The Key Man: How the Global Elite Was Duped by a Capitalist Fairy Tale by Simon Clark & Will Louch (Harper Business: 2021), 352 pages.
Nobody wants to admit to knowing Arif Naqvi these days, now that he is under house arrest in London awaiting extradition to the United States after having paid the highest bail in British history (£15 million). But just a few years ago he was the perfect emblem of an era.
Naqvi was founder and CEO of the Abraaj Group, a private equity firm based in Dubai that one sympathetic journalist called “the go-to private equity firm for outreach to Muslim nations.” When President Barack Obama announced “a new fund to support technological development in Muslim-majority countries” in his famous Cairo speech in 2009, Abraaj was among the firms chosen to distribute hundreds of millions of dollars. Naqvi was a regular at Davos, a guest at the White House, a recipient of nine-figure checks from the Bill and Melinda Gates Foundation.
Abraaj’s attraction for Western leaders is summed up in the subtitle of this new book by two Wall Street Journal journalists who helped chronicle the firm’s downfall, The Key Man: How the Global Elite Was Duped by a Capitalist Fairy Tale. “The market has been the most powerful force the world has ever known for creating opportunity and lifting people out of poverty,” Obama told Muslim business leaders at a summit on entrepreneurship held after his Cairo speech. Naqvi spoke a few minutes later and echoed the same message: The Third World’s problems would be solved not by government but by capitalism. Prosperity was the solution to everything from women’s rights to terrorism.
Abraaj was able to win so many highly placed supporters—and still has its defenders today, who claim that Naqvi is being scapegoated—because its business model made sense. It was the firm that could translate First World business standards into Third World practice. The rising middle class of Asia and Africa is promising territory for Western businessmen but, as the saying goes, the smartest investor in New York can be the dumbest investor in Nairobi if he doesn’t understand how things work there. On the other hand, just throwing money at a local entrepreneur may go badly if your man in Nairobi lacks an understanding of how things are supposed to work according to Western investors’ standards.
The way Abraaj bridged this gap can be seen in one of its success stories, Karachi Electric. Pakistan’s former capital was known as the “City of Lights” when Naqvi was born there in 1960. By the time he returned to buy its recently privatized electricity company in 2009, the name was ironic. Power outages were frequent, customers refused to pay their bills, the workforce was apathetic and corrupt, and a third of the city’s electricity was siphoned off either by individuals or by gangs selling the power for their own profit.
A team of Germans from Siemens was brought in to modernize Karachi Electric in 2005, but they added technological improvements without fixing the underlying problems and the company’s losses doubled. It’s easy to see why the Germans failed. Whenever employees heard rumors of impending layoffs, they would rampage through the company’s headquarters, loot its offices, and fire guns at senior executives. When non-paying neighborhoods had their service cut off, residents would riot, blockade streets, besiege the company’s field offices, and set its repair vans on fire. This kind of behavior was outside the German managers’ comfort zone.
Abraaj, on the other hand, was comfortable facing down violence. When disgruntled employees started taking potshots at the new CEO’s house while his children were home, he stood his ground, laying off thousands of redundant employees and firing hundreds more for corruption. Gradually theft rates went down and reliability went up. The impressive results were written up as a Harvard Business School case study.
But if Abraaj was a bridge between First World rectitude and Third World corruption, the traffic went in both directions.
A basic pillar of Naqvi’s business strategy was hiring well-connected people to gain access to elite circles. In the company’s early days in Dubai, this was a necessity. The company would never have flourished without the right connections and the right palms being greased. The son of the Malaysian prime minister, a nephew of the king of Jordan, the daughter of Sri Lankan hedge fund tycoon Raj Rajaratnam were all on Abraaj’s payroll and helped smooth its operations in regions where their families had influence.
Naqvi continued to use nepotism as a tactic in the America arena. He hired Wahid Hamid, President Obama’s old roommate from Occidental College, and Pradeep Ramamurthy, a White House official who helped draft the Cairo speech. When John Kerry needed a place to hang his hat after leaving the State Department, Abraaj offered him a salaried role, which he eventually declined though he did accept a $250,500 speaking fee. Globetrotting McKinsey alum Kito de Boer, who succeeded Tony Blair as head of the U.N.-sponsored Palestinian development organization the Quartet, was hired by Abraaj at a six-figure salary in 2017 shortly before things went sideways.
A constant theme of Naqvi’s speeches at dozens of Davos knockoff conferences over the years was the meaning of corruption. How can Western investors call emerging markets corrupt when it was they who caused the global financial crisis? “Dare I say it, cheekily, that when risk came into the global financial system and into all our lives it came from right here in New York City in 2008 with the Lehman Brothers crash,” he told an impact investing conference in Manhattan.
It’s a cute rhetorical trick. But the truth is that brazen nepotism simply is not as big a problem in the West as it is in the Third World. The advantage of hiring Obama’s old roommate was not, as it would be in Karachi, expectation of illicit favors or the former president’s sifarish. It was the signal it gave skeptical investors that Abraaj was a legitimate company. American and European businessmen felt safe assuming that someone like Kito de Boer would not take a job with a company that wasn’t fundamentally trustworthy.
So Naqvi’s favorite talking point is a false equivalence—or at least it used to be. The line between Third World nepotism and First World networking has gotten blurrier in recent years. The most tantalizing suggestion in The Key Man is that Naqvi’s bogus empire came crashing down because Donald Trump was elected president. “If the globalist Hillary Clinton had won,” the authors explain, “there was a movement in place that could have led to Arif becoming an even more central partner to America and a manager of billions of dollars more in government funds.”
The book implies that Trump doomed Abraaj by making anti-globalization fashionable. “Trying to raise money from the pension funds and money pots of the Western world, Trump’s isolationism was becoming a real threat to [Naqvi’s] vision and his marketing pitch,” Clark and Louch write. “As Trump established himself in power, opportunities diminished for globalists who believed in win-win outcomes,” even though “Arif took every opportunity to preach globalization to America in a bid to drown out the president’s words in the ears of the people he needed most.”
That’s nonsense. Trump’s words never counted for much with the people Naqvi was courting. They believed in globalization before 2016 and still believe in it today. Their minds didn’t change, only their access to power. If The Key Man is right and Abraaj came crashing down not because the music stopped the way it does in any Ponzi scheme but because the firm’s political allies lost the 2016 presidential election, then the corruption it exposed was something much bigger than Naqvi’s peculations—and Trump’s victory was a bigger blow against our crooked global elite than we realized.