Page 17 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

2 Introduction

deficits. Companies and individuals in the world’s leading economies
find themselves facing a painful process of “deleveraging,” seeking to
recover from the burdens of high debt levels in recent years. For many
economies, generating fresh capital for investment may be a multi-
year challenge.
At the same time, in contrast, a number of economies, mainly in
emerging markets, are continuing to grow. A handful of countries (a
fortunate few) enjoy large capital reserves, continue to generate
budget surpluses, and act as next exporters of capital. As many
economies are slipping deeper into debt, others are busily accumulat-
ing savings. Our long-held belief that capital naturally flows from
developed economies to emerging markets no longer holds—today,
saver nations in the developing world provide much-needed capital
to the world’s largest economies. This shift in topography is funda-
mentally changing global markets.
In the evolving financial topography, the economies of the Gulf
region—the six countries that make up the Gulf Cooperation Council
(GCC)—are new and increasingly important peaks. Individually and
in aggregate, the member states of the GCC—Saudi Arabia, the
United Arab Emirates (UAE), Qatar, Kuwait, Bahrain, and Oman—
are playing an increasingly pivotal role in global markets. At the same
time, Islamic finance, a phenomenon that is distinct from but deeply
linked to the rise of the Gulf, has evolved from a niche, regional sector
to an increasingly integral part of the world’s financial system.

ON THE WORLD STAGE

When General Electric (GE), one of the world’s most admired compa-
nies and a titan of US business, resolved to sell its plastics business in
2007, the most attractive buyer was not a midwestern chemical com-
pany or even a European conglomerate. It was the Saudi Basic
Industries Corporation (SABIC), a leading industrial conglomerate.
SABIC, by the way, had once reached a market capitalization of $135
billion—a shade under those of Google and Honda, and greater than
that of Coca-Cola. 1
As Citigroup—at the time, the world’s largest bank—began to
buckle under the pressure of the credit crisis in 2008, the first waves of
relief did not come from Wall Street or from Washington. They came
from the Abu Dhabi Investment Authority (ADIA, a Gulf sovereign
wealth fund) and Prince Alwaleed Bin Talal (a Gulf-based private