitra Khoubbrou, and Rem Koolhaas (eds.), Al-Manakh, Special Issue of Volume (2007) p. 154.

46. Heard-Bey (note 38) p. 262.

47. Michael Pacione, ‘City Profile: Dubai’, Cities 22/3 (2005) p. 260.

48. Ellen Meiksin Wood, Empire of Capital (London: Verso 2003) pp. 93–95.

49. Heard-Bey (note 38) p. 261. A civil engineer from Sir William Halcrow and Partners, who completed the dredging of the Dubai creek, reminded Shaikh Rashid in 1966 that “we have helped to provide much valuable land.” The National Archive, FO 1016/838/1391/66C, Dubai Harbour (Halcrow/Arabicon), 1966, folio 3.

50. The National Archive, FCO 8/2888/NBE 014/3, U.A.E. Annual Review 1976, 1977, p. 3.

51. On the 1950s activism of the merchant-dominated National Front, see Saleh Hmad al-Sagri, Britain and the Arab Emirates, 1820–1956: A Documentary History, Ph.D. Dissertation, University of Kent at Canterbury, July 1988.

52. Interviews with various businessmen in Dubai, July 2005.

53. On the British decision to end its colonial relationship with the Arab sheikdoms of the Gulf and the various boundary disputes at that time see Balfour-Paul (note 41) Chapter 4. Also see, Sean Foley, ‘What Wealth Cannot Buy: UAE Security at the Turn of the Twenty-first Century’, in Barry Rubin (ed.), Crises in the Contemporary Persian Gulf (London: Frank Cass 2002) p. 38.

54. Christopher M. Davidson, The United Arab Emirates: A Study in Survival (Boulder: Lynne Rienner Publishers 2005) pp. 199–208. From the perspective of the British, the Shaykh Rashid and Shaykh Zaid rivalry fuelled tensions. See The National Archive, FCO 8/2887/NBE 014/1, U.A.E. Internal Political Affairs, 1977; and The National Archive, FCO 8/2888/NBE 014/3, U.A.E. Annual Review 1976, 1977.

55. Balfour-Paul (note 41) p. 114.

56. The UAE has oil reserves of about 98 billion barrels, ninety-four percent of which are in Abu Dhabi.

57. The National Archive, FCO 8/2660/NBE 014/2, Internal Political Situation: United Arab Emirates (UAE), 1976, folio 31–41.

58. Wilson (note 34) pp. 432–433.

59. Davidson (note 52) p. 232.

60. Other free zones in Dubai include: Dubai Airport Free Zone (1996), Dubai Cars and Automotive Zone (2000), Dubai Internet City (2000), Dubai Media City (2001), Gold and Diamond Park (2001), Dubai Knowledge Village (2003), and Dubai Health Care City (2003). Free trade zones in other emirates include: Fujairah Free Zone (1987), Ahmed Bin Rashed Free Zone in Umm al Quwain (1988), Hamriyah Free Zone in Sharjah (1995), Sharjah Airport International Free Zone (1995), and Amjan Free Zone (1996).

61. Qasrawi (note 30) p. 43.

62. Ibid., pp. 40–41.

63. The local business community was in fact hostile towards the influx for foreign firms during the oil boom years. Anthony (note 40) p. 160.

64. David E. Spiro, The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets (Ithaca: Cornell University Press 1999).

65. The National Archive: FCO 8/2623/ NB 065/1, ‘Anglo/US Talks on Defense Matters in Persian Gulf [American Position in the Gulf]’, 1975. Also see The National Archive: FCO 8/2363, NBT 6/548/1 Part C, ‘Commercial and Economic Relations between United Kingdom and United Arab Emirates (UAE)’, 1974.

66. See also, The National Archive, FO 1016/838/1391/66C, ‘Dubai Harbour (Halcrow/Arabicon)’, 1966; and The National Archive, FCO 8/2665/NBE 020/548/1, Part B, ‘U.K./U.A.E joint Committee’, 1976, folio 61.

67. The National Archive: FCO 8/2666/NBE 020/548/1, Part C, ‘UK-UAE Joint Committee’, 1976. On British contractors and advisors in Dubai see The National Archive, FCO 8/2361/NBT 6/548/1, Part A, ‘Commercial and Economic Relations between United Kingdom and United Arab Emirates (UAE)’, 1974.

68. Jebel Ali port was designed and built by Balfour Beatty plc, a prominent British construction company involved in the construction of M25 Motorway (London ring road) and the Channel tunnel, as well as various projects in the British Empire in the 1920s and 1930s, including in Mandate Palestine and Iraq. It is currently building the Burj Mall in Dubai. Other major British contractors involved in Dubai at this time were Sir William Halcrow and Partners (Halcrow International Partnership), Costain Construction Company, and Taylor Woodrow International.

69. Al-Sayegh (note 38) p. 100.

70. Foley (note 51) p. 49. Also see, Jeffrey R. Marcus, ‘Between the Storms: How Desert Storm Shaped the U.S. Navy of Operation Iraqi Freedom’, White House Studies 14/2 (Spring 2004).

71. ‘Forward … from the Sea: The Navy Operational Concept’, March 1997, available at <http://www.navy.mil/navydata/policy/fromsea/ffseanoc.html>, accessed 31 Aug. 2008. For a general discussion see Rahul Roy-Chaudhury, ‘US Naval Policy in the Indian Ocean’, Strategic Analysis: Monthly Journal of IDSA 22/9 (Dec. 1998).

72. Michael Knights, ‘Southern Gulf Co-Operation Council Countries Brace for Terrorist Attacks’, Jane's Intelligence Review, 1 Nov. 2005.

73. ‘Mine Jebel Ali’, Global Security, available at <http://www.globalsecurity.org/military/facility/jebel-ali.htm>, accessed 14 Jan. 2008. In a 2000 speech in Abu Dhabi, Secretary of Defense William Cohen also states, “This is the port that the United States Navy visits the most outside of the United States.” Available at <http://www.defenselink.mil/transcripts/transcript.aspx?transcriptid=1187>, accessed 14 Jan. 2008.

74. Steve Negus and William Wallis, ‘An American Style Emirate? Dubai Sees a Future as Ally, Entrepot and Playground’, Financial Times, 8 May 2006.

75. This paper is silent on firm-level interests and organisational structure, but I recognise that research in this area is needed to clarify the balance of forces involved and clarify the mechanisms in the making of the coalition.

76. Similar conclusions regarding Dubai's economic liberalism are made by Hazbun (note 8) Chapter 5.

77. Ministry of Interior, Census District Statistics of the First National Census of Iran (Aban 1335 9 November 1956)), Volume XCIX: Bandar Langeh Census District (Tehran: Ministry of Interior, Public Statistics 1956) p. 1.

78. Heard-Bey (note 38) pp. 243–245.

79. Maryam al-Sadat Malihi, Radepa-ye Amvaj: Tarikh-e Tawseh-ye Jazireh-ye Kish 1300-1377 (Tehran: Sazman-e Mantaqeh-ye Azad-e Kish n.d.) p. 17.

80. Sazman-e Barnameh va Budjeh-ye Ostan-e Bushehr, Barresi Vaz‘iyat-e Banader-e Ostan-e Bushehr, 1372 (1993) p. 42.

81. Malihi (note 77) pp. 20–21.

82. Manuchehr Hashemi, Davari: Sokhani dar Karnameh-ye Savak (London: Aras Publishers 1984) pp. 269–280.

83. Taliesin Associated Architects of the Frank Lloyd Wright Foundation, Minoo and Kish Islands: Potentially Important Resorts for Modern Iran, Tourist Feasibility Study for the Imperial Government of Iran, Ministry of Interior, Stage I (Nov. 1967) p. 11.

84. Asadollah Alam, The Shah and I: The Confidential Diary of Iran's Royal Court, 1969–1977 (New York: I.B. Tauris 1991) p. 103.

85. On the British attempt to sell Concord plans to Iran see The National Archive, Prem 16/1513, ‘The PM Agreed to See the Iranian Minister of Commerce, Mr. Mahdavi, During His Visit to London in December, 1975’, 1975.

86. Malihi (note 77) p. 39.

87. It should be noted that in the 1950s Nasser was viewed as “the prime threat to the shaykhly system” by the British and the Arab rulers in the Gulf too (Balfour-Paul (note 41) p. 120).

88. Hashemi (note 80) pp 275–276.

89. Wm. Roger Louis, Ends of British Imperialism: The Scramble for Empire, Suez and Decolonization (London: I.B. Tauris 2006) pp. 877–903; Balfour-Paul (note 41); ‘The Gulf: Implications of British Withdrawal’, Special report Series: No. 8, The Center for Strategic and International Studies, Georgetown University, Washington DC (Feb. 1969).

90. For instance the Shah was concerned about the possibility of a military coup in the UAE. FCO 8/2623/021/10, Brief from British Ambassador in UAE, D. J. McCarthy to Parsons, Ambassador in Iran, 5 April 1976.

91. Sarah Searight (ed.), Britain and Iran, 1790–1980: Collected Essays of Sir Denis Wright (London: The Iran Society 2003) p. 141.

92. Denis Wright, in an interview recorded by Habib Ladjevardi, 11 Oct. 1984, Haddenham, England. Tape No. 6. Iranian Oral History Collection, Harvard University.

93. Keshavarzian (note 14) pp. 187–227; Fariba Adelkhah, ‘Le Retour de Sindbad: L'Iran dans le Golfe’, Les études du CERI, no. 53 (Paris: Centre d’études et de recherches internationales – Sciences Po 1999); Christopher S. Stewart, ‘The Axis of Commerce’, Condé Nast Portfolio, Sept. 2008, available at<http://www.portfolio.com/news-markets/international-news/portfolio/2008/08/13/US-Trades-With-Iran-Via-Dubai>, accessed 31 Aug. 2008.

94. Rao (note 17) p. 252.

95. Madawi Al-Rasheed, ‘Introduction: Localizing the Transnational and Transnationalizing the Local’, in Madawi (note 28) pp. 9–11.

96. Philip Bobbitt, The Shields of Achilles (New York: Alfred A. Knopf 2002); Michael Hardt and Antonio Negri, Empire (Cambridge: Harvard University Press 2000); Richard Rosecrance, ‘The Rise of the Virtual State: Territory Becomes Passé’, Foreign Affairs 75/4 (1997). Kenichi Ohmae, The End of the Nation State: The Rise of Regional Economics (New York: Free Press 1995); Edward Cohen, ‘Globalization and the Boundaries of State: A Framework for Analyzing the Changing Practice of Sovereignty’, Governance 14/1 (2001); James N. Roseneau, Along the Domestic-Foreign Frontier Exploring Governance in a Turbulent World (Cambridge: Cambridge University Press 1997); Susan Strange, The Retreat of the State: The Diffusion of Power in the World Economy (Cambridge: Cambridge University Press 1996).

97. Daniel W. Drezner, All Politics is Global: Explaining International Regulatory Regimes (Princeton University Press 2006); Peter Evans, ‘The Eclipse of the State? Reflections on Stateness in an Era of Globalization?”, World Politics 50/1 (1997) pp. 62–87; Robert Gilpin, The Challenge of Global Capitalism: The World Economy in the 21^st Century (Princeton: Princeton University Press 2000); Stephen D. Krasner, ‘Compromising Westphalia’, International Security 20/3 (1995/1996) pp. 115–151; Jonah D. Levy (ed.), The State after Statism (Cambridge: Harvard University Press 2006); David Newman, ‘Geopolitics Renaissant: Territory, Sovereignty, and the World Political Map’, Geopolitics 3.1 (1998) pp. 1–16; Wood (note 46).

98. Ahmed Kanna, ‘Dispatch from the Subdivision Archipelago’, Harvard Design Magazine (Fall 2006/Winter 2007) pp. 95–96; and Ferguson (note 13) pp. 194–210.