Perhaps expectations of the IDB to effect dramatic change in its member countries are too high and unrealistic. Perhaps the edge of the Meeting was lost because it was not convened in the original host country of Yemen because of the political protests there and moved at the eleventh hour to Jeddah.
Unfortunately, judging by the utterings of the senior management and individual governors, it seems that some member countries continue to live in self-denial; some others attend these meetings as civil service and diplomatic tourists who see the IDB Group as a mutual admiration club; and the very few countries who are on top of their brief and are trying to confront the problems their countries and the IDB as a group are faced with and the plight of the so-called Muslim Ummah, and who have been refreshingly frank.
Saudi Finance Minister Ibrahim Al-Assaf’s speech was a mere reiteration of what the IDB achieved in 2010. There was nothing about Saudi Arabia ever issuing a debut sovereign sukuk.
The key demands made by IDB governors were highlighted by Ahmad Mohamed Ali, president of the IDB Group, in his closing address. One demand was for a bigger role for Islamic banking, and Ali stressed that the IDB will be giving priority so as to promote Islamic development finance. "The IDB needs to conduct more dialogue on the role Islamic banking can play in promoting economic and social development in member countries and the incentives that may be provided to encourage Islamic banks to have long term investments in development projects that generate new jobs," stressed Ali. But is this not the mandate which the IDB has had for the last 36 years of its existence? And yet many of its member countries do not have any Islamic banking, while some have a mere peripheral few token products or the odd institution or window.
The governors supported the member countries partnership strategies (MCPS) launched a year or two ago. But this is still in its nascent stage and has been piloted only on Turkey and more recently Indonesia. To do this on the required scale and urgency would require huge technical resources which the IDB does not currently have. Predictably down the line at future annual meetings, the complaints will resurface that the IDB is not implementing MCPS fast enough.
This may help through greater and more meaningful decentralization, which the IDB has promised, but this Ali conceded will be gradual.
The issue of making the terms and conditions of IDB financing provided to member countries more competitive is an annual sore point. Even some IDB managers agree that these have to be improved because if they remain uncompetitive say to the conventional trade and other financing, then it becomes a disincentive for corporates and entities in member countries to use these IDB financing facilities. This in turn undermines two of the very core objectives of the IDB of promoting intra-Islamic trade and Islamic banking and finance per se.
One IDB Group entity, the Islamic Corporation for the Development of the Private Sector (ICD), has already pledged to making its mark-up and repayment schedules more flexible as well as lowering its financing costs. The ICD, according to Ali, is also seeking to introduce new financial tools that respond to the requirements such as the creation of employment opportunities particularly among the youth.
Governors also called on the bank to mobilize financial resources from the market at the cheapest possible rate. In terms of peer review against other multilateral development banks such as the World Bank, Asian Development Bank and African Development Bank, the IDB pricing for its last two Sukuk offerings in 2010 and May 2011 were more expensive and as such at a higher cost to the bank. Sameer Sayyad, alternate governor for Egypt, called for "a periodic review of the IDB Group's pricing policy and its mobilization of resources at competitive prices, to help reduce the cost of financing projects in member countries, under conditions as easy as those applied by similar financing institutions."
Sayyad, also warned that the negative impact of high unemployment on society required the Bank to expand its support to SME's in order to create real employment opportunities, in conjunction with larger projects, in such a novel way as may correspond to the conditions in each country and correct the dysfunctions of its industrial structure. What these small projects basically need, he added, is soft loans to procure production equipment and raw materials. In this respect the ICD is also giving priority to targeting its financing to SMEs in member countries.
However, Sayyad too gave no insight into the problems faced by a post-Mubarak Egypt; the policy of the government on Islamic finance and the latest on Egypt's plans to introduce legislation to facilitate sukuk issuance, which many believe could play a vital role in mobilizing funds to finance development in those economies undergoing political transformation.
Abdel-Hamid Al-Triki, minister of planning and international cooperation of Tunisia, however should be commended for his frank assessment of Tunisia's political, economic and social challenges following the ousting of President Zine El Abidine Ben Ali. He was the only governor to link democratization with economic and political progress. "Successful democratization requires the full commitment of all segments of Tunisian society; i.e. the government, the people and political parties, in this ambitious futuristic project and concerting all efforts to meet this great challenge. We are confident that successful transition will inevitably help us lay the foundations of democracy that will turn Tunisia into a better country and secure welfare and prosperity for its people," he maintained.
Malaysian Finance Minister Mohd Najib Razak, who is also the prime minister, in his statement as governor, stressed that "we are aware that there are a number of instances where Islamic Development Bank, institutionally, was unable to make appreciable differences. If we are to hold Islamic Development Bank as a catalyst of change, we must also recognize that Islamic Development Bank needs to implement its internal reforms, not least in the building of its capacity to a level that allows the bank to be an effective catalyst of change."
As an organization whose responsibilities are global in scope, Islamic Development Bank, he suggested, must begin to pronounce its voice beyond its existing perimeters.
