Speech:
Mr. John Davie, Conference Chair,
H.E. Alderman Ian David Luder, Right Honorable Lord Mayor of the City of London,
Your Excellencies,
Distinguished Guests,
Ladies and Gentlemen,
A pleasant morning to all of you, and welcome to our capital city of Abu Dhabi. I join you in eager anticipation of the valuable insights we shall gain on private-public ventures and how Islamic finance can direct this concept of multi-sector growth to greater heights.
May I take this opportunity as this event’s patron to commend the organisers for providing an excellent platform for us to discuss and debate the role of the Arab World’s unique financial philosophies in boosting the regional and global economies, and in particular attaining and maximizing the numerous benefits of Private Public Partnerships (PPP). It is truly motivating to see such a diverse group of participants who are committed to using such partnerships as tools for progress.
Ladies and Gentlemen:
We all share the sense of urgency in coming up with viable and sustainable solutions to the prolonged financial crisis that made its presence especially felt in the previous year. The International Monetary Fund World Economic Outlook 2009 report’s prediction of a 0.3 per cent reduction of global GDP in 2009 means that none of us will be spared its undesirable effects; we thus need to adopt at the soonest possible time highly effective strategies that can jumpstart the international economy. For us to successfully overcome today’s challenges, however, we need to harmonize rather than isolate our national and regional strengths so that we can come up with unified approaches to recovery and development.
Private Public Partnerships perfectly typify the collaborative notion of growth. They combine and capitalize on the skills and resources of public and private entities to deliver exceptional services to the general public. And while the partners do share the risks that are always present in any economic undertaking, they also partake of the potential rewards that their teamwork offers.
Distinguished Guests,
The Gulf offers great potential for PPPs to reach their maximum potential, as it expects to post a combined GDP growth of 2.5 per cent in 2009. The Emirates in particular is eyeing almost 3 per cent growth in its national revenue, as our non-hydrocarbon businesses continue to expand and as our realty sector steadily moves to more stable levels. The resilience of our economy opens the doors to numerous projects that will be undertaken with the private sector to further enhance public services and facilities. The region thus continues to be a robust partner for international companies to realize exceptional growth through government collaboration.
Islamic finance offers to extend the profitability of the PPP paradigm even further. The global Islamic finance industry is expected to achieve a 15 to 20 per cent steady annual asset growth rate, with the top 100 institutions eyeing a 26.7 per cent annual rate . This industry has transformed phenomenally from being focused on retail financing to providing a comprehensive line-up of financial products and services. It has also extended its reach to serve even the non-Muslim community and blends international regulatory and accounting standards with Islamic financing concepts that foster entrepreneurship, trade and commerce, and societal development.
The Banker 2008 report covering 500 Islamic institutions, including banks, finance companies and insurance or Takaful companies from 47 countries, shows that Sharia-compliant assets of the top 500 grew 27.6 per cent since the November 2007 report to reach USD 639.1 billion. This follows what has been a robust expansion of Islamic institutions over the past years; the 2007 report reflected a 29.7 per cent growth approximating USD 500.5 billion.
One important development that we are observing is the growth of new institutions, especially Islamic investment banks, in the Gulf and even Europe. We can thus say that this new financial form is spreading its influence far beyond the Middle East and Muslim countries. The Gulf currently provides both the largest regional segment and the largest growth in the 2008 report. Institutions in our area posted a phenomenal 47.5 per cent growth to USD 262.7 billion. Non-Gulf states of the MENA region also expanded strongly, expanding 40.4 per cent to hit USD 248.3 billion.
GCC and non-GCC MENA states thus accounted for 80 per cent of the Islamic financial institutions market in 2008, compared to 70.9 per cent in 2007. Asia has been a particularly exceptional performer, led by Malaysia which grew by 32.3 per cent to reach USD 67.1 billion. Pakistan and Indonesia are expected to attain similarly strong growth.
Meanwhile, the combined Australia/Europe/America group expanded by 60.6 per cent to reach USD 35.1 billion in 2008, representing 5.4 per cent of the market; UK’s rapidly expanding activities in Islamic finance significantly fueled this surge. The steady growth of MENA banking and finance along with the region’s resilience against the global financial crisis bodes well for the ability of Shariah-compliant assets to sustain its approximated 30 per cent high growth yield.
Islamic banking is thus turning out to be one of the most vital developments in the global financial services sector at the beginning of the 21st century. The sector currently influences the integration and expansion of international economic movements, part of which come in the form of sovereign Sukuks, or Islamic bonds. Standard and Poor’s reports that USD 73 billion worth of Sukuks were issued worldwide at the end of 2008, compared to USD 61.8 billion in 2007 and USD 27.5 billion in 2006.
As the 2007-2008 World Islamic Banking Competitiveness Report aptly notes, Islamic finance is a trillion-dollar opportunity that definitely deserves further consideration.
Ladies and Gentlemen,
This forum affirms the Arab community’s solidarity with the world, as we offer the resources and skills needed to achieve a much-needed global economic turnaround. Through stronger collaboration between our governments and the private sector, and with the support of our financial institutions, we hope to emerge victorious in our shared quest of attaining sustained prosperity and peace.
I would like to extend my sincerest appreciation for your presence and look forward to the results of your productive contributions. I hope that this event will be both an enjoyable and rewarding endeavour for all of you.
Thank you and please enjoy the rest of the Forum.
