Page 24 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

Introduction 9

Development Company of Abu Dhabi and the Saudi Industrial
Development Fund (SIDF). Though also government-supported,
these vehicles have narrower (and often more aggressive) objectives
and operate more like private investment firms than like public agen-
cies. The past decade has seen dramatic growth in these specialist
institutions. As GCC governments respond to the current financial
crisis and economic recession, additional specialist entities, such as an
$800 million Saudi vehicle for agricultural investment, 17 are being
launched for both investment and overall economic objectives.
In the Gulf private sector, there are also multiple key categories
of investors. Some GCC families have long been sophisticated global
investors, holding significant portfolios worldwide and participating
in private equity, hedge funds, and managed accounts with multina-
tional financial institutions. Though they are often underestimated,
some of these investors have frequently shown themselves to be as
savvy as their international counterparts when it comes to investment
decisions and negotiations.
Since the boom of the 1970s, there have also been a number of
private investment houses (such as Investcorp of Bahrain) through
which Gulf investors have invested internationally. The 2000s have
witnessed an expansion in the number and type of these companies,
with firms such as Abraaj Capital of the UAE and Global Investment
House of Kuwait tapping into regional liquidity and developing tar-
geted funds and investment vehicles. The appearance and expansion
of these private investment houses represent an important stage in
the development of Gulf capital markets.
Chapter 3 reviews the rise of Islamic finance in the Gulf and
beyond. Islamic finance is rooted in a set of basic principles with
universal relevance. While the technical aspects of the Shariah are
themselves a sophisticated science, the core principles of Islamic
finance are largely accessible and relevant far beyond the Muslim
world. For example, the principle that a person should not profit from
activities that he believes to be immoral—a core tenet of Islamic
investment—is shared by ethical investors of all traditions.
In discussing the origins of modern Islamic finance, we note that
its pioneers have largely been from outside the Gulf region.
Groundbreaking institutions were founded in a range of countries,
including Egypt and Malaysia. Today, however, the GCC region rep-
18
resents the bulk of the accessible Islamic finance market. A majority
of the industry’s leading institutions—for example, the Saudi bank Al
Rajhi and the regional conglomerate the Al Baraka Banking Group—are