LONDON, 27 October 2003 — Last year at the 27th annual meeting of the Islamic Development Bank (IDB) board of governors in Ouagadougou in Burkino Faso, the World Bank announced the Ouagadougou Declaration, whereby it committed $2 billion of financing to its 19 sub-Saharan African member countries, some of which are the poorest on earth according to bank criteria. The IDB also signed an MOU with the South Africa-based NEPAD (New Economic Partnership for African Development), pledging cooperation under the Ouagadougou Declaration, especially in the primary healthcare, education, basic infrastructure, and technology exchange areas.
At this year’s 28th annual meeting of the IDB board of governors held in early September in Almaty in Kazakhstan, it was no different. The bank hosted a special side meeting of regional officials and experts aimed at facilitating development similarly in primary healthcare, education, basic infrastructrure, and technology exchange.
At the same time teams of senior IDB officials also visited a number of CIS countries including Russia, which culminated in two conferences-cum-trade fairs in Tajikistan and Uzbekistan between Sept. 25 to Oct. 1. IDB President Dr. Ahmad Muhammad Ali announced a $400 million special financing facility for these countries. Indeed, fiscal year 2002/2003 has been encouraging compared to recent years. Total financing approved by the multilateral development bank (MDB) increased to $3.08 billion compared with $2.88 billion in the previous year. Of this some $1.89 billion was for trade finance operations only.
The bank has instituted an ultimate annual trade finance target of $2 billion in order to promote intra-trade between its member countries — $1.2 billion from its own resources and $800 million from external sources such as the Islamic banks portfolio and the IDB Unit Investment Fund.
Cumulative gross approvals by the IDB between 1976 to end March 2003 totaled $34.57 billion, of which net approvals totaled $30.4 billion. The good news is that gross disbursements for the various financing facilities increased to $1.86 billion, suggesting that deal sourcing and turnaround, and project appraisal is improving.
The IDB has over the years achieved notoriety for its painstaking bureaucracy and rigidity in processing deals and inquiries. Though Dr. Ahmad Muhammad Ali has openly acknowledged that the bank needs to improve in this area, the pace of improvement, according to bankers and financial institutions, is still sluggish.
One reason may be that the IDB is seriously under-resourced in terms of experts and personnel in some of these departments especially the Import Trade Finance Operations (ITFO), the Islamic Banks Portfolio (IBP), Unit Investment Fund (UIF), and the Islamic Banks’ Department. At end 2002/2003, the IDB staff marginally increased to 881 from 878, with the actual administrative budget increasing to ID51.73 million from ID48.04 million.
Intra-trade together with training, healthcare, and literacy are core components of the Plan of Action launched by the Organization of the Islamic Conference (OIC) in 1994 through its specialist body, COMCEC. The IDB, being an organ of the OIC, was given the task of facilitating this Plan of Action. Earlier this year the OIC Framework Agreement on the Trade Preferential System came into force, and first round negotiations are due to start in Istanbul in early 2004.
Some OIC leaders such as Malaysia’s Prime Minister Dr. Mahathir Mohamad have in the past complained that many Muslim countries pay lipservice to economic and trade cooperation with each other. But in the end, nothing significant happens. This despite the fact that Malaysia has unilaterally spent huge resources in promoting trade and banking cooperation between Muslim countries. Malaysia is also perhaps the most proactive promoter of Islamic banking, another core objective of the OIC and the IDB.
A major problem is the poor information flow between member countries. Many IDB member countries still rely on Western consultancies for information about each other. The credit and country risk perception of IDB member countries of each other once again is wholly under-developed. Perhaps the IDB should adopt the “One Stop Shop” concept with deadlines and performance commitments, that are both transparent and subject to accountability.
On a positive note, in April 2003, the IDB has been included in the zero-risk weighted MDB category by the Bank of International Settlements in Basel, in the company of illustrious counterparts such as the World Bank, Asian Development Bank, EBRD, Inter-American Development Bank, EIB, and the Nordic Investment Bank.