ALGIERS, 1 November — Government officials from three Muslim Asian countries have voiced concern over the impact of the twin challenges of global economic downturn and the international fight against terrorism could have on their economies. They called of strong regional cooperation to contain economic problems while committing to continue strong efforts in economic reforms.
The officials who were speaking during a recent meeting in Algeria for finance and economy ministers from 53 Muslim countries hosted by the Jeddah-based Islamic Development Bank, urged a soul-searching exercise to overcome the challenges ahead through accelerating regional integration and bridging the development gap. They also called for redressing the negative connotation and erroneous perception on the Muslim community.
“The Sept. 11 events have unleashed uncertainties about the future of global economy and its fallout on Pakistan. The impact on our economy is emanating from major sources; reduced levels of imports and exports, decline in the flow of foreign investments and slowdown in the privatization programs and lover revenues and widening budget deficit,” said Pakistan’s Minister of Finance Shaukat Aziz. The impact on the most populous Muslim country, Indonesia, was to such extent that it affected the country’s recovery process that followed the 1997 Asian financial crisis. The country registered a GDP of $154 billion showing a growth rate of 4.8 percent while trade balance until the first half of 2001 indicated a surplus of $2.02 billion and international reserves in July 2001 of $28.9 billion which is enough to finance more than five months of exports.
According to Widjanarko, the secretary general of the Ministry of Finance, the country needs to strengthen its internal efficiency and competency through sound macro economic policies and through stronger regional cooperation.
“ Despite the many difficulties that we have been facing and the current unfavorable world economic conditions, the government has pit tremendous efforts to pull through the crisis. Indonesia remains committed to continue strong efforts in economic reforms,” he said.
Indonesia, he stressed, needs to speed the economic recovery process especially to tackle the increasing unemployment rate and the deterioration of the quality of human welfare.
The Malaysian deputy finance minister, Shafie Muhammad Saleh, said his country shares the concern on the impact of terrorism in the global economy and that it is imperative that Muslim countries work more closely to strengthen their cooperation in the wake of these adverse developments.
He said while Malaysia is willing to cooperate with the international community to counter terrorist acts, it believes that this should be done through a more rational approach without inflicting miseries and death to innocent people.
The impact on Pakistan is such that the country’s ability to stay the course will depend on the support it receives from the international community. “It is imperative that Pakistan receives adequate support from the international community to face the new challenges without undermining its reform efforts. It is also imperative that the burden of foreign debt is lessened through a meaningful debt relief package so that Pakistan gains the required fiscal space for increasing spending on social development and poverty reduction programs,” said Aziz.
The importance of foreign direct investment (FDI) to the economies of developing countries was underlined by former Indonesian president, Professor Bacharuddin Yusuf Habibie who said FDI will enhance productivity and competitiveness of the host economies and contribute to the growth of the GDP.
“The experience of the Indonesian economic crisis has taught us that fast uncontrolled shot-term capital and FDI flow in and out of the country can have a negative impact on the economy, transforming economic growth into shrinking economy. As such, a better international mechanism has to be developed to avoid the negative impact and contain the damages during such crisis,” Habibie said.
Developing countries’ share of total FDI inflows rose from 26 percent in 1980 to 37 percent in 1997 and their share in total outflows for the same period rose from 3 percent to 14 percent. Developing countries in Asia received 22 percent of the total, Latin America and the Caribbean 14 percent and Africa 1 (one) percent. In 1998 the Muslim world accounted for 5.6 percent of the world’s GNP while its share in the world’s GDP rose from 4.7 percent in 1994 to 5.7 percent in 1997. More than 90 percent of the Islamic community lives in developing countries which have 98 percent share of the world’s population growth.
Aziz however said that the twin impacts of an anemic global economy and the US-led fight against terrorism can be turned to the advantage of Muslim countries if they properly worked on the opportunities brought about by these events. “ We have to understand our weaknesses, vulnerabilities as much as identify our strengths and defenses. While improving our strengths, we must also overcome our weaknesses,” he said.
Dr. Habibie said if developing countries were to get foreign investments, they have to improve their human rights record. “Human rights, human responsibilities and human security issues are beginning to dominate the credibility criteria for countries to get FDI as one of the vehicles for sustainable economic growth.”