David Hodgkinson

So how does he feel about the present situation in Saudi Arabia, and how does it affect the bank's interests in the Kingdom?

'Saudi Arabia is the region's biggest economy and the only country in the world with spare oil production capacity in the short and medium term. What happens in Saudi Arabia matters to the world, and there is insufficient recognition of that fact.

'Having lived and worked in the Kingdom twice as a banker, most recently as Managing Director of The Saudi British Bank of which I remain a Director, I can say that banking is very well regulated, and that the traumas of the late 1970s and early 1980s have been overcome. There is a pretty competent business community, low inflation and at the basic level capitalism works well. It is a very robust economy.

'The issue is politics and the demographic challenge, and how to prepare youngsters for a lifetime in the workforce. It is a question of matching the skill sets and expectations, and investment in training. This almost certainly means inflation in labour costs because local people will want to be paid more than expatriates'.

In the Saudi British Bank, which is 40% owned by HSBC and run with the bank's technical and managerial expertise there are more than 1,600 Saudi nationals out of a total staff of 2,000, including 250 women. 'I would say their service ethos is better than in much of the UK,' remarks Mr. Hodgkinson.

'The economy is doing very well in Saudi Arabia but this is overshadowed by the political situation. If the House of Saud does what they say that they are going to do in terms of liberalization then I hope we can come through the current difficulties. At present a few religious fanatics are being highly successful in creating a climate of fear, particularly for expatriates.'

Since moving to the UAE last year, Mr. Hodgkinson has been responsible for a root and branch review of operations. What did he find? And what is being done as a consequence?

'Fundamentally I found that our business on the corporate side was in good shape, but felt that on the personal banking side we needed to up our game. We had centralized in a way that did not fully take customer preferences into account, and become too bureaucratic.

'Since then we have had quite a few changes in personnel, partly due to the normal rotation of staff and also because of the need for some new faces. And more authority has been given back to the branch managers who are now fully responsible for their customers again.'

'But overall the review confirmed that the Middle East was a good place for HSBC to do business and that we remain committed and happy to do business here despite the politics and the regional issues which do not get any less interesting.

'There is a dichotomy in the Middle East in that from the commercial perspective most countries are making the right moves to liberalize and shift away from the 'government-provides-all' model, and to involve the private sector. Even without the upsurge in the oil price since 1999, a lot of the economic growth would still have happened.'

Not surprisingly, Mr. Hodgkinson is particularly impressed by what is happening in places like Dubai and Qatar, although he notes that Oman and Abu Dhabi are also starting to invest in tourism and real estate projects.

'Dubai is still relatively small,' he says. 'But it is easy to imagine the population doubling from one to two million within 10 years. What is happening here is smart, and as long as quality, standards and issues like traffic are addressed I think it is sustainable. The customers are now paying for the projects, and not the Government, which is how it should be done.'

Mr Hodgkinson also sees great potential in Iraq, and notes that many of his customers have Iraq as a significant part of their business expansion plans. HSBC has been granted a banking license, and has made no secret that it is looking for a joint venture with an Iraqi private bank with whom to start operations.

'We hope the security issues are soon resolved,' he adds. 'But there is a great deal going on right now, and people just need to be given a chance to develop.

HSBC's regional head is also optimistic about the outlook in Iran - another place with 'a well educated population and tremendous natural resources'. His hope is that the European non-confrontational style will prevail over a more confrontational approach.

Meawhile, HSBC Amanah is making great strides in the Islamic banking market, far ahead of the bank's initial expectations. 'We were not sure how credible an international bank would be as a source of Islamic finance, and have been surprised by the level of acceptance,' says Mr. Hodgkinson.

'But we were very careful to select a very highly qualified and respected Sharia board. It is still early days after six years, but there is undoubted huge potential and rapid growth in Islamic banking.'

Even an hour's interview is hardly enough to wrap up a full overview of HSBC's activities in the region. In Kuwait the bank has applied to become one of the first foreign banks to get a license, and the radical changes in Libya also open up new opportunities. There is just so much happening in the Middle East today, and HSBC has its foot in many doors.