CONSENSUS OVER ISLAMIC ECONOMIC BLOCK YET A DISTANT DREAM
Muslim leadership at the WIEF conference could not come forward with any solid time-bound mechanism for establishing a common economic market.
Nov 20 - 26, 2006
The dream of making the Muslim Ummah an effective economic bloc stayed far from reality as the rhetoric Muslim leaders could not come out with a concrete move at the 2nd World Islamic Economic Forum (WIEF) 2006 conference in Islamabad.
The experts talking to the PEAGE remarked that the Muslim leadership at the 2nd WIEF gathering could not come forward with any solid time-bound mechanism for establishing any common economic market. The three-day WIEF conference concluded simply with a call to accelerate the cooperation at regional and sub-regional level, which will lead to the establishment of Islamic Free Trade Area (IFTA), increasing the economic cooperation and investment among the member countries of Organization of Islamic Conference (OIC).
In his concluding remarks, WIEF Chairman Musa Hitam also underlined the need for the implementation of the decisions taken at this forum to get the desirable results of these deliberations by saying, "it is tantamount to a futile exercise if actions are not taken on the decisions agreed here at Islamabad." He also announced the new date and venue for the next WIFE conference, which will be held on May 5-7 2007 in Kuala Lumpur, Malaysia.
The declaration urged the member countries to provide full support to the WIEF and its activities, create conducive environment for business, investments and economic growth through regular dialogues between private-public partnership. It also urged them to provide an efficient framework to facilitate movement of entrepreneurs, capital and trade flows, promote Islamic banking, finance and insurance and accelerate regional and sub-regional cooperation leading to establishment of an IFTA. The declaration said: "The pragmatic and action-oriented programmes with effective implementation mechanisms within a well-planned timeframe will open new horizons for the Muslim Ummah. However, within the Muslim countries' bloc, at present Islamic Development Bank is the only financial institution that is providing financial support to the Muslim nations. But it is a tragedy that the bank is much interested in offering credit to its member countries for the purchase of oil and other commodities and is least interested in supporting social and economic-oriented uplift schemes. For example, for the past many years the Pakistan government has been seeking loans for various development projects from the Islamic Development Bank, but the IDB has been showing reluctance in supporting a project and providing only a paltry credit, less than 100 million dollars a year for development projects, whereas the World Bank and Asian Development Bank are providing more than two billion dollars a year to Pakistan for various projects.
Another shocking aspect is that setting aside the gravity of poverty and underdevelopment, the IDB is demanding higher mark-up on lending to Muslim countries for development projects as compared to the lending rates of the World Bank, Asian Development Bank and other multilateral donor agencies. Another drawback of Muslim nations is that they are least concerned about developing their trade bloc.
In this era of globalisation, stiff global competition and changing WTO requirements, several non-Muslim countries are inking bilateral trade agreements with their favourite trade partners. But the Muslim countries are slumbering over the creation and development of a much-needed trade bloc. The classical example of Pakistan can be quoted here. Pakistan has launched a Free Trade Agreement with China last year and negotiating FTAs with Sri Lanka, USA, etc. But the major Muslim trade partners of Pakistan such as Saudi Arabia, Kuwait, UAE, Iran and Indonesia are giving a pathetic response to Pakistan's initiatives of developing a strong trade pact like Free Trade Agreement. Interesting to note is that during recent 2nd World Islamic Economic Forum, hosted by Pakistan from November 5-7, some Muslim countries' leaders pointed out that more than 800 billion dollars are required to develop a comprehensive infrastructure in the Islamic countries. They also stressed the need for developing a strong trade bloc within the Muslim countries. But the question that boggles people's minds is that who would arrange this sizable amount of money and who would come forward to fight against poverty, promote trade and to work for overall development.
Although the oil-rich Arab countries (which have multiplied their wealth through hike in oil prices) have plenty of resources and they are in a position to support the whole Muslim Ummah, but can the Muslim nations expect financial support from Arab leaders, who are not willing to provide oil to their poor brethren countries on lower than market rates or on deferred rates at this critical time when world oil prices are hovering above 60 dollars a barrel, after surpassing 77 dollars mark.
For example, Saudi Arabia has suspended years-old oil supply to Pakistan on deferred payment. Pakistan used to receive up to 500 million dollars crude oil every year from Saudi Arabia on deferred payment, but the Saudi government cut-off this facility irrespective of the fact that unprecedented increase in world oil prices have not only bolstered the graph of poverty, but also made the life of common people miserable in Pakistan and other poor countries as the prices of essential items have increased manifold.
Pertinent to note is that the population of most of the Muslim countries is growing rapidly and the number of people living below the poverty line would further increase in case the Islamic nations and their leaders failed to promote overall development.
Dr. Zeshan Tariq of Lahore University of Management Sciences (LUMS) talking to PEAGE said that various Muslim countries were developing expertise around modern manufacturing and services industries including automobile, defense, information technology, financial, agri-business, energy, bio-medical and many others. He said that these industry clusters could be identified which are trying to improve sector relations between the Muslim world's businesses. He said that much of research and networking tools were still needed for private sector businesses to learn more about opportunities in the OIC members' marketplace. Perhaps greater coordination among OIC member countries' trade promotion agencies to enable easy access to information and opportunities for the private sector would be a valuable start. He said that the analysis has provided some evidence of increased intra-Muslim business activity. It's too early to make waves about this positive trend as even with the tremendous resources and one fourth of the world's population, most Muslim countries still languish in the pool of underdeveloped nations. It is quite clear that there is much more that can be done to strengthen this network of economies.
However, it's the positive efforts and trends that need to be recognized and encouraged for further development. However, recent years have seen a substantial increase in intra-Muslim trade with the top three economies of the Muslim world - Saudi Arabia, Turkey and Indonesia - showing net increase of 57% in exports and 44 percent in imports with other Muslim countries between the period of 2000-2003. The output of the member countries as a group in constant prices doubled to US$ 1.8 trillion in 2004 from US$0.9 trillion in 1990. In relative terms, the average real output of the member countries was 5 per cent of the World output and about 25 per cent of that of the developing countries. Five member countries with the largest economy in 2004 were Turkey (US$ 229 billion), Saudi Arabia (US$ 215 billion), Indonesia (US$ 197 billion), Iran (US$ 126 billion), Egypt (US$ 117 billion), and Malaysia (US$ 107 billion).
The output of these five member countries nearly accounted for one-half of the real output of the IDB countries as a group. Turkey's real output alone far exceeded the combined output of the Least Developed Countries since 1990. The annual real GDP growth of IDB member countries as group has exhibited cyclical trend: it peaked at 8.4 per cent in 1990, slowed down to 1.7 per cent in 2001 and then accelerated to 6.2 per cent in 2004. The annual real output growth of member countries varied widely from one decade to another but in 1995-2004 it recorded 3.9 per cent growth. During 1995-2004, the real GDP growth of member countries was sufficient to compensate for the population growth of 1.9 per cent.
In the period 1985-1994, real output growth decreased in four countries (Albania -4.3 per cent, Cameroon -3.5 per cent, Sierra-Leone -1.9 per cent, and Tajikistan -7.5 per cent), while during 1995-2004 only Guinea-Bissau recorded a negative real output growth of -1.4 per cent.
Decade-wise comparison of real output growth shows that 10 countries experienced contraction in their output. During 1995-2004, nearly one-half of the member countries had average annual real output growth that exceeded the average of the member countries. The real output per capita of the member countries as a group increased to US$ 1,317 in 2004 from US$ 944 in 1990. The top three countries with real per capita output of US$ 10,000 or more in 2004 were U.A.E (US$ 22,173), Kuwait (US$ 17,674) and Bahrain (US$ 13,852). The bottom three countries in terms of real per capita output in 2004 were Tajikistan (US$ 223), Niger (US$ 156), and Guinea-Bissau (US$ 137). At the country level, the per capita GDP ranged from US$ 137 in Guinea-Bissau to US$ 22,173 in U.A.E. Over one-third of the member countries had per capita GDP in 2004 above the average of the member countries