Nahed Taher, CEO of Gulf One Investment Bank

Nahed Taher, the first woman to head a large Saudi investment bank, says the arid, hidebound kingdom at last will flower as a good place for Western money.

Nahed Taher is raising a $10 billion private equity fund. And negotiating the fine print on a batch of mutual funds she will offer to focus on the volatile Saudi stock market. But the high-flying head of Gulf One Investment Bank still can’t drive her own car or vote. That’s because Taher lives in Saudi Arabia.

The mere fact that Taher, an outspoken advocate of women’s rights in the archconservative kingdom, has such prominence shows that maybe, just maybe, this oil-rich country is ready to revamp its hidebound ways and become a good place for Westerners to invest. While foreigners are forbidden to own Saudi stocks, King Abdullah has called on the nation’s Capital Market Authority (its Securities & Exchange Commission) to permit non-Saudis to buy. Now the only ways outsiders can invest are via private equity pools like Gulf One’s or several Arab-owned mutual funds…

She is every inch the well-spoken, self-possessed investment banker, with a Rolodex and friendships that would be the envy of any of her peers on Wall Street or in the City of London. She’s also very high on the prospects of her nation’s economy and equally upbeat on the entire Persian Gulf as a profitable region for global investors. “I see investment opportunity materializing,” says Taher. She has raised most of the initial $10 billion from investors throughout the Gulf region, including Saudi Arabia. “They believe in my vision,” she says.

Certainly, continued high oil prices are key to her vision of an expanding Saudi economy. Given the high global demand, pricey oil seems like a pretty safe bet. Yet what really encourages Taher is that King Abdullah, crowned after the death of his half-brother Fahd last August, wants to update the Saudi economic system. And to do it right this time. During the 1970s oil boom, when the kingdom last tried to broaden the economic base, Saudi petro-wealth went into government-funded boondoggles, and it all faded with crashing crude prices. Now, she says, there’s a much bigger emphasis on private enterprise and a willingness to invite Western capital into the kingdom for both securities and direct spending. Not to mention increased financial expertise, and some hint at Western-style accounting transparency.

Today Saudi companies, owned by the state or the royal family, are being privatized. Billionaire Prince Alwaleed bin Talal Alsaud, Saudi’s richest man, plans this year to take public his conglomerate, Kingdom Holdings, on the Saudi exchange, and the government is looking at private ownership for its Saudi Arabian Airlines. Taher’s new private equity fund will concentrate on infrastructure, such as building factories and ports. Saudi wishes to become a leading fertilizer and petrochemical provider.

Of course, a tanking of oil prices would severely harm such a sunny scenario. So would a radical Islamic takeover of the country or serious sabotage of its oil apparatus. In February radicals launched an unsuccessful attack on the Abqaiq oil processing center. The hardline Wahhabi school of Islam, which preaches intolerance toward the West, is potent in Saudi; 15 of the 19 Sept. 11 hijackers were Saudis.

Taher, however, is strongly influenced by the West. She spent five years as a child in Houston, when her father was posted there with Petromin, the Saudi state-owned oil company. While a college undergrad, she married and had three children. Her 16-year-old son now attends a private school in Florida. All her kids studied at an American school in Jeddah.

Taher herself got an economics Ph.D. from Britain’s Lancaster University. Eager to “do something for my country,” she turned down a high-powered International Monetary Fund job and in 2001 returned to Saudi Arabia, where she became the first woman (among 4,000 men) hired at the National Commercial Bank. The manager told her: “I am going to take a risk on you.” She quickly rose through the ranks.

Saudi banks are more like private equity funds, which buy companies, than the depository institutions common in the West. Since paying interest is banned under Islamic law, depositors are putting money into a pool that they hope will appreciate. As a result Taher got a good grounding in how to invest and nurture the companies that receive bank capital.

In 2005 she set up her own firm in Bahrain, the Gulf region’s financial hub, where startups are easier, and she will soon have approval to operate in her homeland. Exploding oil prices, robust earnings growth (Saudi companies increased profits 31% last year) and the kingdom’s increasingly free-market tilt have spurred the Saudi stock market. Over the past three years the 79-stock Saudi exchange rose sevenfold.

By David A. Andelman, 05/08/2006

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