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Abstract
During the 1970s and the early 1980s, the GCC countries made significant progress in financial deepening and in building a modern financial infrastructure. Abundant oil revenue led to the accumulation of sizable official foreign assets and private wealth, part of which were intermediated by GCC financial institutions. Moreover, the GCC countries, which were net providers of savings to the rest of the world until the early 1990s, had little constraint in mobilizing resources for the financing of domestic investment projects, most of which were undertaken by governments. However, activity of the GCC financial intermediaries continued to be centered around their traditional niche consisting mainly of short-term lending to trade, building and construction, and small manufacturing. It was not until the early 1990s that the process of rapid development of financial intermediation and integration with international financial markets started to take hold under the effects of profound changes in the economies of the region, stemming, in particular, from the impact of the Gulf war and the economic reforms that have been initiated thereafter.
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