One of the major initiatives of the OIC (Organization of Islamic Cooperation) toward addressing challenges arising from the global financial crisis is the progressive development of Islamic financial products.
To this end, the OIC, through its relevant institutions such as IDB Group and SESRIC, is promoting the increased popularization of Islamic financial products in OIC member states, according to Ambassador Hameed A. Opeloyeru, assistant secretary general, OIC (economic affairs). “The convening of eight sessions of international conferences on Islamic economics and finance in several world capitals has been made possible by the continuous collaboration among the various OIC institutions and Institute of Islamic Economics of the King Abdulaziz University, Jeddah,” Opeloyeru told Khalil Hanware of Arab News in an exclusive interview.
The following are excerpts from the interview:
What is the total value of intra-OIC trade and how is it progressing?
The OIC has undertaken various initiatives aimed at increasing intra-OIC trade. This features in particular such activities as trade facilitation, promotion, and financing as well as capacity building and development of strategic commodities. As a result of these measures and consequent to the adoption of the OIC Ten-Year Program of Action (TYPOA) in Makkah in 2005, intra-OIC trade has sharply increased from $ 55.3 billion in 2000 to $ 681.6 billion in 2011 at an average of 16.9 percent annual growth rate, that is double the global average over that period. Progressively, the volume of intra-OIC trade moved from 14.4 percent in 2004 to 17.71 percent in 2011 in consonance with the objective of TYPOA, which seeks to attain 20 percent of intra-OIC trade by 2015. In the same vein, the establishment of International Islamic Trade Financing Corporation (ITFC) in 2008 has catalyzed increased trade financing interventions. The cumulative net trade financing approvals for OIC member states has increased by 63 percent from $ 24.4 billion in 2005 to $ 39.9 billion in 2011. Similarly, the intra-OIC trade increase could also be traced to the activities of the Islamic Center for Development of Trade (ICDT), also known as Casablanca Center, which has continued to organize biannual Islamic trade fairs with the 14th edition to be held in Tehran, Iran from Oct. 28 to Nov. 1. Qatar hosted the 8th edition of the Islamic Trade Fair in 2000, while the UAE hosted the 9th and 13th editions of this trade fair in 2002 and 2011. Saudi Arabia is expected to hold the 17th edition in 2019.
What concessions are offered by OIC to its member states to bolster intra-OIC trade?
To realize the objective of expanding intra-OIC trade, the OIC member states and institutions have adopted various mechanisms toward a progressive removal of tariff, para-tariff and non-tariff barriers to trade among OIC member states. The execution of the three main instruments of Trade Preferential System of OIC (TPS-OIC), namely the Framework Agreement, the Protocol (PRETAS) and the Rules of Origin and their entry into force in 2002, 2010 and 2011, respectively, provided for the removal of tariff and non-tariff barriers to trade and facilitated increased trade exchanges as well as increased access to an estimated 1.6 billion strong OIC market with a value of $ 3 trillion. The common project on the development of strategic commodities and the colossal support by the three new trade facilitation institutions, namely International Islamic Trade Financing Corporation (ITFC), Islamic Corporation for the Development of the Private Sector (ICD), and Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) have also increased the productive capacities of OIC member states, leading to increased competitiveness and growth of their exports.
Which major economic projects are under way in OIC states?
The OIC has put in place several programs and projects to actualize the vision of its leaders as espoused in the outcome of the 3rd Extraordinary Summit held in Makkah in December 2005. In the domain of promoting intra-OIC trade, the OIC has put in place as I mentioned the Trade Preferential System (TPS-OIC) through the elaboration of three instruments to harmonize trade policies among its member states. The signing and ratification of these instruments were accomplished following constant but intense consultations between the secretary general Ekmeleddin Ihsanoglu and senior policy-makers in OIC member states. In the area of human capital development and poverty alleviation, OIC projects include the establishment of Islamic Solidarity Fund for Development (ISFD), to complement the traditional interventions of Islamic Solidarity Fund (ISF). The ISFD intervenes principally in the domains of food security and agriculture and rural development, micro-finance, housing and vocational training. To date, its cumulative interventions amount to $ 1.193 billion. In the domain of transportation, the flagship OIC projects remain the OIC Dakar-Port Sudan Railway Project. This is in addition to the co-financing of other railway projects in OIC regions, such as the Turkmenistan-Kazakhstan-Iran Railway line, within the framework of OIC deliberate policy of assisting the newly independent countries of Central Asia in their economic development initiatives. The contribution of OIC in the development of the proposed rail transportation sector Dushanbe-Mazari-Sharif-Herat is also significant. Tourism development is also on the agenda of OIC economic cooperation, considering the crucial role which tourism plays in promoting the development of small and medium enterprises (SMEs) and, by extension, assisting in the alleviation of poverty in OIC member states. Harmonization of standards is also considered as crucial to the promotion of intra-OIC economic cooperation as well as welfare of Muslim communities in non-OIC countries. To this end, the OIC is promoting the harmonization of halal standards on food and other products. The Standards and Meteorology Institute for Islamic Countries (SMIIC), which is an affiliated institution of the OIC, is now focused on the major tasks of OIC standardization program, including the halal food standards. Recently, Saudi Arabia announced its membership of SMIIC. The OIC, through its relevant institutions, is also promoting Islamic financial products in OIC member states.
What role does the private sector play in the economic development of OIC?
Recognizing the importance of the private sector as the engine of economic growth, the OIC and its relevant institutions have continued to undertake activities toward enhancing the private sector activities, through the holding of private sector meetings, businesswomen forums, capacity development workshops, tourism, and privatization and investment conferences, including exchange of trade delegations and co-organization of fairs and specialized exhibitions. The Islamic Chamber of Commerce, Industry and Agriculture (ICCIA), headquartered in Karachi, Pakistan, is an affiliated institution of the OIC and provides a platform for regular consultations among the private sector organizations in OIC countries. The relevant institutions of OIC also continue to organize training programs and workshops in order to increase the capacity of private sectors in OIC member states and expand their involvement in OIC economic activities.
What role does Saudi Arabia play in OIC’s economic development activities?
Saudi Arabia, as a founding member of the OIC and host of its headquarters, has continued to play a pivotal role in the implementation of the various economic cooperation programs of the organization. Saudi Arabia is the largest contributor to the subscribed capitals of most of the OIC funds, including the Islamic Development Bank Group, ISFD and Islamic Solidarity Fund (ISF), among others. It is also the largest contributor to the budgets of OIC institutions, including such non-OIC funds that have always co-financed OIC projects. The latter includes the Arab Bank for Economic Development in Africa, the Arab Fund for Socio-economic Development and OPEC Fund for International Development, among others. In addition to humanitarian aid, Saudi Arabia also helps through the Saudi Fund for Development (SFD) to finance many key projects in OIC member states. To date, the SFD has financed the various socioeconomic development projects in many OIC countries in Africa, Asia, Europe and South America with a total amount of $ 10 billion.
What has been the impact of Arab Spring on OIC states?
The thrust of the reforms undertaken in the aftermath of the adoption of the OIC Ten Year Program of Action was the mainstreaming of democracy as a recipe for freeing the energies of the unemployed youthful populations in OIC member states. The unrest that resulted in the change of government in some of the OIC member states, popularly referred to as countries of the Arab Spring, has paved the way, albeit potentially, for the socioeconomic transformation of these countries. In addition to its robust but unprecedented humanitarian support projects in the Arab Spring countries, the OIC has created a Trust Fund for Somalia and the 12th OIC Summit held in Cairo, on Feb. 2-7 also recommended for voluntary financial support for Mali and the Sahel, in order to address its humanitarian and security challenges.
Did the euro zone crisis impact OIC’s exports?
In my opinion, the level of exposure of the OIC member states to the euro zone crisis has been far from creating serious financial contagion effects. On the contrary, during that period, the growth of OIC GDP remained positive at 6.3 percent, 1.9 percent, 5.3 percent and 4.8 percent, respectively. This can be interpreted as an increase in wealth within the OIC community. However, there are two identified aspects in which the euro zone crisis could be said to have impacted OIC countries, the merchandise trade and development assistance inflow.
What economic prospects OIC states hold in 2013?
Notwithstanding difficult global economic climate resulting in reduced capital flows to OIC countries, it is expected that the series of intra-OIC collaborative measures in the area of trade exchanges, capacity utilization and investment promotion would lead to increased growth and development in OIC countries. The copious interventions in the area of trade and micro-financing as well as increasing support to SMEs will increase the vibrancy of the economies in the OIC countries. It is projected that the growth rate in OIC countries might become closer to 2007 figure (6.3 percent), due to increased activity on human capital development. On its own part, the OIC programs in 2013 are expected to underscore closer cooperation for the promotion of employment and entrepreneurship, including activities for the promotion of the private sector.
How does cooperation among the stock exchanges of OIC member states work?
The OIC member states’ Stock Exchanges Forum was established in 2005 with a view to promoting cooperation among the stock exchanges of the OIC member states. In addition to establishing a platform for mutually rewarding cooperation, the OIC Member States’ Stock Exchanges Forum launched the S&P OIC/COMCEC Index in 2012. The S&P OIC/COMCEC Index will create new opportunities for investors to benchmark their investments in OIC member states, and for asset managers to create new investment products serving OIC community. Most importantly, it will also address the increasing demand for Islamic financial products, considering the fact that in recent years the interest in these products has been on the rise globally and their market size estimated at $ 1.5 billion in 2012 with a growth rate of 15 percent annually.
Is there intra-OIC cooperation to boost tourism between OIC member states?
The regional project on “Sustainable Development of Tourism in a cross-Border Network of Parks and Reserves in West Africa” is an example of OIC’s efforts in establishing regional and bilateral tourism projects among its member states. This 43 million euro project seeks to develop cross-border conservation parks in West Africa and maximize contribution of tourism to poverty reduction and economic development. The development of eco-and heritage tourism is also receiving considerable boost within the OIC economic cooperation agenda.
The establishment of the Islamic Solidarity Fund for Development (ISFD) has greatly assisted OIC member states in many ways. How have OIC member states benefited from this fund?
One of the major instruments of intra-OIC collaboration is the ISFD. It came about upon the realization that the OIC has adopted many resolutions, programs and projects without putting in place practical mechanisms for funding of these projects. So they created this endowment fund, capitalized at $ 10 billion, as a poverty alleviation fund aimed at ensuring coordination of the various capacity-building efforts of OIC institutions. The fund, which was established by the 3rd OIC Extraordinary Summit in Makkah in December 2005, has hitherto made targeted interventions with a view to fostering sustainable economic growth and job creation, reducing illiteracy, and eradicating contagious diseases and epidemics, such as malaria, tuberculosis and HIV/AIDS in the OIC member states. ISFD is currently preparing to launch two new flagship programs for fighting poverty in the Muslim world, the Basic Education for the Poor (BEP) and the Renewable Energy for the Poor (REP).
Does the OIC have any specific plans to help SMEs?
Since the convening of the six workshops organized under the umbrella of the OIC Task Force on SMEs, which held its final session in 2008, the OIC has multiplied its engagement with SMEs. The tourism sector cooperation framework of the OIC underlines active cooperation with SMEs in the area of artifacts and handicrafts. This is in addition to many specialized trade fairs held for the purpose of empowering the SMEs. The Islamic Corporation for the Development of Private Sector (ICD), as the private sector development arm of the Islamic Development Bank, continues to support the various programs aimed at developing SMEs in OIC member states. The programs of ICD cover such priority sectors as financial, agricultural, logistics, affordable housing, services and manufacturing industries.
OIC is a supporter of agricultural financing and development of strategic agricultural commodities, and recommended the creation of an appropriate mechanism that can promote partnerships between the public and private sector operators. What has been the progress of the agricultural strategy?
Agriculture is considered to be the primary economic activity in majority of the 57 OIC member states and more than 52 percent of the OIC population lives in rural areas and depends on this sector. A significant number of OIC member states figure among the top 20 producers of major agricultural commodities. Recognizing the importance of developing strategic agricultural commodities and competitive agro-industries for generating employment and income opportunities in majority of OIC member states, the OIC developed a number of programs on development of strategic agricultural commodities. One of these programs is the Jeddah Declaration initiative of the Islamic Development Bank, which is a specialized institution of the OIC. This program envisages technical collaboration with FAO and IFAD for the execution of food security projects in OIC member states. Another program is the OIC Cotton Action Plan. This plan is aimed at rehabilitating the cotton sector in cotton-producing OIC member states, in order to develop the SME sector and promoting pro-poor economic activities within OIC member states.
How does cooperation among the stock exchanges of OIC member states work?
The OIC member states’ Stock Exchanges Forum was established in 2005 with a view to promoting cooperation among the stock exchanges of the OIC member states. In addition to establishing a platform for mutually rewarding cooperation, the OIC Member States’ Stock Exchanges Forum launched the S&P OIC/COMCEC Index in 2012. The S&P OIC/COMCEC Index will create new opportunities for investors to benchmark their investments in OIC member states, and for asset managers to create new investment products serving OIC community. Most importantly, it will also address the increasing demand for Islamic financial products, considering the fact that in recent years the interest in these products has been on the rise globally and their market size estimated at $ 1.5 billion in 2012 with a growth rate of 15 percent annually.
Are there any specific OIC plans for Africa development?
African countries constitute the largest group in OIC with 27 member states. Most of Sub-Saharan African countries belong to the Least-Developed Countries (LDCs), majority of which depend for their growth and development on the exports of a few primary commodities, mostly agricultural ones. The Ten-Year Program of Action addressed achieving economic and social development in OIC African member states as an objective, including supporting industrialization, energizing trade and investment, transferring technology, alleviating their debt burden and poverty, and eradicating diseases. The IDB launched in 2008 a Special Program for the Development of Africa (SPDA) with a cumulative financing of $ 12 billion. During the first phase of the SPDA, which was completed in 2012, all the funds allocated under the program have been disbursed in financing 480 development projects in 22 OIC countries in Sub-Saharan Africa. A second phase is now being prepared.
