Saudi Arabia's finance minister on Wednesday urged Muslim countries to adopt suitable economic reform programs and adapt to the changing global economic atmosphere to confront the challenges facing them.
“We should also strengthen our joint efforts to overcome development obstacles,” Finance Minister Ibrahim Al-Assaf told the annual conference of the Jeddah-based Islamic Development Bank. Opening the 36th annual meeting of the bank’s board of governors, the minister underscored IDB’s contributions toward boosting the progress and prosperity of Muslim countries. He underscored the Kingdom’s continued support for the bank. Al-Assaf called for greater efforts for manpower development and achieving sustainable economic progress in the member countries.
The minister’s call is significant in the backdrop of anti-government protests in some Arab countries as a result of unemployment, poverty and political corruption. Al-Assaf said Saudi Arabia is the largest contributor to the IDB, holding 25 percent of its capital. “We have also contributed immensely to the capital of other regional and international development organizations. Moreover, we have been at the forefront of donors providing emergency assistance to countries hit by natural calamities,” the minister said.
Referring to IDB’s annual report, Al-Assaf highlighted the assistance offered by the bank to member countries to help them overcome the global economic crisis. The IDB had given a package aid of $250 million to tackle the problem of unemployment in member countries, by providing manpower training, and financing small and medium enterprises.
The minister welcomed a joint IDB-World Bank initiative to finance infrastructure projects. He supported the program proposed by IDB President Ahmed Mohamed Ali to transform the bank into a source of knowledge and efficiency to mobilize resources. Al-Assaf, who is Saudi Arabia’s governor to the bank, lauded the success of the IDB sukuk.
“We hope that the bank would continue its efforts to make use of the excellent rating it has obtained for mobilizing funds at reasonable cost,” he added. He urged all member countries to pay their contributions to the $10 billion Islamic Solidarity Fund.
Saudi Arabia has paid fully its contribution of $1 billion to the fund aimed at fighting poverty in the least developed Muslim countries.
“We also request those countries that made nominal contributions to revise those offers in order to help the fund realize its objectives,” he said. Al-Assaf backed the proposal made by the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) to increase its capital from 150 million to 400 million Islamic dinars.
“We hope that ICIEC would make greater efforts to increase its operations and raise its revenues,” he added. Speaking to Arab News, Al-Assaf noted the growing popularity of Islamic banking and finance. “It’s making big annual growth.
Islamic financial institutions are now operating not only in Muslim countries but also in non-Muslim societies. After the last global financial crisis, Islamic finance has gained greater recognition.”
He said the governors would discuss ways and means of strengthening cooperation. The opening session at Jeddah Hilton was attended by more than 1,000 delegates including ministers, businessmen, bankers and economists. Abdul Karim Al-Arhabi, Yemeni deputy prime minister for economic affairs and minister of planning and international cooperation, presided over the meeting. IDB chief Ali thanked Saudi Arabia and other member states for supporting the bank.
“This helped our institution retain its distinguished AAA rating by international rating agencies and sustain the growth of its project financing operations, which stood at $3.7 billion in 2010,” the president said. IDB has given $70 billion worth of funding for development projects since its inception in 1975.
He said Muslim countries were incurring heavy losses due to lack of cooperation among them. “If we take Maghreb Union as an example, the figures are really frightening. Some studies indicate that the stagnating level of economic cooperation among these countries cost them 2 percent of their annual growth and lowered their GDP by 5 percent. It is indeed surprising that trade among the countries of this group constitutes less than 2 percent,” he explained.
The president also spelled out IDB’s plans and initiatives for the next four years. “We would like to improve the economic development facilities offered by the bank and stimulate the Islamic Solidarity Fund,” he said and urged more cooperation among member countries in the fields of knowledge economy and trade.
“Who will lead the world in the 21st century is the question raised by Arab youth,” Ali said, and urged Muslim countries to play a leading role on the world stage. He said the global financial crisis proved the relevance of Islamic banking and finance.
“Our confused world is in dire need for financial, economic and social systems that are more balanced and more responsive to man’s material, moral and spiritual requirements.” Ali emphasized IDB’s support for Egypt to rebuild the country. “For development work, failure is not an option. We have to work together to meet the urgent social needs by creating employment opportunities, and stimulate growth by attracting direct foreign investments,” he added.
He noted the enthusiasm shown by the present Egyptian government to create a new economic and social model. Commending the role of the youth in the revolution, the IDB president said the youth want the Ummah to seize the opportunity without delay, because they sense the dangers inherent in remaining spectators rather than players.
“The youth fully realize the fact that the world economy is now turning from the West to the East where the Islamic Ummah lies. They yearn for liberation and for restoring the position their Ummah deserves. They believe that competition in the 21st century will not be confined to industrialized countries and will include new countries that have become capable of competing with big countries with soft power, having learned how to use the tools of the new world.”
Ali said the renaissance of the Ummah sought by the youth was not different from the IDB’s Vision 2020. “Ours is a vision for human dignity and is inspired by the resolutions of the emergency Islamic summit in Makkah in 2005. The IDB has taken strategic initiatives aimed at combating poverty and unemployment,” he said referring to the Solidarity Fund. He said the global crisis was the best answer to skeptics of Islamic finance.
“The financial crisis has shown one of the wonders of divine revelation. It showed the harmful effects of engaging in fictitious transactions for making quick material gains and the danger of giving loans without adequate guarantees.”
The IDB chief also pinpointed some of the major shortcomings, calling for urgent remedial action. The development models in member countries are based on outdated systems; the role of the Zakat and Awkaf has become ineffective in containing economic upheavals; there is a lack of strategic orientation toward knowledge economy; and debt-based products outweigh financing tools and investments in the real economy, he said.
Ali said the IDB had signed an agreement with the UNDP to establish an effective mechanism for monitoring and taking preventive action in times of crises and disasters in favor of the citizens of member countries. The IDB has signed a memorandum of understanding with Jeffrey Sachs, head of the Earth Institute at Columbia University, with the objective of benefiting from its millennium village experience.