KUWAIT CITY, 5 June 2006 -- The 31st annual meeting of the Islamic Development Bank (IDB) may have ended on Thursday in Kuwait City, but how successful has the meeting been in achieving further progress toward its core objectives?
The "Kuwait Declaration" issued by the 56-strong IDB Board of Governors at the end of their deliberations highlights the main achievements -- an increase of the multilateral development bank (MDB's) authorized capital from 15 billion Islamic dinars to 30 billion Islamic dinars and its subscribed capital from 8.1 billion Islamic dinars to 15 billion Islamic dinars; the establishment of a $5 billion Poverty Alleviation Fund, to which Saudi Arabia has already contributed the initial $1 billion; and the signing of the final agreement for the incorporation of the International Islamic Trade Finance Corporation (ITFC), which has an authorized capital of $3 billion and a subscribed capital of $500 million of which $450 million is paid up.
The Board of Governors, in the context of the extraordinary Islamic Summit held in Makkah on Dec. 7-8, 2005 in which the "Ten-Year Program of Action" for the Muslim countries was adopted, identified four main challenges for the IDB member countries -- achieving the UN Millennium Development Goals; achieving sustainable economic growth through greater investment and resource flows, increased trade and improved infrastructure; following sound economic policies; and collaborating to stave off the effects of globalization.
The synergies with the "Ten-Year Program of Action" are evident. The aim is to reduce poverty and hunger in the least developed member countries (LDMCs) by half by 2015 -- indeed a very tall order in a mere nine years. "We believe that our resolution to establish the Poverty Alleviation Fund as a new member of the IDB Group will help promote strategic programs designed to economically empower the poor and the needy and thus improve their living standards. We also believe that in this connection there must be special attention given to least developed member countries," stress the governors' Kuwait Declaration.
It also welcomes the establishment in Jeddah of the ITFC with an immediate branch in Dubai; and exhorts the IDB to continue to expand intra-Islamic trade and "to consider the possibility of establishing a free trade area among them (IDB member countries) for greater economic integration".
The Board of Governors further stressed that the IDB can make a difference in the area of development by focusing on knowledge and capacity building in both member countries and the bank, especially through promoting technology and boosting private sector investment in science and technology. In fact, the IDB now requires 10 percent of its annual operations to be devoted to science and technology projects.
However, if you separate the hype and rhetoric from the reality, it becomes obvious how steep the learning curve still is for the IDB and its various entities in achieving their core objectives. As a group the IDB has major organizational shortcomings in terms of strategic leadership; human resources; corporate governance; decision-making process; corporate communications; and effective delivery.
If the bank's institutional capacity is lacking, how can its Board of Governors seriously expect it to deliver effectively on major issues such as a 50 percent reduction of poverty and hunger in a mere nine years; and promoting intra-Islamic trade and greater private sector involvement of member countries?
In Kuwait, the quality of the side meetings was disappointing and perhaps another indicator of how far rhetoric is divorced from reality. The session on the private sector and Islamic banks hardly inspired any confidence. It was organized and dominated by the Bahrain-based General Council for Islamic Banks and Financial Institutions.
"We were wasting our time discussing the budget of an organization totaling $1 million. I have more constructive ways of spending my time. Shamil Bank of Bahrain resigned from the board of the council. Without due process, Jordan Islamic Bank was appointed to the board, which is a member of the Albaraka Banking Group (ABG). The perception in the market is that the General Council is a front for ABG. As such very few institutions take it seriously," confided the CEO of one Kuwaiti Islamic financial institution.
Similarly, others seriously doubt whether the Islamic Chambers of Commerce has the capacity and the clout to deliver on private sector development and cooperation in member countries.
Some of the papers at some of the technical seminars were so abstract that many delegates questioned their immediate relevance to Islamic banking. This was specifically relating to Basel II, where some speakers made absolutely no effort in discussing their impact on Islamic financial institutions and their regulation and supervision. Other side meetings were designed to promote the activities or achievements of the various IDB entities. As such there was no independent scrutiny of these achievements. The IDB annual meeting should be a platform for honest and open debate and discourse. It should be open to embracing new ideas if they are "fit for purpose". Unfortunately, nor the IDB nor the Kuwaiti organizing committee were successful in leveraging the occasion. The whole concept of the annual meeting needs re-evaluation. Above all, it needs imagination.
Take for instance, the question of poverty alleviation. The IDB recently allocated $1 million in emergency aid for the victims of the Indonesian earthquake. Unfortunately, many IDB member countries are prone to natural disasters of one sort or the other. And yet the IDB do not have a permanent Disaster Emergency Reconstruction Fund. IDB President Dr. Ahmad Muhammed Ali is not keen on such a fund, stressing that the IDB is a development bank and not a disaster emergency organization. Such a fund should be the task of the Red Crescent Society or such humanitarian organization. But reconstruction after a natural disaster is a function of development. The Red Crescent Society neither have the funds nor the development capacity to take on such a task.
Similarly, HIV/AIDS is devastating many IDB member countries especially in Africa and Asia. Its impact on the economies of these countries has been well-researched and quantified. And yet the IDB dare not speak its name -- no dedicated action plan to combat or alleviate the impact of HIV; no fund to underwrite such plans; and no vision to give hope to the people in these countries in this respect.
If the organizers of the Kuwait meeting exercised a bit of imagination, a seminar on the economic impact of HIV/AIDS in member countries would have been imperative.
By Mushtak Parker
© Arab News 2006
