China, India eye Asian Century as Brexit rattles the old order

BUYING TIME: A customer counts yuan banknotes as she purchases vegetables at a market in Beijing. (Reuters)
Updated 11 July 2016

China, India eye Asian Century as Brexit rattles the old order

NEW DELHI: Britain’s vote to leave the European Union and simmering discontent in other Western countries is seen as hastening the arrival of an “Asian Century,” analysts say, led by the rise of China and India.
By 2050, Asia will account for over half the world’s GDP, almost double that of 2011, according to the Asian Development Bank, with three billion newly affluent citizens.
The EU and other powerful collectives such as the UN, NATO, IMF and World Bank hark back to the post-World War II era, with a vision of cooperation leading to peace, prosperity and security.
But the churning currents of globalization and institutions’ reluctance to reform have left Asian nations feeling that they are not well-represented and looking to form new alliances.
“The old system which kept the West rich and safe is under threat,” said Neelam Deo, a former ambassador and director at Gateway House think-tank in Mumbai.
“The British voting to leave the EU in the way they did will impact the old institutions which were set up after World War II and intended to entrench Western power,” she said.
Brexit has summoned the specter of a domino-like departure of other members of the EU, pounded by the migrant and euro crises, as well as a fragmenting United Kingdom, should Scotland vote for independence.
A resurgent Russia, which is angered by EU- and US-imposed sanctions and has friendly ties with China and India, has hailed the Brexit vote as it looks for cracks to exploit.
As the “American Century” got underway after WWII, following imperial Britain before it, China was writhing in the chaos of civil war and colonial India was just gaining independence.
Now China is the world’s second-largest economy, set to overtake the US in around a decade, while India will be the world’s most populous nation by 2022.
The IMF named the Chinese renminbi a reserve currency — a main world currency — last November, joining the pound, dollar, euro and yen.
Rising economic stars Indonesia and the Philippines are growing at around five percent a year, while Europe remains sluggish.
Yet emerging markets argue that IMF voting reforms still don’t give them a big enough voice, while India laments its lack of a permanent seat on the UN Security Council.
Three centuries ago, before the industrial revolution, Asia was the dominant power, far away from the twin Atlantic centers.
With a name that harks back to those days, Beijing’s flagship “One Belt, One Road” policy seeks to revive the ancient Silk Road trade route with huge investment from central Asia to Europe.
In January China opened the Asian Infrastructure Investment Bank, seen as rivalling the World Bank or the Japan-led Asian Development Bank, seeking to expand its financial clout.
Describing itself as “a bank conceived for the 21st century,” AIIB has attracted 57 members including Britain and Australia — with the notable exclusions of the United States and Japan.
Asia’s growing clout rests on various assumptions, including that nations continue on the same economic trajectory and aren’t derailed by unforeseen financial crises.
Other threats include rising inequality, the middle-income trap — where an economy gets stuck at a certain stage of development — and competition for natural resources.
Tensions between rivals China and India were highlighted in June when Beijing blocked New Delhi’s entry to the Nuclear Suppliers Group, a trade group of 48 nations.
“India and China have a fair amount of discontent. Until this is resolved, the Asian Century is going to be very elusive,” C. Uday Bhaskar, said a leading Indian security analyst.
And the West will vigorously defend itself after Brexit, with US President Obama insisting at a NATO summit Friday that the earthquake will not harm transatlantic unity.
World Bank chief Jim Yong Kim used a visit to New Delhi in the aftermath to warn against nations “looking inward.”
But the US is feeling similar pulls, with presidential candidate Donald Trump playing to a desire to retrench from globalization and immigration by pledging to bring back manufacturing and build a wall with Mexico.
Some see a drift back toward sovereign nation states hostile to outside forces — seen in the mantra of “take back control from Brussels” that won the Brexit vote.
“We had this romantic vision to be one world — it is clearly over, nation member states have come back with a vengeance,” said Samir Saran, a senior fellow at the Observer Research Foundation in New Delhi.
“It is something we are witnessing around the world.”

Future ‘extremely bright’ for UK’s Islamic finance economy

Updated 48 min 55 sec ago

Future ‘extremely bright’ for UK’s Islamic finance economy

  • London’s unique position as a finance and technology hub has it perfectly placed to capitalize on a domestic and global boom in demand for Islamic finance
  • UK’s Islamic finance economy and customers will benefit greatly from London’s dominance in the world of fintech

LONDON: London is perfectly placed to continue its rise as a global centre for Islamic finance in the coming decade, and the dual challenges posed by Brexit and the coronavirus (COVID-19) pandemic are unlikely to derail that ascension, according to experts and industry insiders.

It has been a hard year for the global financial markets. The pandemic’s emergence saw 30 percent of global equity wiped out in a matter of weeks in March, and the recovery since then has been marred by intermittent shocks and an atmosphere of deep uncertainty. The world of Islamic finance was no exception to this hardship.

According to Salaam Gateway’s annual State of the Global Islamic Economy report, released this month, global Islamic finance assets were valued at $2.88 trillion in 2019, with roughly $6 billion of Shariah-compliant assets held in the UK — the most in the West. However, globally, “due to the impact of the COVID-19 crisis, the value of Islamic finance assets is expected to show no growth in 2020,” despite consistent growth of a minimum of three percent in previous years.

Many in the UK fear the devastating economic impact of an ill-timed separation from the European Union’s free trade area, just as the country plots its long and difficult recovery from the pandemic, will compound the economic misery after a year of job losses, lockdowns and costly government bailouts.

But despite the near-term challenges, Martina Macpherson, senior vice president of partnerships and engagement at Moody’s ESG Solutions Group, told Arab News that she expects the global Islamic finance industry to ultimately continue to see growth move in an upward direction.

“Islamic finance (will) continue to expand in the next decade across regions and asset classes,” she said. “From a market of just $200bn in 2003, the Islamic Finance sector is expected to grow to over $4trn in assets by 2030.”

Thanks to London’s unique position as a finance and technology hub, Youness Abidou, CEO of Shariah-compliant property investment firm Nester, told Arab News, the city is perfectly positioned to be a key beneficiary of the explosive growth of this industry in the coming decade.

The British capital, he said, has “arguably the perfect mix to support investment into innovative growth whether that be fintech (financial technology) or Islamic Finance. Interestingly, London is considered a hub for both these sub sectors, yet uncertainty lies ahead … the true impact of Brexit remains unknown.”

However, he continued: “I believe true free market economics will prevail. There is a growing demand for Islamic finance products. Innovation in the sector is necessary and so supply has to catch up.”

Abidou explained that London’s fintech sector, in particular, is central to London’s Islamic finance future. Fintech, he said, “continues to challenge the ethics of traditional banking, a fundamental principle of Islamic finance, and so coupling Islamic finance with fintech will drive innovation and growth of products to a wholly under-serviced population.  

Peter Cunnane, national and international strategy lead at Innovate Finance, echoed these views to Arab News, hammering home the importance of the British capital’s burgeoning fintech scene for the UK’s future in a post-Brexit, post-pandemic world.

“The UK fintech ecosystem provides global leadership and knowledge, not just in the broad range of products and services offered by our businesses but also through our deep pools of expertise, and our international connectivity which in turn strengthens our domestic industry. 

“This expertise comes particularly to the forefront during times of crisis,” he added.

One of the most important factors that has allowed the UK to ascend to such an imposing position in the world of Islamic finance is the top-down support the sector has been receiving from the government for years, Samina Akram, managing partner at Samak Ethical Finance, told Arab News.

“Our government’s and our regulator’s commitment and support has been at the heart of the development of the UK Islamic finance sector. The UK was the first member of the EU to authorise Islamic banks, and has been providing Islamic financial service for over 30 years. Over the years our sector has attracted business, capital and investment into the country,” she said.

But after the pandemic, and when the dust clears from Brexit, she argued that not only will Islamic finance stand to gain from the city’s infrastructure and human capital, but the unorthodox approach it takes toward investment — one answerable not only to financial returns but to a set of moral principles — is going to be an increasingly compelling argument that will draw all types of investors, not just Muslims, to invest ethically.

“COVID-19 has slowed us down as humans and is forcing us to reflect,” she said. “What type of future do we want to create for our next generation? What type of impact can I personally make on the world and the planet? These personal and meaningful questions are having major implications on our financial decisions.” And when people ask those questions, she explained, the world of Islamic finance stands to gain.

Akram continued: “At the heart of Islam lies cooperation, transparency and fairness. In essence, it aims to establish a just society, so everyone has a chance of leading a dignified life. This style of ‘finance of empowerment’ is appealing to Muslims and non-Muslims alike.” 

She added: The future is looking extremely bright not just for the UK Islamic financial system, but the global Islamic financial system.”