KUALA LUMPUR, 23 June 2005 — Malaysian Prime Minister Abdullah Ahmad Badawi has called for increased economic cooperation among Muslim countries to promote trade and investment.
Delivering a keynote address at the seminar on the 10-year master plan for the Islamic Financial Services Industry held at Putrajaya yesterday, Badawi said “barriers to such cooperation must be removed to allow for mutual economic and financial collaboration, progressive trade relations and the development of economic infrastructure,” adding “the 1.4 billion Ummah today accounts for about 20 percent of the world’s population, Muslim countries contribute only 5 percent of the world’s income.”
He said, “Intra-regional trade among Muslim countries only accounts for about 10 percent of the total trade of Muslim countries, while the balance with non-Muslim countries. A Similar situation also exists in terms of investment flows. A large proportion of wealth generated in a number of Muslim countries does not get invested in other Muslim countries in need of financial resources to pursue economic and social development.”
Badawi said “Poverty and inequities prevail in many parts of the Muslim world today, with high rates of illiteracy, lack of human capital development and poor infrastructure common in many Muslim countries. Of the 57 Organization of Islamic Conference (OIC) states, 27 are classified by the World Bank as low income countries, with a per capita income of less than $765. At the same time, 21 countries are classified as severely indebted. Some Muslim countries are also faced with extremely difficult socio-economic problems and are often forced to rely on international aid and assistance.”
In order to keep pace with Islamic financial institutions, Badawi said, there is an urgent need for more Islamic financial experts, academics and professionals, who have wide knowledge of Shariah laws and regulations.
Badawi also announced yesterday that Bank Negara Malaysia (central bank) will establish an endowment fund of 200 million ringgit to support the role of the international community of Shariah scholars in the global development of Islamic finance.
Islamic Development Bank (IDB) President Dr. Ahmad Mohamed Ali also called for Islamic countries, members of the IDB and the providers of Islamic financial solutions around the world to work toward a common regulatory framework for Islamic financial services industry.
He said “IDB’s highest priority will be working toward a 10-year master plan for the Islamic financial services industry to create an international body that oversees the legitimacy of Islamic financial institutions and draw regulations that will be applicable to all in the industry.”
Ali said through Shariah governance structure, the Islamic financial institutions have introduced a unique corporate culture which ensures a process of rigorous self-regulation.
Addressing the seminar, Bank Negara Malaysia Governor Zeti Akhtar Aziz said “the proposed 10-year master plan for Islamic financial services industry provides a common vision and template for countries to develop sustainable Islamic financial services sector.
Aziz added that it needs to be recognized that while the plan provides the strategic direction, the implementation needs to be managed with flexibility.
The action plans should be implemented taking into account the potential of change that may occur in both domestic and external envirnment.
To keep the sanctity and credibility of the Islamic banking, Aziz called on countries with dual banking system, where conventional banks are allowed to offer Islamic products, to build adequate firewalls and ensure the separation of banking operations to avoid co-mingling of conventional products with Islamic products.
IFSB Secretary-General Rifaat Ahmed Abdel Karim said “The seminar aimed to gather inputs for outlining what the future directions of the Islamic financial services industry should be in the form of 10-year master plan.
“We hope players in each segment of the Islamic financial services industry — including banking, insurance and capital market — will support the formulation of such roadmap and share it as a common agenda in consolidating our efforts to bring the Islamic financial services industry to its next level of development.”
Facilitated by Bank Negara Malaysia, the seminar jointly organized by IDB and (IFSB) was held alongside the 30th annual meeting of IDB Board of Governors, which was attended by 400 professionals, Shariah scholars, banking industry regulators from around the world.