LONDON, 8 August 2005 — The consultation process for the Islamic Development Bank Vision 1440H (2020) (IDB Vision 2020) kicked off last Tuesday in the Kazakh capital, Almaty.
The two-day consultation seminar, organized by the IDB’s regional office in Almaty, attracted Islamic bankers, development experts and academics from the region, and was aimed at harnessing the input of professionals in the field at a regional level, which would then culminate in a set of recommendations to the IDB Vision 2020 Commission for consideration.
The commission was established by the Board of Governors of the 56-member country multilateral development bank (MDB) at its 30th anniversary annual meeting held in Kuala Lumpur at end June 2005. The commission, which is based both in Kuala Lumpur and Jeddah, is headed by former Malaysian Prime Minister Dr. Mahathir Mohamed.
The IDB Vision 2020 is aimed at coming up with a strategic vision for the pan-Islamic MDB through the next 15 years, especially in enhancing its three core objectives of promoting intra-Islamic trade between its 56 member countries which currently stands at 12 percent; to promote Islamic banking and insurance worldwide; and to alleviate poverty in member countries, most of which especially those in Sub-Saharan Africa are classified as Least Developed Member Countries (LDMCs), some of the poorest nations on earth.
The IDB has also started on a complementary consultative initiative in conjunction with the Kuala Lumpur-based Islamic Financial Services Board (IFSB) in drawing up a 10-year Master Plan for the Islamic financial services. The aim is to chart a roadmap for the next decade of Islamic financial development, and would look at five functions — Islamic banks; Islamic insurance; Islamic capital markets; Islamic non-banking financial institutions; and Islamic financial infrastructure.
In Kuala Lumpur recently, Malaysian Prime Minister Abdullah Badawi pledged his support for the commission and its mandate: “I look to the commission to formulate the vision that will guide us in embarking upon strategic initiatives that will bring prosperity and development to the Muslim world. It will embrace the economic, governance and social agenda as well as future development needs. In many of our countries, the most critical challenge, the root of most of our problems, lies in the economic field.”
The IDB member countries have disparate economies ranging from some of the highest per capita income countries to newly-industrialized economies; developing countries; and some of the poorest nations on earth.
The consultation conference in Almaty did attract some plain speaking. No doubt the recommendations would land on the desk of commission Chairman Mahathir, who was represented at the conference by a colleague. It is perhaps strange that the process should have been kicked off in the Central Asian region, whose countries are the newest IDB members and who have the least developed banking and commercial regulation and legal infrastructures, let alone Islamic finance sectors.
Some of the recommendations doing the rounds both in Kuala Lumpur and Almaty are both fundamental and controversial. Mahathir and his commission have a fine line to tread. But if it is going to be taken seriously and if the IDB is going to benefit from its recommendations, then the commission has to have an independent and free mandate. In other words, no issue or subject should be taboo as long as they are argued and presented professionally and on the merits of the issues, and there should be no self-censorship. The Muslim world, let alone institutions, cannot live in a perpetual state of denial. That the IDB needs a major overhaul is not in dispute. How to go about is the major challenge.
There is a need for some of the larger member countries, other than the Gulf Cooperation Council (GCC) states, to play a more active role especially in their equity subscription to the MDB. Malaysia, Iran, Turkey, Pakistan, Egypt, Iraq and Morocco can all contribute more to the IDB equity subscription, which would create a greater level playing field and would give these countries greater scope in voting through some of the more contentious issues on the agenda.
The IDB group is by far the biggest in terms of affiliates and subsidiaries. Perhaps it may be wise to streamline some of these entities or even privatize one or two entities. The merger of the IDB’s Islamic Banks Portfolio (IBP) and Export Finance Scheme (EFS) to form the core assets of the new$500 million capital Islamic Trade Finance Corporation is a good start.
Other recommendations include the adoption of a new two-term limit of five years each for the job of the president of the bank. This would bring the IDB in line with other MDBs including the World Bank group. The IDB should also have a public performance and delivery charter against which it should be benchmarked and judged. Senior managers should be held accountable in case of non-performance and delivery.
Corporate governance and compliance need to be elevated to international best practice. The core objectives of the bank need to be revisited and refined. For instance, promoting Islamic banking should not be confined to member countries only. It should cover all countries where Islamic banking is practiced and where there are sizeable Muslim minorities such as Russia, China and India.
Above all, the IDB needs to come up with a long-term vision which is pragmatic and achievable; which matches resources with development challenges; which roots out corruption and mismanagement and promotes good governance in member countries; which bridges the gap between rich and poor; and which delivers in its core objectives.
