KUWAIT CITY, 30 May 2006 — The Islamic Development Bank (IDB) will continue to deal with Iran on a “business as usual” basis and as an important member of the Multilateral Development Bank (MDB) of the Muslim world. IDB President Dr. Ahmad Muhammad Ali was responding to reports that the Bush administration in Washington has been putting behind-the-scenes pressure on financial institutions including those from the Middle East not to have any dealings with Iran because of Tehran’s nuclear policy.
“Iran is a member country of the IDB. Our relations with Iran are not affected and will continue as normal. We see this situation as a summer cloud that will vanish,” explained Ali to Arab News. Ali is in Kuwait for the 31st Annual Meeting of the IDB Board of Governors, which opens at the Al-Bayan Palace this morning in Kuwait City. He said that this annual meeting will be attended by a record number of delegates and several important decisions will be taken by the MDB’s Board of Governors.
Top of the agenda is a proposed increase in the authorized, subscribed and paid-up capital of the bank. IDB sources confirmed that the subscribed capital will increase by $2 billion, although this will not be a new commitment but a call on the remainder of the capital increase agreed three years ago by the Board of Governors.
The Board of Governors is also expected to ratify the articles of association of the newly incorporated Islamic Trade Finance Corporation (ITFC), which will have a paid-up capital of $500 million and an authorized capital of $3 billion.
Ali confirmed that $450 million of this capital has already been subscribed. The General Assembly of ITFC is due to meet in Jeddah, its headquarters, in September this year, at which its inaugural board of directors would be elected and its first chief executive officer. Although there are several nominations for the top post of the ITFC, Kuwait is believed to be lobbying strongly for the CEO to be a Kuwaiti appointment.
The ITFC would endeavor to attract more funds from the market through deposits, placements and “any other means of resource mobilization”. Ali rued the fact that “the level of intra-Islamic trade is still well below the aspirations of the bank. It is currently between 13 percent and 13.5 percent. In accordance with the ‘10-Year Action Plan’ agreed at the Extraordinary Meeting of the OIC in Makkah Al-Mukarramah in December 2005, the target for intra-Islamic trade is set at 20 percent over the next ten years.”
Ali confirmed that the bank also plans to establish a Poverty Alleviation Fund, subject to the approval of the Board of Governors. This fund was similarly proposed by the extraordinary meeting in Makkah. The fund is aimed at poverty alleviation programs in the poorest members of the IDB. According to UN least developed country classification, some 21 of the 56 IDB member countries fall under this category, most of which are in Sub-Saharan Africa.
The funds will go toward projects fighting disease such as AIDS and Malaria; developing rural infrastructure, primary healthcare and education. The size of the fund has yet to be decided. Ali confirmed that this fund is separate from the $2 billion set aside under the Ouagadougou Declaration of 2002 aimed at African development over a five-year period.
He acknowledged that trade and investment information between member countries is lamentable and that there is a tremendous shortfall of quality data and information on intra-Islamic trade. This is partly due to the “insufficient capabilities and resources” of the IDB’s own Islamic Research and Training Institute.
