Egyptian mogul speaks

His father was Muslim, his mother was Christian, but for the past 38 years, Egyptian investor and philanthropist Shafik Gabr said, religious concerns have not affected his ability to make sound and rational financial decisions.

At a luncheon hosted Thursday by the International Club of the Yale School of Management, Gabr addressed approximately 40 students and faculty and offered his views on how the Middle East should respond to the global financial crisis.

“For the past 15 years, I have been a voice calling for Middle Eastern banks to integrate globally,” said Gabr, chairman and managing director of an international conglomerate based in Cairo, Egypt.

Gabr said that, in his view, the Middle East’s tradition of allowing religious considerations and to shape its investment strategies has resulted in a growth rate that is more moderate than that of the United States. For example, Islamic banks will not invest in items such as alcohol, pork and gambling because Islam finds them unacceptable items and activities.

Gabr’s company, ARTOC, has been in business for 38 years and is a multi-pronged holding company whose subsidiaries invest in real estate, consumer products, publications, engineering and technologies projects. According to ARTOC’s Web site, Gabr’s father started the company as the Adel Gabr Consultant Company in 1971, and since then, the business has evolved into an international conglomerate.

During his talk, Gabr said the Middle East needs new approaches to leadership and investment attitudes if it is to ensure its long-term prosperity and stability. He also discussed the problems he believes the 2008 financial meltdown revealed in the Middle East, such as its heavy dependence on oil revenue, and the obstacles the people trying to solve those problems will encounter.

He said the region needs to foster well-regulated private economies and to denationalize its state-run economies. However, since his vision for developing the economies of the Middle East is unpopular, he cautioned that leaders in the region will no doubt encounter “political pushbacks,” from those who support the status-quo. He said such parties are the “traditionalist states where the entire government is pretty much run by one family.”

After Gabr’s speech, attendees asked him to compare the economies of the Middle East with those of Asia, and to elaborate on his personal investment tactics.

“Can the Middle East afford to depart from the status quo … and what will that mean for the region’s development?” asked SOM International Club member Mena Cammett SOM ’11.

Gabr replied that the region will develop more rapidly if it adopts a more robust market economy while maintaining its ability to regulate market participants vigilantly. He explained that if more effective institutions are not established to monitor financial derivatives and debt accumulation, he thinks the 2008 financial crisis could recur and the world economy could “once again look into the abyss of uncertainty.”

“I say this because I really do believe in capitalism,” Gabr said. “I really do believe in market economies, but I think we need to save market economies from bad capitalists.”

Toward the end of the luncheon, Yale Law School Fellow Eleni Martsoukuo asked Gabr what factors could explain the Middle East’s inability to keep up with the economic success of the Asian markets, especially given the Middle East’s access to raw materials and human capital. Gabr said he thinks it is a matter of culture and of work ethic. He said that if there is one major challenge that the Middle East faces, it’s education and the creation of a new social dynamic where success is to be emulated rather than disparaged.

“An entire unwritten social contract was created that said, ‘You’re born, you’re guaranteed subsidized service, an education, a job, insurance,’ ” he said of Egypt’s nationalization of its private sector in 1952. “[It] took core ethics of success … out of the equation.”

Gabr’s talk is part of a larger attempt on behalf of the International Club to hold guest speakers three to four times each semester, said Siobhan Agarwal SOM ’10, who organized Thursday’s event.

According to Forbes Magazine, Gabr’s net worth is approximately $700 million.

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