Middle East: Leaders who guided a region through 50 turbulent years
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Middle East: Leaders who guided a region through 50 turbulent years

Over 50 years, leaders of Middle East financial institutions have steered their businesses through very good and very bad times, including oil price crashes, rampant property and stock speculation, and war. Some key figures highlight the events they remember most and spell out lessons for the next generation.


Prominent figures in the modernization of the Middle East in the last half century say the region’s economies and financial institutions have come a long way over 50 years. The financial sector is now more professional and better regulated than ever before.

But they warn that the next generation of leaders still needs to act to diversify away from dependence on oil revenues, reduce the number of financial institutions and further develop local capital markets that will enable money generated in the Middle East to be invested there.

Furthermore, some argue that the increase in oil sales to Asia means that in the next 50 years the Arab world will increasingly look east rather than west.

These figures, who have held positions of power for nearly two generations, are uniquely placed to assess how successful the region has been in steering its way through the challenges and opportunities since the first oil boom of the mid 1970s.

Abdullah Saudi

Nasser Saidi served as deputy governor of the Lebanese central bank and a government minister in the 1990s, before becoming chief economist at the Dubai International Financial Centre in the 2000s. He says the first key moment came when civil war ended the era in which Beirut had been the region’s financial centre.

“The big story from Lebanon’s point of view is that the centre of economic geography moved from the Mediterranean to the Gulf,” he says. “Lebanon used to be the petrodollar hub, with Beirut playing the leading part. Now the Gulf can manage its own money through its domestic and free-zone financial centres, and to an extent they have come of age.”

Sultan Nasser Al Suwaidi was governor of the UAE central bank from 1991 to 2014, while John Elkhair worked for central and commercial banks across the region and was Middle East managing director for JPMorgan Chase. They both see the sharp increase in US interest rates in the early 1980s, which led to the first falls in oil prices, as the next seminal shift.

“The most important moment in my career came when US dollar interest rates were hiked in 1981 – and the impact this had on economic growth and oil prices,” says Al Suwaidi. “The fall in oil prices created a lot of problems for the young economies in the region. Our banks had had only five or six years of growth from the mid 1970s to the early 1980s. Then revenues went down and assets were impacted.”

According to Elkhair, the importance of the oil price fall was that for the first time “decision makers became aware of the cyclicality of the commodity.

“The first time it happened, it had a major impact in a region that had become used to the good times rolling on,” he says. “Bankers, traders and businesses had to adjust suddenly and it was a really important lesson for the big borrowers and lenders. Now, oil price ups and downs have become part of the normal cycle and bankers are much more experienced in dealing with them, as they showed in the financial crisis of 1998 and in the aftermath of the 2008 crash.”

The effects of greater western interest in Arab finance are still being felt. Any law adopted by the US becomes effectively international, whether or not it is necessary for a local economy - Abdullah Saudi

But in Kuwait the difficulties were compounded by the dramatic Souk al-Manakh crisis of 1982. Investors had piled money into this illegal stock market, and when it crashed every bank but National Bank of Kuwait (NBK) was technically insolvent. There was a government bailout for banks and investors.

Ibrahim Dabdoub first joined NBK in the early 1960s, rising to become chief executive from 1983 to 2014. The Souk al-Manakh crisis left Dabdoub more convinced than ever “of the virtues of prudent and sensible banking”.


Dabdoub was soon to face an even greater challenge: the Iraqi invasion of Kuwait. His task then was to smuggle the discs that contained all the bank’s data and details of its customers’ accounts first to Jordan and then to London.

“This gave me all the information I needed to enable us to continue to offer a banking service to our customers,” he says.

Abdulkarim Bucheery

Inevitably there was a regional impact from Saddam Hussain’s perceived threat to the Gulf’s political stability and security.

“The invasion of Kuwait and the disruption that hit the region was a challenge, as it was unseen and untested,” says Elkhair. “I was in Bahrain and saw the liquidity dry up. Foreign banks curtailed their business. Demand dropped, but there was a pickup in trading and services due to the military mobilization.”

The veteran bankers agree that the experience gained from these early financial and political difficulties taught them and their fellow leaders an important lesson in crisis management and left them much better equipped to deal with future challenges.

They note that the region subsequently dealt more effectively with the Russia and emerging markets crashes of 1998, 9/11, the US invasion of Iraq in 2003 and the global economic crash of 2008.

“We came through the invasion by Iraq and the Souk Al Manakh crises, so subsequent events caused much less panic and a desire to sort out the problems,” says Dabdoub.

Moreover, it also become clear that while a war may have caused a short-term downturn, the states damaged by conflict provided lots of reconstruction business.

“The invasion of Iraq and first Gulf war did impact the region, but only for a short time,” says Al Suwaidi. “In the longer term, the need for reconstruction created growth. There were periods of downturn followed by reconstruction.”

That is not to say that the region was immune from the impact of global financial crises. The fallout from the 2008 sub-prime crash exposed the risky lending practices of many private equity companies and some banks, culminating last year in the collapse of Abraaj Capital.

Moreover, a consequence of 9/11 was that Western regulators paid a lot more attention to the Middle East financial sector as they tried to stop money laundering and terrorism financing. For Arab central bank governors like Al Suwaidi there was the challenge of explaining to American politicians how systems like the informal Hawala network of money brokers really worked.

When oil prices are high, talk of diversification goes off the agenda. But when they fall, there is not enough revenue to carry out reforms - Abdulkarim Bucheery

And in the longer term, 9/11 had a more profound impact on the Middle East than any other jurisdiction as the West regarded Arab banks with even greater suspicion because it regarded them as the main route for terrorism finance.

Al Suwaidi is keen to stress that: “The effect was felt most strongly post 9/11 because of the anti-money laundering and counter terrorism legislation, but the economy did bounce back a couple of years later and did so all over the world due to lower US interest rates.”

John Elkhair 

However, Abdullah Saudi, who founded Arab Banking Corporation in 1979, argues: “The effects of greater western interest in Arab finance are still being felt. Any law adopted by the US becomes effectively international, whether or not it is necessary for a local economy. This is still causing a lot of disturbance to banks because of the amount of information they are asked to provide.”

This is perhaps the clearest evidence that one of the key ambitions of the late 1970s – to make the region independent from international interference – has not been fulfilled.


On the positive side, there has been a dramatic improvement in the quality of local financial institutions and the local bankers who manage them.

In 1980, the Gulf relied heavily on western banks, mostly clustered in Bahrain, to recycle petrodollars. The majority of local banks depended on the expertise of non-nationals, mainly from the US and Europe, to run their institutions; with governments as their main shareholders, they did not have to work hard to acquire deposits. There was little expertise in investment banking.

Today most banks are more professionally managed and many run by experienced nationals; and they are better placed to play a leading role in managing financial deals. The leading local bankers include Dabdoub, who year after year delivered strong performance at NBK, and Ali Shihabi, who formed his own investment bank, Rasmala, and more recently established a Washington DC geopolitics think tank, the Arabia Foundation.

Shihabi remembers leading a hostile takeover of Saudi Hollandi bank by the local Mawarid group when he was just 30.

“This was something Saudi Arabia had never seen before,” he says.

The region has plenty of consultants providing long term visions, but it needs to be accompanied by sound implementation strategies and processes to ensure execution yields the desired outcome of creating jobs for economies with high levels of young people - John Elkhair

As chairman of Saudi Hollandi, he then oversaw a restructuring over three to four years, including firing all the top management and half of the staff. He now admits he was too aggressive.

“We lost share; clients left us. We upset a lot of people,” he says. “I learnt the lesson that in Saudi Arabia you do things more softly. You can’t take the ruthless approach that you see in New York.”

Nasser Saidi

Other positive changes include a reduced reliance by banks on government funds. Islamic finance is now a mainstream business, gaining greater traction across the region and becoming a commercially competitive operation. It no longer involves just acting as a deposit house that offers very little return for those who wish to bank in line with their religious principles.

But the creation of cross-border banks such as Arab Banking Corporation and Gulf International Bank in the 1970s has in some respects proved to be a false dawn. The region’s financial sector remains fragmented and overbanked.

While there have been important mergers – most recently between Abu Dhabi Commercial Bank, United National Bank and Al-Hilal Bank to create a $114 billion institution, to be called ADCB – most takeovers are within countries rather than cross-border.

There are still too many small financial institutions, while the idea of creating a regional banking powerhouse, which many political and economic leaders enthused about in the 1980s, is yet to materialize.

Financial sector regulation, however, has improved markedly. In the 1970s, regulators had for the most part failed to shake themselves free of political interference and there was a reluctance to clamp down on so-called ‘name lending’.

Since then, long-serving governors, such as Al Suwaidi, Abdullah Saif in Bahrain and Hamad Al-Sayyari in Saudi Arabia, gradually imposed stricter regulations.

“There is no doubt that the quality of financial regulation is much higher and better now,” says Abdulkarim Bucheery, chief executive of Bank of Bahrain and Kuwait from 2008 to 2016.The move to higher standards was also helped by the introduction of financial centres in Dubai and Qatar, regulated by international rather than local courts.

Equity markets are also better regulated. In the 1970s, insider dealing was rife and suggestions of independent capital market authorities were greeted with incredulity. But attitudes changed when the Gulf states relaxed their opposition to foreign investment, urged on by senior figures such as Jammaz Al-Suhaimi, the first head of Saudi Arabia’s Capital Market Authority.

Markets behave differently. They force you to focus on international standards and ideas and adopt them - Nasser Saidi

It was process of change that accelerated as stock markets allowed in foreign investors who insisted on proper independent regulation and transparency.


The failure, according to almost every banker and regulator, has been in establishing debt markets. Historically corporations and governments have relied heavily on banks for their funding.

Ibrahim Dabdoub 

Al Suwaidi says: “There is still a need for a proper market for bonds and sukuks, which will help governments and banks free up their balance sheets. I want to see corporates raise money through bond markets.”

Saidi puts some of the blame for the failure to develop debt markets on to the big family businesses that have “never convinced themselves that they should use the markets. They have never seen the power of debt and equity markets.

“Once you get on to the markets, automatically you will get international investors, and they will not only provide greater scrutiny and corporate governance but are also a source of technology and new ideas. Commercial banks don’t do this – they are just lenders. Markets behave differently. They force you to focus on international standards and ideas and adopt them.”

A further consequence of this lack of local debt markets has been that too much regional money is placed globally rather than invested locally. Government sovereign wealth funds, which should have been invested in developing the Middle East, have instead placed the bulk of their money overseas.

"We should have been able to attract the wealth of the Arab world, but we lost it,” says Saidi. “We have not invested enough in ourselves.”

As well as developing debt markets, there is a general consensus among the veterans that more effort must be made by the next generation of financial and political leaders to convert the ambitious plans prepared by consultants into reality. They should, says Elkhair, look at the need for long-term planning.

Even so, there is general agreement that the quality of economic management has improved.“The region,” he says, “has plenty of consultants providing long-term visions, but it needs to be accompanied by sound implementation strategies and processes to ensure execution yields the desired outcome of creating jobs for economies with high levels of young people.”

“The message from the past few decades is the importance of managing the economy rightly and effectively, including resources and the price at which they are sold,” says Bucheery. “The way a country’s top team manages things is critical. In Dubai, there is a team of talented entrepreneurs, Qatar has dynamic young leadership, as do Bahrain and Saudi Arabia.”

We came through the invasion by Iraq and the Souk Al Manakh crises, so subsequent events caused much less panic and a desire to sort out the problems - Ibrahim Dabdoub

Much has been achieved even though the Gulf states have been less successful when it comes to working together through institutions. The creation of the Gulf Cooperation Council (GCC) in 1981 was meant to herald an era in which regional states did not compete directly with each other but shared responsibility for a particular industry such as ship repair.

The concept was stillborn, not least because Dubai refused to accept it and systematically and successfully challenged Bahrain, which argued that it should be the centre for ship yards, aluminium production, airlines and most importantly finance. In part, Bahrain was itself to blame as it failed to take the rivalry from Dubai seriously in the 1970s.

Sultan Nasser Al Suwaidi

Nor have plans to diversify the economy away from a reliance on oil revenue been successful. Billions have been invested in property in the region, while some states, particularly Dubai, have developed a booming tourism sector and service industries such as airlines and free zones. But the vision of establishing manufacturing industries in sectors that are not oil dependent has not been brought to reality.

In part it is an inevitable consequence of political and economic pressures.

“When oil prices are high, talk of diversification goes off the agenda,” says Bucheery. “But when they fall, there is not enough revenue to carry out reforms.”

Al Suwaidi still thinks there are opportunities.

“We can create opportunities for diversification,” he says. “For example, we can develop our tourism further and we need a good train system to go round the Gulf. Different economies have tried to diversify, and some have been more successful than others. There is a chance to diversify, but we need to rethink the process and come up with strategies.

There has also been an acceptance that large government subsidies to kick start industries like agriculture have not really justified the investment. Further challenges, says Saidi, will come from the need to adapt to technological developments, both those in finance and those brought on by the speed of decarbonization, while remaining internationally competitive.

Different economies have tried to diversify and some have been more successful than others. There is a chance to diversify, but we need to rethink the process and come up with strategies - Sultan Nasser Al Suwaidi

The challenge of diversifying the regional economy has been made much more difficult, says Elkhair, because “the low labour costs of Chinese and other east Asian countries have made it much harder to attract industry”.

Next generation

One of the key questions for the next generation of leaders is whether or not the focus of Middle East governments will shift from the West to Asia. For 50 years, Gulf governments have looked to the US and Europe as their main trading and political partners. Now, as more oil is sold to China and other Asian countries, and as China looks to extend its political influence to the region, this could change.

Saidi is in no doubt.

He sees: “A tectonic shift from the US to China, which is much more prepared to act as a development partner.

“When I look at what China does,” he continues, “I see a country that invests in infrastructure and into supply chains. In the decades ahead, this will lead to a transformation. Look at the prospective rebuilding of Syria, Iraq, Yemen, Lebanon and Sudan, and you will see that funding will come from the GCC and China who will be involved in construction sector.

“Chinese and GCC developers will successfully develop partnerships and joint ventures for reconstruction and development.”

The new generation of Gulf leaders has much to do in terms of completing the work begun by their predecessors. But they have been given the considerable legacy of economies and financial sectors that are now capable of building on the successes of the last 50 years and performing resiliently in the face of political and economic turmoil.

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