ISLAMABAD, 15 September 2003 — Fifty-seven Islamic countries have billions of investment funds but are unsure where to park them. Many of them are starkly poor, whereas others wonder as to what to do with their burgeoning billions, and some say, even trillions.
The search for parking Islamic countries’ investment funds, varyingly reported at $3 trillion to $5 trillion, is getting frantic, after 9/11. Arab and other Muslim countries find the environment in United States - the former investment magnate - to be unwelcome, if not utterly hostile. At the same time, even before Washington’s invasion of Iraq, European investment flows into America already had slowed down in the wake of 9/11 and the prolonged stagnation of the US economy.
“Billions of dollars are likely to be pulled out from US,” says a top financial experts specializing in international investment flows. “This trend is likely to strengthen,” say experts just back from Almaty’s intra-investment conference of 57 Islamic countries, grouped under the Jeddah-based Organization of Islamic Countries (OIC). OIC countries have abundant capital, a very large pool of underutilized funds, and an increasingly resourceful Muslim diaspora spread across the globe. The group’s natural resources and energy exports were 40 percent, while the rest of the world exports were 60 percent in 2001. Oil exports alone were 50 percent, while rest of the world contributed the other half.
The investment conference has just concluded at Almaty, Kazakhstan. Sponsored by the Islamic Development Bank (IDB), the conference heard experts from a wide range of countries. Its theme was “Cooperation Among OIC Member Countries for intra-Investment.”
It coincided with 28th annual meeting of IDB’s board of governors. Finance ministers, heads of central banks, monetary authorities, and financial, investment and banking experts attended the conference. It took place at “a crucial point of time for Islamic countries to plan and select their future investment destinations,” said a participant. Pakistan attached a considerable importance to the Almaty conference as it offers a productive environment for foreign direct investment (FDI), a large program in sectors like industry, telecom, IT, financial services, and oil and gas development. It also has a large privatization program of its major state-owned enterprises including banks, telecom monopoly, industrial units, and oil production and marketing. The sale is open to foreign investors.
Islamabad sent its top financial and investment experts to Almaty, headed by Dr. Abdul Hafeez Sheikh, minister for investment and privatization.
How far have OIC countries lagged behind in economic cooperation? How far did they fail in joining hands in intra- regional investment? How far were they unable to generate trade among themselves? Looking at the statistics, their failures are staggering.
Dr. Hafeez Sheikh, for instance, points out, the total FDI that flowed into developing countries in 1998 was $166 billion, of which only $ 16.4 billion — or 10 percent - went to OIC countries. “The situation is no different today,” he said. “Over 70 percent of this FDI, went to less than 20 percent OIC countries. It means, 45 OIC countries, representing almost 25 percent of United Nations members, received less than three percent of total FDI flows that year,” he explains.
Intra-regional foreign trade that is easy to manage — and expand — did poorly, too. OIC failed to loosen the Western hold over foreign trade of the region, or even modify trade flows that would have been cost-effective. As late as 2001, OIC merchandise exports totaled $520.2 billion — only 8.6 percent of the total world merchandize exports that year. “Despite this miniscule figure, it was an achievement for the OIC. It was highest in the last decade. The lowest share was 6.4 percent in 1998,” Dr. Sheikh points out.
The task now laid out for Arab and Muslim countries is enormous. Their previous record of cooperation has been negligible. Dr. Sheikh, for instance, points “out the OIC Common Market has remained just “an idea” since it was adopted in 1974. The OIC Treaty on Investments has received only 19 ratifications, out of 57, since 1981. Dr. Sheikh urged the conference to establish and support “four important clusters in OIC.” These clusters are one each for financial services, energy, agri-business and IT development, for which separate Islamic Funds should be created.
