Page 21 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

6 Introduction

Islamic finance, much of the foundational literature—with notable
14
exceptions —has focused more on economic theory, legal principles,
and instrument structures than on the evolution and relevance of
the industry. In discussions with financial professionals worldwide, I
have often heard readers express interest in work reviewing the rise of
the Islamic finance sector from a commercial and strategic perspective.
Additionally, international discussions on Gulf capital and
Islamic finance often take a geopolitical perspective rather than offer-
ing an empirical analysis of the opportunities. Some observers, whose
perspectives are often rooted in misconceptions about the Middle
East region and its institutional investors, view these phenomena
with suspicion. The controversy in the United States regarding Dubai
Ports World’s acquisition of the British firm P&O (operator of several
US ports)—dubbed a “debacle” in a Harvard Business School case—
was a prime example of such suspicion. 15 Members of Congress
raised objections to the acquisition (which had the support of the
security-sensitive Bush administration), and the transaction was
ultimately restructured so as to avoid the controversy. A common per-
ception of Gulf investors as a potential threat prompted BusinessWeek
magazine to run a cover story in 2008 entitled “Who’s Afraid of
Mideast Money?” 16
As sovereign wealth funds have gained prominence in recent
years, fundamental questions have been raised about their intentions
and the potential impact of their role on the global stage. Such ques-
tions are only fair, and warrant exploration. An accurate assessment,
however, must be guided by a robust and fact-based review rather
than colored by fear and hostility. Fear-based assessments can lead to
many missed opportunities for mutually beneficial investment
flows, potentially derailing otherwise promising financial and busi-
ness collaboration.
The time is right for a holistic analysis of Gulf capital, Islamic
finance, and their impact on global markets. In crafting their global
strategies, financial professionals worldwide increasingly wonder

■ Is the wealth of the Gulf here to stay, or is it a short-term
phenomenon?
■ What institutions in the Gulf are making investments, and
what are their objectives?
■ In what regions, countries, and sectors are Gulf institutions
investing?