The Cash Haven; Arab markets are booming, and financiers say the money is coming home from post-9-11 America.(Cover Story)

Byline: Christopher Dickey

From outer space, the developers claim, you can see the palm trees growing. They are in fact man-made islands in the shapes of palms, under construction off the coast of Dubai. In all, some $30 billion is being spent to line a relatively short stretch of sand with thousands of villas and apartments, themed shopping centers and aquatic parks, even a "Dubai-land" meant to surpass the fantasies of Walt Disney.

What's happening in Dubai reflects a larger trend that many in the West, distracted by chaos in Iraq and terrorism in Saudi Arabia, have failed to notice. For all its troubles, the region has seen a huge boom in real estate and equities. Financiers say the rise in prices has been driven largely by Arabs bringing billions home from America, to escape post-9/11 counterterrorism measures that, in effect, target them and their money. But that's not all: "9/11 did to the Arab world what no Arab government nor the Arab League could achieve for the past 50 years," says one of Jordan's leading entrepreneurs. "It got the Arabs to finally invest in the region. Some money came back from the West, but more importantly, the oil-price windfall profits have remained here."

Nobody has published reliable estimates of how much Arab money has fled the United States, but it's clear that vast sums are flowing into the region. Throughout the 1980s and 1990s, with oil prices low and Arab money eager for the high returns available in the United States, liquidity was as hard to find in the Middle East as water in the desert. But in 2003, the trickle became a raging flood: the Saudi stock index jumped 76 percent; Kuwait's rose 102 percent; Egypt's, 152 percent. The property boom is most striking in Dubai, but extends to Beirut, Cairo and Saudi Arabia, where prices for prime real estate rose by as much as 100 percent last year. Even trackless desert sells well in the vicinity of a city like Riyadh, which has grown from 600,000 people in ...