Organisation of Islamic Cooperation
The Collective Voice of The Muslim World
Date: 05/11/2009
“The Impact of Global Financial Crisis in OIC Countries: Projections for Recovery and the Role of Key Sectors in Development” Istanbul, Republic of Turkey 5-6 November 2009 -------------------- Bismillahi Arrahmani Arrahim In the Name of God, Most Compassionate, Most Merciful Mr. Chairman, Your Excellencies, Distinguished Ladies and Gentlemen, Assalamu Aleykum Wa Rahmatullahi Wa Barakatuh. I am pleased to express my profound gratitude to the Government of the Republic of Turkey for hosting this important Forum and for the kind invitation addressed to me to take part in the inaugural ceremony. I wish also to commend the State Planning Organization as well as the Undersecretary of Foreign Trade, and the Union of Chambers and Commodity Exchanges of Turkey for the excellent arrangements made for this important Forum. I must also welcome all the representatives of both the Public and the Private Sectors in the Member States of the OIC as well as other participants at the Forum. This Forum is being held during the 25th anniversary of the establishment of the Standing Committee for Economic and Commercial Cooperation (COMCEC). As you know the mandate of this Standing Committee chaired by H.E. the President of the Republic of Turkey is to adopt appropriate measures with a view of strengthening economic and commercial cooperation among Member States. It has also remained a credible partner in the implementation of the mandate given by the 3rd Extra-Ordinary Summit of our Organisation on the need for closer economic cooperation among our member states, in order to face current challenges. In this regard, the Agenda of this Business Forum is very topical and significant. Prior to the global meltdown, the OIC leadership saw the need for collective economic actions by members of the Islamic Ummah. Hence the adoption of the vision for accelerated economic development that will cater for the welfare of the various classes of the Muslim population. The global financial crisis came about as we begun to implement the provisions of the Ten Year Programme of Action. This crisis was a symptom of another deeper crisis, which is a systemic crisis of international capitalism itself. The constant decrease in GDP growth rates created a growing surplus of capital, which did not have sufficient profitable investment outlets in the real economy. The alternative was to place this surplus into the financial market, which became more profitable than productive capital investment, especially with subsequent deregulation. This phenomenon has led to recurrent financial bubbles and is the deep cause of the financial crisis of 2007-2009. These financial and economic crises did not only affect the advanced and emerging economies but created enormous economic problems to the Least Developed Countries in terms of massive loss in earnings, in addition, to creating higher rate of jobless and increasing the number of the poor segment of the population. Dear Participants, There is no doubt that trade remains the most credible way of creating wealth, generating economic growth and increasing welfare for the teeming masses of any nation. This realisation is responsible for the emphasis which OIC has currently placed on trade facilitation and trade promotion within the OIC member-countries. Notwithstanding our current objective to achieve the target of an increase to 20% in intra-OIC trade by 2015, the question of bridging the existing gap between growth and poverty reduction is what should be engaging our attention in the long run. As a way of boosting trade among OIC countries, a trade preferential system has been established among OIC Member States. Two subsequent important agreements, namely the Protocol on the Preferential Tariff Scheme for TPS-OIC (PRETAS) and TPS-OIC Rules of Origin, have been finalized and opened for signing and ratification by Member States. PRETAS is expected to enter into force very soon and this will pave the way for the removal of some tariff and para-tariff barriers and will consequently herald a freer flow of trade within OIC countries. With the expected incremental effect of free trade on economic growth in Islamic countries, the problem of poverty alleviation has always revolved around the situation of least developed countries, which constitute one third of member-states of this Organisation. There are pertinent issues of infrastructure deficits in poorer countries, weak capacity utilization, poor human development indices, low income and unemployment, including rural-urban migration. These socio-economic problems are to be addressed by this esteemed Islamic corporate group in collaboration with Governments of OIC member countries. The OIC has several programmes for poverty-alleviation, which can be recommended for your active participation. Infrastructure development is at the core of the OIC Cotton rehabilitation programme, which is also increasing capital investment. In the same vein, the Dakar-Port Sudan Railway project is also receiving attention of Member States as a result of which a Ministerial meeting would be hosted by the Government of the Sudan in December 2009 to be followed by the necessary feasibility studies of this integrative project. A necessary intervention in the area of food security is also encouraged by the General Secretariat and efforts are in place to pool the abundant resources within Member States in this domain. The tertiary sector is still underdeveloped in most of OIC countries, as the services sector accounted for 18.66% of OIC exports and 4% of world services exports. Import of services, on the other hand constitutes 11.24% of OIC imports in this sector. Countries such as Turkey, Malaysia and Egypt do have developed services sector accounting for 20.69%, 18.61% and 13.93% of OIC exports. Cooperation can thereby be meaningful if resources are pooled in cooperative manner. In this regard, one of the initiatives to increase service sector activity in OIC countries is the promotion of tourism. The OIC has therefore adopted a Project on cross border network of Park Reserves and Sanctuaries and another project on cooperation in the area of Information and Communication Technologies. I would, therefore wish to urge you to support these efforts, which are geared towards reducing the cost of doing business in OIC member states. Other issues on the demand side of the various economic endeavors of OIC are those relating to micro-credit and the role of businesswomen in promoting the trickling down of economic welfare to the poor segments of the Islamic Ummah. The financial market in the Islamic world must be developed. The meeting of the Governors of Central Banks in the Islamic States held in Istanbul, Turkey had a similar theme as the one we are discussing here. The effect of the global financial downturn on the economy of member-states. In the midst of the worst financial crisis, the world is desperately looking for a viable solution towards a sustainable financial system. In this context, we require the rethinking of our current international financial architecture. This includes international cooperation in regulatory reform of financial and capital markets, accounting standards, and treatment of international financial transactions. The aim is to strengthen both integration and stability of world capital markets. In addition, we have to rethink the way international financial institutions provide support to countries facing capital and external-payments crises. In this respect, I would like to observe that the Islamic banking and finance can provide a ready response to the search for a new financial order so that we can have the requisite confidence in our international economic relations. The basic element of Islamic finance is the participatory finance model, in which both the financiers and business partners share in the outcome of risk and reward. Mainstreaming this feature of Islamic finance carries the potential of contributing towards the promotion of market-based discipline and stability in the global financial system. Veritably, participatory financial intermediation will help in controlling leverage and the resulting excessive credit expansion. It will also, in turn, help bring about realistic pricing of assets and liabilities. Therefore, the key elements of Islamic finance can lead to the reform of the global financial system and build a resilient financial system, which can prevent the recurrence of financial crises in the future. The Private Sector can also promote foreign direct investments through establishment of subsidiaries in Islamic countries as it is the case with trans-national companies. This initiative would foster employment generation and technology transfer, which are required in order to mobilize the vulnerable segments of the population in the entire developmental process. In addition, partnerships between the private sector and the public sector would be the ideal way of striking a useful balance between provision of social and economic goods. This arrangement is, indeed a recognition of the core role of government to ensure that it puts in place sound and stable ‘rules of the game’ that create a fair, attractive and level playing field and which gives the private sector the confidence to operate, to compete and to do what it can do best: business and the creation of wealth. Your singular and collective roles as stakeholders in this system whether as producers, manufacturers, central bankers, or traders, are absolutely crucial. However, of course, it requires too a commitment to standards, the highest standards, on the part of the private sector. It requires that the private sector sets for itself high standards in terms of the way it behaves, its corporate governance, its approach to corporate citizenship, its approach and attitude towards the evils of corruption, its approach and attitude towards environmental sustainability. All of that is part of the deal that has to be struck if profit is to be maximized, if growth is to be sustainable and if the widening gap between the rich and the poor can be bridged. We also support the SMEs so that they can play their pivotal role in accelerating growth, providing employment, mobilizing local resources for global competitiveness. I wish you every success in your deliberations. Wassalamu Alaikum wa-Rrahamatullahi wa-Barakatuh.
