WIEF and the challenge of economic renaissance

OIC has 57 member states. Of these, 31 are classified as least developed and low-income countries and not even a single is considered as developed or industrialised. Of the 26 remaining states, most are developing and only a handful can be considered as emerging economies

By M. Sharif

The second World Islamic Economic Forum (WIEF) concluded its three - day deliberations on 7 November, 2006 in Islamabad on a positive note of establishing a free trade regime amongst the Islamic States and promoting Islamic banking, finance and insurance.

“Unleashing the Potential of Emerging Markets” was one of themes focused by the 250 foreign and 300 local business delegates who attended the forum. Among the many people present were the Malaysian PM, PM and President of Pakistan, President of the Islamic Development Bank (IDB) and many others.

WIEF is the successor to OIC Business Forum that first appeared on the scene in 2004. It was subsequently renamed WIEF and its third meeting will be held in Kuala Lumpur from 7th to 9th May, 2007. In fact Malaysia has a lot to offer in terms of kick starting an economic renaissance in the Islamic World, given the country’s successful experience.

However, there are some questions that need to be answered and some realities that have to be understood before the process can actually be used as a tool to bring about an economic renaissance.

Economic challenges

It is not difficult to define economic challenges faced by the Islamic World. The situation exists on ground and hence the challenges are real and quantifiable. But facing it because of its diversity and vastness makes it somewhat formidable and that is the real challenge for political leaders, technocrats, businessmen, academics and the people. It is worth mentioning that OIC has 57 member states. Spread from Indonesia to Morocco, the total population comes to about 1.25 billion people. 70 per cent of global energy resources are located within the Islamic States, mostly concentrated in the ME, Gulf and Central Asian States.

However, despite being rich in resources, the overall region has very little in real economic terms and there are very few Muslim states that can be classified globally competitive. Conspicuous among them are Malaysia and the tiny Gulf states which are beginning to show sparks of entrepreneurship.

The 57 OIC member states collectively produce less than 5 per cent of global GDP that is valued at $42 trillion. Their GDP is less than the annual GDP produced by Germany whose population alone is less than one - fifteenth of the population in Muslim countries. Moreover, of these states, 31 are classified as least developed and low-income countries (LDCs) and not even a single is considered as developed or industrialised. Of the 26 remaining states most are developing and a few of them are emerging countries economically.

Moreover, intra-Islamic states trade is around 13 per cent and their share in global trade is 6-7 per cent. 39 per cent of 1.25 billion people or 480 million people live below the poverty line.

Most Islamic countries that faced the after effects of the neglect of colonial powers soon after WW-II have really measured up to the challenge of improving governance, giving impetus to economic growth and development, developing infrastructure and human resources and alleviating poverty.

The post-WW II period, spread over six decades, has been a period of varying experience of development among Islamic states and in fact had a positive impact on Muslim states located in the region. Malaysia is the finest example. The country under the leadership of its former PM Mahateer Muhammad scaled many heights of economic and human resource development and good governance. It is now moving ahead under the leadership PM Badawi.

Indonesia did make strides but its economic and human resource potential is yet to be fully developed. The political turmoil of the 60s and then again in the 90s sapped quite a bit of its energy and inhibited to optimise the gains that the country would have made otherwise.

In South Asia, Pakistan and Bangladesh - the two large Islamic states are struggling to have stable systems of governance and achieve sustainable high economic growth with improved prospects. They fall in the category of developing countries and their economic challenges are no less different from those of any developing country.

The Gulf and ME, on the other hand, are blessed with rich oil resources and have developed infrastructure with comparatively better per capita income and surplus budgets but certainly their human resource and non-oil industrial output have been wanting for improvement.

The overall African continent has financial resource constraints, problems of governance and economic development and the Islamic states are no exception. In fact, that region is the worst hit.

The economic challenge for the Islamic World is really formidable because of its diversity and vastness. There are no easy solutions. The only ray of hope is that the more we talk about it, the greater are the chances of creating awareness about improving in the global economic village that is highly demanding and competitive.

Global economic challenge

Having scanned economic challenges faced by the Islamic World, one should look for solutions. This is what was exactly done during the WIEF’s meeting in Islamabad. But understanding of economic challenges and suggested solutions to resolve it world remain incomplete and an effort in isolation unless the challenge was viewed in a global context. This goal post will give correct orientation to find practical solutions. There are different aspects of the global economy but a few of them - competitiveness, value addition, investment, harnessing new methodologies (for industrial products) and new technologies (for management) - are most conspicuous.

They, in them, encompass many facets of development. They are very demanding at the individual and collective level and require survival of the fittest.

The global economic challenge is basically a challenge of multi-nationals and of the corporate sector that flourished in rich industrialised countries during the post WW-II period on the US model. It is considered a reminiscent of the colonial era and of a mindset that considered state - managed economic development the ultimate solution to achieve economic growth, equitable distribution of wealth, employment and basic necessities for all.

The globalisation of economy during the past more than one and half decade has made adoption of corporate culture a must for economic growth. Its adoption by China, India and Pakistan and many other countries around the world has really made it the key to economic success.

Search for solutions

PM Badewi pin-pointed the solution to economic challenge: “to break the vicious cycle of poverty in Muslim nations, we need to develop infrastructure, telecommunication, skilled and efficient human resources to strengthen our economics”. The measures needed to adopt include, “establishing good governance and bridging the gap between rural and urban societies”.

FDI plays a crucial role in solving these issues but then again the initiative to attract FDI has to come from the national governments. Investors, even if they were rich Muslim investors would hardly opt to invest in for reasons of faith if a country does not meet the specific meet criteria for investment.

Conclusion

The adoption of the declaration at the end of the WIEF to accelerate sub - regional co-operation leading to establishment of IFTA (Islamic Free Trade Area) is the first step in the right direction. Commitment of promoting Islamic banking, finance and insurance is also a right approach.

A lot of hard work and vision is required to translate the declaration with something real and concrete. It is generally said that where there is a will, there is a way.

This declaration is the real test of will of the entire bloc and what now remains to be seen is will the leaders be able to carve out a place in the highly competitive global economy. One should stay optimistic about the outcome.

By Mehmood-Ul-Hassan Khan

The second World Islamic Economic Forum (WIEF) ended in Islamabad last week but it did manage to start about a philosophy of integration and cooperation among the Islamic world in order to achieve some kind of financial independence and a respectable position in emerging international geo-politics and economic crisis. Muslim leaders agreed to struggle for the formation of an Islamic Economic Union to secure food, energy, and water security for its populace and pledged to uproot extremism through economic interactions.

Distinguished speakers/leaders

Indonesian President Susilo Bambang Yudhoyono, Malaysian Prime Minister Abdullah Ahmad Badawi, Jordan’s King Abdullah, Egyptian Prime Minister Ahmad Nazif, Saudi Prince Al-Waleed bin Tallal bin Abdul Aziz, General Pervez Musharraf and Shaukat Aziz. The Bank Negara Governor Dr Zeti Akhtar Aziz, Petronas President and Chief Executive Officer Mohammad Hassan Marican, Malaysia Airlines Chairman Dr Munir Majid and CIMB Chief Executive Officer Nazir Razak were also among the prominent guest.

Prime Minister Shaukat Aziz and Malaysian PM Abdullah Ahmed Badawi put forth the ideas of world Islamic unity, Muslim economic renaissance, OIC reforms, and integration of Islamic economy into the global market.

There were also considerations regarding the need for joint efforts for social uplifting by reducing poverty, improving the conditions of people and bringing women into the mainstream society in Islamic countries.

Seven-point agenda

The Prime Minister Shaukat Aziz presented seven-point agenda to achieve diversified but integrated socio-economic goals within the framework of OIC:

* Creation of an Islamic Economic Union within the Islamic countries will be the first step towards integrated and calibrated efforts for Muslim economic renaissance and entering into multilateral free trade arrangements.

* Evaluation of effective mechanism to resolve issues put in place a framework for mutual cooperation to promote unity within the Islamic countries and broaden economic relations.

* Prime Minister Shaukat Aziz urged Muslim countries to fight corruption, set up good governance and take steps for the empowerment of women in order to achieve economic development.

* The Islamic countries must undertake political, economic and social reforms to create an enabling environment for harnessing individual and collective potential. They must ensure political stability and continuity, good governance, transparency and accountability as well as consistent economic policies and improved delivery of social services, especially in health and education with special emphasis on poverty.

* Catch up with the West in the field of science and technology. Skill development through vocational training should receive priority to equip workforce with capabilities which are in demand in national and international markets.

* Evolving a comprehensive growth model to provide a strategy for balanced development and for sharing of financial and commodity surpluses through institutional mechanisms driven by public-private partnerships.

* Unearth the possibility of a world class Islamic capital market to attract international capital, which would enable financing the growth and development of Muslim world.

Integrated outcomes

Prime Minister Shaukat Aziz and his Malaysian counterpart Abdullah Ahmed Badawi agreed on setting up of a Pakistan-Malaysia investment company to encourage investments in the two countries. Under this agreement, Pakistani and Malaysian investors will be able to invest in each other’s country.

The two countries have a trade volume of around $700 million which could reach the $1 billion mark. The two leaders announced that a Free Trade Agreement (FTA) would be signed between them by the end of this year to boost trade and economic relations. Pakistan and Malaysia have multi-faceted cooperation in the defence field. A Malaysian defence delegation would participate in the annual defence exhibition to be held in Karachi this month. Malaysia has excellent universities and Pakistan would like to benefit from their experience by sending its students there.

Also, a Memorandum of Understanding was signed between the National Institute of Banking and Finance (State Bank of Pakistan) and the International Centre for Education in Islamic Finance (State bank of Malaysia). President Islamic Chamber of Commerce and Industry (ICCI) Shaikh Saleh Bin Abdullah Kamel Shaikh Saleh said that ICCI would set up a mega bank with a capital of $100 billion for investment purposes only and added that a formal announcement in this regard would formally be made by Sheikh Mohammed Bin Rashed al Maktoom in Dubai on November 18.

Prospects

Many sectors have been identified among the Islamic countries to open for mutual cooperation and business relationship. It includes, tourism, science & technology, research, biochemistry, agriculture, cottage industries, managed flights of human resources, oil & gas exploration, imports of gas, alternative sources of energy and power, education, health, and many more.

Constraints

*        Bad governance

*           Rampant corruption

*           Decencies human and financial infrastructure

*        Low levels of GDPs rations towards health, education and social uplift

*          Increasing levels of poverty, illiteracy and unemployment

*        Lack of spirits of fair play, accountability, impartiality

*           Absence of rigorous policies of economic deregulations, privatisation, regulatory reforms etc

*        Lack of simple and pure democratic traditions

*        Low levels of industrialisation

*        Lack a vibrant, well-informed middle class which could have a stake in democracy

*        Denial to the people-to-people relationship among Muslim states is conspicuous by its absence, and all that is being done by way of Islamic unity is at the governmental level. That deprives unity efforts of popular support and involvement

*        Tough laws for the issuance of visa among the members of Organisation of Islamic Conference (OIC) to enhancing business ties

*        Lack of FTA mechanism

*        Above all regional and international commitments of different Islamic countries differently due to which the whole Islamic world suffer badly

Concluding remarks

Deeds should speak louder than words and this basically implies that the success of the conference can only be gauged in the days to come. There is one per cent inspiration and 99 per cent preparations to achieve any socio-economic goals. Political will is usually lacking among the Islamic countries but let us hope that the high promises of the 2nd World Islamic Economic Forum may be transformed into reality and we may achieve our past lost glory in all respects in the days to come.