Cooperation between the Islamic Development Bank Group and the Kingdom of Saudi Arabia

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1 Cooperation between the Islamic Development Bank Group and the Kingdom of Saudi Arabia

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3 Cooperation between IDB Group and the Kingdom of Saudi Arabia Under the patronage of the custodian of the Two Holy Mosques King Salman Bin Abdul Aziz Al Saud - May Allah protect him, the city of Jeddah will host the 42 nd Annual Meeting of the Board of Governors of the Islamic Development Bank (IDB). This confirms the unwavering support rendered by the Custodian of the Two Holy Mosques to the Group. The Custodian of the Two Holy Mosques, then Crown Prince, had inagurated the last Annual Meeting held in Jeddah in 1435H (2014) on behalf of the late King Abdullah Ibn Abdulaziz - may Allah bless his soul. 3

4 In light of the tremendous support that the IDB receives from the Custodian of the Two Holy Mosques, from his Government and from various institutions in the Kingdom of Saudi Arabia, the relationship between the IDB Group and the Kingdom of Saudi Arabia is witnessing unprecedented momentum. A high-level IDB Group delegation led by H.E. the President, IDBG, visited Riyadh between January 2017, and held executive and technical level meetings with selected Ministries and Government institutions to identify potential areas of cooperation to compliment the Government s efforts towards achieving the strategic objectives (KPIs) of the National Transformation Program (NTP) for 2020, under Vision The Roadmap Partnership with the Kingdom of Saudi Arabia Through selectivity and focus approach, the IsDB Group Member Country Partnership Strategy (MCPS) for Saudi Arabia, for the period , seeks to support implementation of the NTP-2020 and thereby help in the realization of productivity gains in the public sector. After gaining insights from diagnostic studies and adequate preparations, the Management of the IsDB Group held wide-ranging Ministerial-level strategic consultations in Riyadh during January There was a mutual agreement that IsDB Group needs to foster publicprivate partnerships and extend advisory services in selected programs that will help to improve productivity in both the public and private sectors. The goal of the IsDB Group MCPS for Saudi Arabia is to support building of economic resilience through productivity transformation in the non-oil sectors. This support will be delivered through finalization of MCPS Program Anchors, which have been developed and shared with the selected line Ministries and their subsidiary institutions (see attached Table). The MCPS Program Anchors will be implemented in two-stages over the period In the first stage, diagnostic work and preparation of Programs Anchors at the sub-sectors level will be carried out during 2017 with the selected line Ministries. In the second stage, the IsDB Group and the relevant line Ministries will formalize and initiate the delivery of Advisory Work or the financing of bankable Program Anchors over the period Both the scope and scale of selected Program Anchors have been modestly designed; upon completion, their outcomes will determine whether or not the selected Programs will be adopted nationally. This approach will allow the IsDB Group to lay and build foundations for longer-term developmental assistance to various entities in the non-oil sector. For the purpose of overall coordination and monitoring the implementation of the Program Anchors, the IsDB Group will jointly work with the relevant line Ministries and the Saudi Vision Realization Office to complete the first stage of finalization of bankable Program Anchors. Accordingly, the IsDB Group MCPS for Saudi Arabia will be updated during the first quarter of 2018 and an overall financial envelope to support the financing of bankable Program Anchors will be firmed up. IDB Group Message to Saudi Ministries and Institutions The IDB Group conveyed a clear and simple message to the 4

5 Saudi ministries and institutions that the IDB Groups experts have reviewed the components of the Kingdom s Vision 2030 and the National Transformation Plan 2020 and have identified the roles, goals and duties assigned to each ministry for the achievement of the Vision and the Plan. The Group then considered the potential and expertise available to it to forge a partnership with those ministries in order to support them in achieving their respective goals. The Group underscored its full willingness to make the required contributions to the vision and plans of those ministries with open hearts and minds. During the meetings, the general framework was reviewed which was developed by the Group based on its examination of the Vision and Plan for cooperation with the various ministries which provided their views and proposals. Fruitful dialogue sessions were held between IDB Group experts and experts from the ministries. A general overview has already been developed for cooperation between the ministries and the IDB Group over the coming period. The precise details of the aspects agreed upon will be examined later with a view to reaching the phase of effective partnership between those ministries and institutions and the IDB Group. The Ministry of Housing An extensive meeting was held at the Ministry of Housing between H.E. the President of the IDB Group and the Minister of Housing, H.E. Majed bin Abdullah Al Hugail. In that meeting, the two parties examined all areas of cooperation with the Kingdom. The Minister described the IDB Group s initiative to forge a partnership with the Ministry as the first initiative of Saudi Arabia is the largest shareholder of the IDB and its member institutions 5

6 its kind offered to the Ministry by a bank for the implementation of the Kingdom s Vision Discussions between the two parties focused on how best to work together in support of the housing sector in the Kingdom and to benefit from the IDB Group s experience in this domain. Three areas were proposed for consideration as priority areas within the framework of that cooperation: housing cooperatives; establishing a fund for science, technology and innovation in the domain of construction materials and cooperation on the establishment of a real estate financing fund. Also, the importance of public-private partnership in stimulating real estate offer and the role of the IDB Group in the development and promotion of such a partnership, thanks to its experience and expertise in this domain, was also addressed. The IDB Group was the first to support the role of the private sector through engaging in investments with real estate companies in the Kingdom of Saudi Arabia, all of which contribute to providing housing compounds for people with limited income. During the visit, meetings were held among experts from both sides to confirm all agreed areas of cooperation. Many details were examined and the meetings continue to be held with the aim of arriving at a joint programme of cooperation between the Ministry and the IDB Group. Ministry of the Environment, Water and Agriculture In the second stage of the IDB Group s visit to Riyadh, H.E. the President of the IDB Group met H.E. Engineer Abdul Rahman bin Abdul Mohsen Al Fadley, the Ministry of the Environment, Water and Agriculture of the Kingdom of Saudi Arabia. The two parties considered the possibility of cooperation between the Ministry and the IDB Group on the achievement of the Kingdom s Vision 2030 and the National Transformation Plan 2020 within the framework of the roadmap laid down by the Group to consider member countries needs and to contribute to the implementation of their development plans. The Minister and the Ministry s team of experts listened to a detailed description of the IDB Group s activities in member countries and its expertise and capabilities that may be utilised in the framework of the partnership between the Ministry and the IDB Group. The Group underscored its willingness to place its expertise at the disposal of the Ministry and its keenness to achieve fruitful and effective results through that cooperation. The useful discussions addressed cooperation in sustainable agricultural activities and the relevant economic, industrial, financial and social investments. In addition, the role of the private sector to that effect and ways of benefitting from the IDB s ability to transfer expertise from numerous countries were discussed, 6

7 taking into account the Kingdom s circumstances and the comprehensive development goals. The IDB Group identified many opportunities of contribution to the development of the water and environment sector in the Kingdom of Saudi Arabia. It should be mentioned here that the IDB Group attaches great importance to the development of the agricultural sector in its member countries, including the Kingdom of Saudi Arabia. An example of this is the IDB Group initiative to develop the date sector in Al Madinah Al Munawwarah Region in cooperation with the International Trade Centre in Geneva and national partners. This initiative aims to develop the date sector and address the obstacles hindering the achievement of the full potential of the sector and to help diversify and create sustainable economic opportunities. King Abdullah City for Atomic and Renewable Energy No doubt, the Kingdom is growing rapidly and its energy consumption is increasing continuously. Therefore, when the IDB Group examined the Kingdom of Saudi Arabia s Vision 2030 and the National Transformation Plan 2020, this issue was high on its priority list, especially as regards renewable energy in which the IDB has a lot to contribute through the available means of financing and under the rules applicable in the IDB. The IDB Group expressed its full willingness to support and finance private sector developers and independent producers in the areas of conventional and renewable energy production based on the mechanism of partnership with the private sector, in addition to capacity development through the transfer of knowledge and expertise from other IDB member countries using specific mechanisms such as the Technical Cooperation Programme and the Knowledge and Expertise Exchange Programme. For its part, the City expressed its willingness to transfer its experience and expertise in the domains of energy to IDB member countries. The IDB Group received great interest from the officials of the King Abdullah City for Atomic and Renewable Energy in partnership with the IDB. It was also clear that there were wide areas of cooperation between both sides in the public-private partnership programmes, an area to which the IDB Group can contribute considerably. During the meeting, extensive presentations were made by experts from both sides on the activities of the King Abdullah City for Atomic and Renewable 7

8 Energy and the activities of the IDB Group. It was agreed to examine all aspects through which both sides can achieve the required cooperation and partnership. The technical committees from both sides discussed this matter and defined the general framework for the major areas of cooperation over the coming period. Ministry of Education The President of the IDB Group met Dr Ahmed bin Mohammed Al Issa, the Minister of Education. Also, a technical meeting was held among experts from both sides. In both meetings, a number of important issues were addressed which are expected to form the basis for partnership between both parties, including the training of directors of schools and assistants to the directors of education with a view to developing the educational process, partnership in supporting curricula development and teacher training centres, and partnership in the scholarship programme in favour of students from the Islamic world to pursue their studies in Saudi universities. Through cooperation between the IDB and the Ministry of Education, the scope of those scholarships can be expanded. Moreover, public-private partnership was addressed as an area of cooperation since the Ministry has numerous programmes in this regard, including the programme of school construction financing through the private sector. The aim is to dispose of the schools rented for public education. The Ministry also has a project of construction and operation of university hospitals USD 105 Million from IDB for Fadhili Project in partnership with the private sector with a view to providing training for students and providing society with treatment services. Another issue discussed was cooperation with the IDB in the domain of Arabic language teaching outside of the Islamic world, in addition to projects relative to the promotion of studies and research and the establishment of a digital library in universities and public education institutions as a national platform for knowledge transfer. Moreover, a discussion was held on the delivery of advisory and knowledge transfer services in the area of Islamic finance 8

9 in cooperation with internationally renowned institutions and the development of a clear strategy for the participation of the private sector in the education sector, with emphasis on the criteria of educational services, outcomes and governance. Ministry of Labour At the Ministry of Labour, the President of the IDB met the Minister Dr Ali bin Nasser Al Ghafis. In addition, the experts from both sides held an extensive meeting and agreed to work together to support civil society institutions, expand the scope and impact of the sector through supporting nongovernmental institutions and associations, training their managers, implementing programmes addressing the issues of poverty, people with disabilities and orphans and encourage the Awqaf sector to have sustainable sources of financing and to make the non-profit sector more effective in the domains of health, education, housing, social programmes and cultural events. Similarly, the two sides expressed their desire to cooperate in the human development activities, upgrading the competencies of human capital, training national executives on entrepreneurship and cooperation on the development of business incubation and support programmes through capacity building, media, cultural and financial support. This is in addition to the need to implement a set of policies and procedures to enhance the performance of flagship projects to serve the economy and provide advisory services in the area of investment opportunities and economic feasibility studies to upgrade the productivity of these projects. It was also agreed to establish a standing committee for coordination among the two parties and followup of the agreed programmes and projects. It is worth noting here that the IDB Group has already contributed to similar projects in some member countries. In 2015, the IDB Group, through the Ministry of International Cooperation of Egypt, agreed with the Social Solidarity Fund to establish a Shariahcompliant micro-finance company. These projects aim at engaging small investors in the private sector and finding sustainable solutions to create job opportunities and develop the existing skills. In addition, the IDB Group has a wealth of experience in financing nonprofit sector empowerment projects so that it can complement and support the public and private sectors in helping satisfy the needs of society in a sustainable manner. 9

10 MOU between Saudi Ministry of Health and IDB Ministry of Health Ministerial meetings in Riyadh were a continuation of the recent understanding between the IDB Group and the Ministry of Health. Ultimately, the main objective is to help achieve the Kingdom s Vision 2030 and National Transformation Plan On 12 January 2017, the Minister of Health, Dr Tawfiq bin Fawzan Al Rabiah, visited the IDB Headquarters and met the President of the IDB Group. The meeting addressed the ways and means of enhancing cooperation between the IDB and the Saudi Ministry of Health, particularly in the public-private partnership in the delivery of health services. A memorandum of understanding was signed which provided for cooperation on the crowd health programme to ensure the safety of pilgrims, Umrah performers and visitors of the two holy mosques through training the personnel of the ministry and relevant sectors in the Kingdom of Saudi Arabia and other Islamic countries, conducting applied research to support the facilitation of Hajj and Umrah and facilitate the exchange of expertise and visits between the International Centre for Crowd Medicine and similar programme in other member countries, in addition to continuous support for awareness-raising and the media. In addition, emphasis was placed on cooperation with the Ministry on the development of a vaccine for prevention of the Middle East Respiratory Syndrome (Corona Virus) and organising international meetings on the matter in coordination with the World Health Organisation and the Organisation of Islamic Cooperation and with the participation of stakeholders in Islamic countries with expertise in this domain. The two parties also agreed to explore and redress the health effects of the implementation of various development projects and to organise scientific seminars and workshops to examine health issues in general and the agreed areas in particular. 10

11 IDB Ordinary Operations in the Kingdom of Saudi Arabia Pilgrims terminal at King Adbulaziz International Airport in Jeddah The Kingdom of Saudi Arabia is one of the key founding member countries of the Islamic Development Bank (IDB) and one of the highest contributors to its capital since its inception, contributing 23.6% of IDB total subscribed capital of US$ 30 billion. The IDB s ordinary financing operations in the Kingdom of Saudi Arabia took numerous forms, including equity participation, technical assistance and Ijarah. The total aggregate ordinary operations in the Kingdom of Saudi Arabia to date amounted to 46 operations, with a total amount of ID million (approximately US$ 1,040.0 million) distributed as follows: 5 equity participation operations in the amount of ID 30.5 million (US$ 45.6 million); 10 Ijarah operations in the amount of ID million (US$ 990 million); 30 technical assistance operations (grants) in the amount of ID 3.05 million (US$ 4.4 million); 1 loan operation in the amount of ID 0.04 million (US$ 0.06 million). The economic sectors that benefited most from IDB operations in the Kingdom of Saudi Arabia include industry, with 9 financing operations in the amount of ID million; the energy sector, with one financing operation in 11

12 the amount of ID million (US$ 107m); the transport sector, with one financing operation in the amount of ID 64.4 (US$ 78.7m) ( million; the finance sector with 5 financing operations in the amount of ID 24.5 million (US$ 33m) and the social services sector (health and education) with 20 financing operations in the amount of ID 7.31 million (US$ 9.6m). Major Projects Financed in the Public Sector In consonance with the Kingdom s development plans, the IDB interventions in recent years have increased sustainably. Most of these interventions targeted the sectors of industry, energy and transport, which received the largest share (95%) of IDB interventions in the Kingdom. Financing operations were approved in favour of public institutions through the Ijarah mode of financing in accordance with structured financing without sovereign guarantees. In view of the nature of projects and the size of the required financings, the latter have been covered by an alliance of financing institutions and various commercial banks. The major projects partly financed by the IDB in the industry, transport and energy sectors include the following: Rabigh refinery project: The IDB s contribution to this project was approved on 27 November 2004 in the amount of ID million (equivalent to US$ million). The project aims to increase Aramco s production capacity, quantitatively and qualitatively, in order to meet the increasing demand. SABIC chemicals project (Yansab): The IDB s contribution to the financing of this project was approved on 6 June The amount of ID million (equivalent 12

13 to US$ million) was allocated to this project which aims to establish a state-of-the-art petrochemical complex in order to increase the production and manufacturing capacity of various oil derivatives to meet the increasing demand from Europe and Asia. Project of expansion of pilgrims terminal at King Adbulaziz International Airport in Jeddah: The IDB s contribution to this vital project was approved on 10 October in the amount of ID million (equivalent to US$ 105 million) in order to cover part of the cost of expansion, modernisation and equipment of terminals. Fertiliser production industrial complex Ma adin project: The IDB s contribution to this project was approved on 6 January 2008 in the amount of ID million (equivalent to US$ 100 million). The project contributes to the realisation of one of the Kingdom s strategic goals, i.e. increasing its non-oil exports and achieving economic diversification. Al Jubail refinery project (Saudi Aramco): The project financing was approved on 13 March 2010 in the amount of ID million (equivalent to US$ 120 million). The project aims to increase Aramco s production capacity quantitatively and qualitatively in order to match the increasing demand. Sadara petrochemicals project (Saudi Aramco): The IDB s contribution to this project was approved on 10 February 2013 in the amount of ID 78.0 million (equivalent to US$ 120 million). The project aims to increase Aramco s capacity in downstream oil industry in an endeavour to create added value for oil derivatives such as ethylene and propylene for which demand is in continuous increase. Wa d Al Shamal phosphate project (SABIC Complex): The IDB approved its contribution to this project financing on 21 December 2013 in the amount of ID 78.4 million (equivalent to US$ 120 million). This project will enable SABIC to produce around 3.7 million tonnes of various fertilisers and chemicals. In addition, it will help achieve economic diversification in the Kingdom and create around 1,600 national jobs. Al Fadili dual thermal energy project (PPP): The IDB approved its contribution to this project financing on 13 November 2016 in the amount of ID million (equivalent to US$ 105 million). The Fadili gas and electricity project, as a gas-operated generation plant, will enhance the diversification of the dual-generation primary energy mix in the Kingdom of Saudi Arabia. In addition, the project will provide the Al Fadili Plant of Saudi Aramco with steam and water and will enhance the gas production and processing 13

14 capacity. This project is harmony with the National Transformation Plan 2020 launched within the framework of the Kingdom of Saudi Arabia s Vision Through this project, the IDB will help achieve the strategic objectives of the Ministry of Energy, Industry and National Resources. Cooperation in the Area of Capacity Development 1. Technical Cooperation Program 2. A number of activities were implemented which aim at corporate capacity development in favour of public institutions in the Kingdom of Saudi Arabia. On-the-job/systematic training: 11 training sessions were held with the participation of more than 279 trainees. Hiring of experts: The IDB financed 7 operations which included the hiring of 9 experts. Organisation of workshops and seminars: 44 events were organised in favour of more than 1,463 trainees and participants. 3. Technical Assistance Grants The IDB approved four technical assistance grants for the Kingdom of Saudi Arabia to help implement a number of projects with a total financing of US$ 788,680 as follows: Technical assistance grant for the project to establish an electronic library for the Standardisation Organisation of the Cooperation Council of Arab Gulf Countries (US$ 220,000): Through this project, an electronic library was established as a growing and developing knowledge structure in the Standardisation Organisation, whose key role is to satisfy the knowledge needs of a community of beneficiaries, individuals, departments and subsidiary standardization organisations, through obtaining various categories and forms of information sources, analysing them and facilitating the ways of making them available and accessible to those beneficiaries. Technical assistance grant for conducting a study on the conditions of Awqaf in Al Madinah Al Munawwarah (US$ 200,000): This grant helped the Research and Studies Centre in Al Madinah Al Munawwarah conduct a study on the condition of Awqaf allocations in Al Madinah Al Munawwarah in order to ensure optimal use and investment of these allocations. The project resulted in the collection, classification, grouping and storage of more than 5,000 registers of Awqaf deeds in Al Madinah in a database created in the Centre. 14

15 Technical assistance grant for the sustainable development project in Al Madinah Al Munawwarah (US$ 148,680): This project aims to implement a number of community development activities based on a socio-economic survey conducted in the Al Madinah Al Munawwarah region in order to identify the needs, capabilities and priorities and subsequently identify the appropriate interventions to create jobs and promote income-generating activities. Technical assistance grant for the project of contribution to the financing of women development project in Hail region (US$ 220,000): This project aims to support the development centres and non-governmental organisations in Hail region, which seek to implement social development programs to support and develop women in the region. This is done through providing female experts in various development areas and training the existing human resources in order to increase their competence in project management, strategic planning and other areas, in addition to organising familiarization visits to learn about success stories of similar institutions in the domain of women development in IDB member countries. Also, through this project, training centres are established in various domains in favour of women in Hail region in order to implement production unit programs aimed at supporting women to become productive through vocational training and necessary consulting. Cooperation in the Area of Investment The Islamic Development Bank cooperated with the Kingdom of Saudi Arabia through investment management to establish several funds serving the Kingdom and other member countries. In addition, the IDB participated in the capital of numerous Saudi companies The following is a list of IDB investments in the Kingdom of Saudi Arabia or joint investments in cooperation between the IDB and the Kingdom: IDB Infrastructure Fund I: This fund, which was established in 2001 as the first private investment tool in project capitals, focuses on developing infrastructure in IDB member countries. The IDB cooperated with the Public Pension Agency of the Kingdom of Saudi Arabia as a partner in this project, in addition to other major corporate partners from IDB member countries. The Fund invested in 11 projects a total amount of US$ 593 million in various countries, including Pakistan, Turkey, Malaysia and the Kingdom of 15

16 Saudi Arabia. Investments were properly distributed among various sectors (such as energy, petrochemicals and communications). The Fund realized an internal return rate up to 19% (net after tax deduction). IDB Infrastructure Fund II: After the success of the first infrastructure fund, the initiative was taken to launch the second infrastructure fund with the participation of the IDB, the Public Pension Agency and the Public Investment Fund of the Kingdom of Saudi Arabia. Like the first infrastructure fund, the second fund focused on investment in infrastructure in IDB member countries. Saudi SMEs Fund: The Islamic Development Bank is a first investor in the Saudi SMEs Fund, in addition to the Saudi Credit Bank. Established in 2013, this fund aims mainly to bridge the gap between the SMEs financing needs and the lack of financing sources, through providing assistance to appropriate SMEs in the phase of development, hence contributing to the economic development of the Kingdom of Saudi Arabia and diversification through employment, stability and growth. The Saudi SMEs Fund is sponsored by the Islamic Corporation for the Development of the Private Sector (ICD), a member of the IDB Group. The First Fund for Real Estate Income of the Saudi Economy and Development Company (SEDCO Capital): In 2013, the IDB established a partnership with SEDCO for the establishment of a fund dedicated to income-generating investments in 16

17 real estate properties in the Kingdom of Saudi Arabia. The Fund mobilised SAR 250 million and invested in various real estate sectors in the Kingdom, including the retail, commercial, housing and public sectors. Al Farida Housing Project: In 2012, the IDB participated in Al Farida Housing Project which is developed by Iwan Real Estate Company and aims to develop a housing complex consistent with the middle-class population budgets and basic needs in the Kingdom. The project known as Al Farida Housing Project was established in a strategic location in the northern part of Jeddah. This housing area will have shopping centres and all services, while respecting the environment and the local traditions. The surface area of the project is 1 million square metres for the construction of more than 2,000 housing units whose value is in excess of SAR 1.2 billion. Middle East Healthcare Company (MEHCO): In 2002, the IDB contributed US$ 605 million in MEHCO, a private holding company of Bayt Al Batarji Holding Group in the Kingdom of Saudi Arabia. This holding company owns (in whole or in part) companies in the healthcare sector under the name of Saudi German Hospital in Riyadh, Al Madinah, Asseer, Hail and outside the Kingdom. Recently, the holding company was restructured in preparation for its listing in the Saudi Stock Exchange (Tadawul) by the year After restructuring the IDB s share in the company became approximately 2%. Al Muttahida Cooperative Insurance Group (ACIG): In 2004, the IDB contributed SAR 20 million in the capital of this company, which represents 20% of its shares. The Group was listed in the stock exchange in 2007 so that it can comply with the statutory capital minimum required by the regulations. In 2012, the Group increased its capital from SAR 100 million to SAR 200 million. The IDB participated in this capital increase and maintained its share in the Group at 20%. International Investment Company (Foras): The Jeddah Chamber of Commerce and Industry and Dallah Holding requested the Islamic Development Bank to support and contribute to its capital of this company which was meant to be established as an incubator risk capital investment company. Foras was established with a capital of SAR 120 million and the IDB s contribution reached SAR 15.2 million, which represents 14% of its capital. The Islamic Corporation for the Development of the Private Sector (ICD) acquired 2.5% of the capital, increasing the IDB Group s total contribution to 15.5% of the company s capital. 17

18 Operations of IDB Entities in Saudi Arabia The Islamic Research and Training Centre The Islamic Research and Training Centre (IRTI) was established in 1981G with the aim of conducting research, training and information activities that enable the economic, financial and banking activity in member countries and Muslim communities in non-member countries to make their transactions compatible with Islamic Shariah, hence increasing economic development and fostering cooperation among countries. IRTI organised a number of training sessions in the Kingdom of Saudi Arabia since 1404H to date in close partnership and cooperation with various Saudi entities, organisations and institutions. The training sessions in which IRTI participated include the following: Training of the trainers, project evaluation, BOT method in cooperation with the Banking Institute of the Saudi Arab Monetary Agency (SAMA), development of the financial and Islamic products, international finance, promotion of banking activity, business financing, Islamic financing modes and their applications in Islamic banking, the hedging system in Islamic finance, a number of training sessions on the principles of Islamic finance, SME financing, risk management in Islamic financial institutions, the principles and applications of Islamic banks, taxes in Islamic finance and the conference and exhibition of the International Training Centre (ASTD-MENA). IRTI has also organised numerous meetings, forums and workshops on Islamic economics and finance research in the Kingdom of Saudi Arabia. In addition, IRTI s presence was concrete in the regular forums held in the Kingdom of Saudi Arabia, such as the Jeddah Economic Forum, Al Baraka Conference and meetings of the International Islamic Fiqh Academy of the Organisation of Islamic Cooperation. 18

19 The Islamic Corporation for the Insurance of Investment and Export Credit The Kingdom of Saudi Arabia was one of the first countries to join ICIEC since its inception in The current contribution of the Kingdom to ICIEC capital is 60,000 shares at a value of ID 60 million, representing 20.92% of the total subscribed capital of ICIEC. The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) aims to expand the scope of trade among member countries and facilitate direct foreign investments into them through providing Shariah-compliant insurance services. It does so through insurance and reinsurance of export credit in favour of exporters and banks against commercial and non-commercial risks and investment insurance in favour of development-oriented infrastructure and industry projects against expropriation risks, wars, civil disturbance, transfer restrictions, breach of contract and non-honouring of sovereign financial obligations. Scope of Cooperation between the Kingdom of Saudi Arabia and ICIEC since ICIEC s Establishment The Kingdom of Saudi Arabia is on top of the list of countries benefiting from ICIEC services. The total actual operations covered by ICIEC in favour of exporters, importers, investors and banks in the Kingdom of Saudi Arabia since inception amount to US$ 12.4 billion, or 22% of the total operations of ICIEC in favour of all member countries combined. The amount of coverage provided by ICIEC has reached US$ 8 billion for Saudi exporters, US$ 4.3 billion for Saudi importers, US$ 100 million for Saudi investors to provide insurance coverage for their investments abroad. 19

20 In addition, as of the end of the abovementioned period, ICIEC has issued 162 insurance policies for exporters, banks and investors from the Kingdom of Saudi Arabia. 1. Cooperation in the Coverage of Saudi Exports and Imports The volume of actual insurance coverage provided by ICIEC to Saudi exports to date has reached US$ 8 billion. The list of exporting companies include, but is not limited to, the Saudi Basic Industries Company (SABIC), Al Zamil Company, Al Banawi Industrial Group, Al Rajhi Industrial Group, Al Kharif Company, Petro Rabigh, the Saudi Industrial Exports Company, Crystal, Al Suraya, Saudi Tasdeer, Al Nahdi Pharmacies, Ismail Abu Dawood Company, Saudi Total Company, etc. The volume of coverage provided by ICIEC to commodity imports into the Kingdom of Saudi Arabia has reached US$ 4.3 billion in favour of 1,789 buyers from small and medium enterprises in the Kingdom in order to obtain credit facilities for their imports through ICIEC s acceptance to cover them for the benefit of exporters from other countries or insurance of letters of documentary credit opened by Saudi banks in favour of importing companies in the Kingdom of Saudi Arabia. For instance, ICIEC contributed to the insurance coverage for the Riyadh Metro project through providing reinsurance service for the Dutch Export Guarantee Agency (Atradius) in the amount of US$ 306 million. ICIEC paid US$ 17.2 million in compensations to its Saudi exporter clients for their non-receipt of their exports due to the default of importers from Jordan, Morocco, Tunisia, Germany, Portugal, Kuwait and the United States of America. In addition, ICIEC paid compensations to a number of companies and banks in member countries, holders of ICIEC insurance policies in the amount of US$5.014 million due to the default of six Saudi companies. 2. Cooperation in the Coverage of Saudi Investments Abroad Within the framework of the foreign investment insurance service, ICIEC issued insurance approvals in the amount of US$ 1.23 billion to cover investment projects for investors and financing institutions in the Kingdom of Saudi Arabia, including but not limited to the implementation of the coverage of an operation of Indonesian PT Natrindo Telepon Seluler (NTS) in favour of the Saudi Telecommunication Company and Malaysian Maxis. The value of this investment reached US$ 316 million financed by a group of banks led by the Saudi British Bank. ICIEC, for its part, provided insurance coverage in solidarity with the World Bank s Multilateral Investment Guarantee Agency (MIGA). ICIEC aspires to play a great role in the insurance of political risks associated with Saudi investments abroad, particularly in 20

21 Importers 4 3 US$ Billion Banks 2 6 US$ Billion 8 Exporters US$ Billion Saudi cooperation with IC IEC Foreign investment 1 23 US$ Billion Investers 100 US$ Billion Riyadh Metro 306 US$ Billion agriculture and food security projects which enjoy great support from the Government of the Kingdom of Saudi Arabia. ICIEC has been receiving numerous requests from Saudi investors for the insurance of political risks related to their investments in other countries. These requests are being considered for appropriate action. Cooperation with Saudi Banks Within the framework of its support for member countries exports, ICIEC supports banks and finance institutions in member countries in export finance operations conducted by these banks through providing insurance coverage for direct financing provided by banks for these operations or through insurance and promotion of documentary credits linked with export operations conducted by these banks. ICIEC issued insurance policies for a number of Saudi banks, including the National Commercial Bank (NCB), the Saudi British Bank (SABB), Samba Financial Group, Saudi Fransi Bank, Riyadh Bank and the Saudi Investment Bank. The total amount of approved for insurance by ICIEC in favour of these banks until the end of 1437H reached US$ 2.6 billion. In addition, ICIEC endorses insurance policies issued in favour of exporters as a guarantee for banks in order to encourage them to finance those exporters. In this connection, ICIEC has reached understandings with some Saudi banks to forge a partnership among the exporter, the financer and the insurer in order to support Saudi SMEs in expanding their export operations and entering new markets supported by finance and credit insurance services. 21

22 ICIEC s Relation with the Saudi Export Program In the framework of its support of the national guarantee agencies in member countries, ICIEC established close cooperation with the Saudi Export Programme of the Saudi Development Fund with a view to enhancing growth and export capacities of Saudi companies and industries so that they may access international markets, through providing financial solutions, insurance coverage and guarantees that would put 22 those companies and industries on the road to export markets and global expansion. In this connection, ICIEC signed a memorandum of understanding with the Saudi Export Programme to enhance relations of cooperation in the domain of insurance, reinsurance, training, marketing and the exchange of credit information between the two institutions. Reinsurance was provided to numerous operations within the framework of this cooperation,

23 Supporting Saudi infrastructure projects Relationship with Saudi Exports Development Program Developing ICIEC operations in KSA Promation of Saudi Arbia investments the total amount of which has reached to date US$ 327 million. In addition, ICIEC is currently considering a joint programme with the Saudi Export Programme aimed at providing Saudi exporters with a package of integrated insurance and financing services. Under this programme, ICIEC provides insurance for export credit and the Saudi Export Programme finances exports based on ICIEC s coverage of default risks related to importers throughout the world. Program of Development of ICIEC Business in the Kingdom of Saudi Arabia ( H) Continuation of close cooperation with the Saudi Export Programme in order to develop a joint programme for the financing and insurance of Saudi exports; Continuation of cooperation with the Kingdom s Saudi investment support programme in the agricultural sector in ICIEC member countries; Support for infrastructure projects in the Kingdom through providing reinsurance and joint insurance services to international guarantee institutions operating in the insurance of these projects in favour of entrepreneurs from major industrial countries. Conclusion ICIEC looks with satisfaction and gratitude to the generous and continuous support it has been receiving from the Kingdom of Saudi Arabia to help it achieve its objectives. ICIEC aspires to play a greater role in cooperation with Saudi exporters, importers, banks and investors to help them expand the scope of their business through accessing new markets supported by the services of credit and political risk insurance provided to them by ICIEC. 23

24 The Islamic Corporation for Development of the Private Sector The Islamic Corporation for Development of the Private Sector(ICD) is a multilateral financial institution that was established by the Board of Governors of the Islamic Development Bank (IDB) in Rajab, 1420H (November, 1999) to serve as the IDB Group private sector window. ICD s authorised capital is US$ 4 billion. Its shareholders are IDB, 53 member countries, and 5 financial institutions from member countries. ICD has attained the excellent ratings of AA/F+1 from Fitch, Aa3/P-1 from Moody s, and AA from Standard & Poor s. ICD aims to complement the activities of IDB and national financing institutions that work with the public sector in member countries by focusing on private sector institutions in its various activities and operations in a Sharia-compliant manner. In addition to the financing and financial services, ICD provides advisory services to governments and private sector institutions, with a view to adopting policies geared towards the establishment, expansion, and modernisation of private sector firms, in addition to development of capital markets, application of best management practices, and promotion of the role played by the market economy. In its financing, ICD focuses on projects that involve a developmental aspect, generate jobs, and promote exports. To that end, ICD establishes and promotes cooperation 24

25 Sector Real Estate Development Financial Healthcare and social services Industrial Trade Agriculture US$ 167,884, ,434, ,905,454 82,280,000 35,172,414 10,000,000 Transport Total 10,000, ,676,867 and partnership relations to arrange for joint or syndicated financing operations. The Kingdom of Saudi Arabia is the major shareholder in ICD s capital, with a stake of US$ million, i.e. 23.8% of the corporation s shares. The Public Investment Fund is also one of the most prominent ICD shareholders among public institutions. Since its inception, ICD has financed and approved approximately 70 operations in Saudi Arabia, with more than 80 beneficiary companies in 8 different sectors and a total estimated amount of US$ million. More specifically, in the financial sector ICD financed and approved projects worth about US$ million. This amount includes the establishment of a fund for SMEs and the Bidaya Home Finance company. In the health sector, ICD provided several approvals worth a total of US$ million. The transport sector received financing amounting to US$ 10 million. The industrial sector got several financing operations and approvals for a total of US$ 82.2 million, whereas approvals for the real estate development sector totalled US$ million, and the trade sector was financed with US$ 35.1 million. ICD also provided financing for the agriculture sector with a US$ 10 million approval. The following table gives an overview of ICD s operations in Saudi Arabia. 25

26 The International Islamic Trade Finance Corporation The International Islamic Trade Finance Corporation (ITFC), member of the IDB Group was established to promote trade among OIC member countries and thus help to develop them economically and soically. The ITFC started operation in 1429H. (2008) to replace Trade Finance and Development department which was under the IDB. Contribution of the Kingdom of Saudi Arabia to ITFC Capital Share value: US$ 120,000,000 Contribution percentage : 17% Paid-up contribution: US$ 120,000,000 Trade Financing Operations Credit ceiling allocated to the country: US$ 410 million Finance operations since 1397H: US$ 2.12 billion Number of finance operations since inception: 120 finance operations. Amount available within the credit ceiling: US$ 410 million Trade Finance and Promotion Department (TFPD): Concerning trade finance operations, the total number of approved operations of import financing since the start of the programme in 1418H to 1428H reached 38 operations at a total value of US$ 1.3 billion. The following companies received the largest share of these financings: 1.Savola. 2. Amiantit Company. 3. Sa ad Company. 4. SABIC. 5. Ahmed Hamad Al Ghosaibi Company. With respect to export finance operations, the number of approved operations reached 64 operations at a total value of US$ 581 million, bringing the total amount of financings to US$ 1.88 billion. The International Islamic Trade Finance Corporation (ITFC): Concerning the operations approved under the International Islamic Trade Finance Corporation (ITFC) since its inception in 1429H, the total number of operations reached 20 operations in the amount of US$ 716 million in favour of the following companies: 1. Sa ad Company for Enterprises and Financial Services; 2. Al Gussaibi and Brothers for Commercial Services; 26

27 The following table shows the finance operations through the TFPD over the last five years prior to the establishment of the ITFC: Year 1424H 1425H 1426H 1427H 1428H Finance operations (US$ million) Savola; 4. Amiantit 5. Chemanol; 6. Aldullatif Jamjoum and Brothers Company. The Trade Cooperation and Promotion Program (TCPP): The Kingdom of Saudi Arabia is one of the most cooperating and interacting member countries with the ITFC in the domain of trade promotion. The Trade Cooperation and Promotion Programme (TCPP) is cooperating with various entities in the Kingdom of Saudi Arabia in order to design, implement or participate in projects and initiatives for intra-trade development. Cooperation has been established with numerous entities in the Kingdom, such as the Saudi Export Development Centre, in the areas of trade development events. Two meetings were organised with exporters and importers from Islamic countries. Also, the chambers of commerce are conducting trainings on international export and marketing strategies in favour of SMEs in the Kingdom of Saudi Arabia. In addition, there is ongoing cooperation with the Saudi Export Development Authority to provide specialised training programmes to those working in the domain of exports. The Kingdom of Saudi Arabia is one of the biggest donors for the budget of the Aid for Trade Initiative for Arab States (AfTIAS) which benefits all Arab countries, the League of Arab States and trade-oriented regional Arab organisations. The Kingdom has benefited from the AfTIAS programme through the following four projects: 1. Enhancement of the management of border crossings between Saudi Arabia and Jordan; 2. Support for and enhancement of the capacities of Saudi trade-supporting institutions; 3.Addressing non-trade barriers in the Kingdom of Saudi Arabia; 4. Support for Small and Medium-sized Enterprises (SMEs) in the Arab Gulf countries. In addition, a programme is being prepared to develop the sector of dates in Al Madinah Al Munawwarah in cooperation with the Chamber of Commerce and Industry of Al Madinah Al Munawwarah in order to support the export capacity for this product and access to foreign markets. The ITFC, in cooperation with the Saudi Export Programme, is designing and implementing the Arab Africa Trade Bridge with a view to overcoming the challenges and obstacles facing trade between the two regions and cooperating in the implementation of activities aimed at increasing the level of trade between Arab and African countries. These activities will include meetings with exporters and importers from Arab and African countries to introduce and open new markets for these countries products. 27

28 The Saudi Project for the Utilization of Hajj Meat The Saudi Project for the Utilization of Hajj Meat (Adahi) was established in 1403H (1983) by order of the Custodian of the two Holy Mosques. A number of government entities were entrusted with the supervision of the Project operations under a committee called The Utilization Committee. 28

29 The IDB was entrusted with Project management and implementation in accordance with a memorandum of understanding between the Government of the Kingdom of Saudi Arabia and the Islamic Development Bank. The Committee for the Utilisation of Sacrificial Meat is composed of the following entities: Ministry of Interior. Ministry of Finance. Ministry of Justice. Ministry of Islamic Affairs, Endowments, Call & Guidance. Ministry of Hajj. Ministry of the Environment, Water and Agriculture. Municipality of the Holy Capital. Mina Development Project. The Custodian of the Two Holy Mosques Institute of Hajj Research. Islamic Development Bank. Mission of the Project: To ease the pilgrims trip by carrying out the rite on their behalf, as well as carrying out the rites of Udhiyah and Sadaqah on behalf of any Muslim willing to do. Objectives of the Project: Utilisation of the meat of sacrificial animals by distributing it among the poor in Al Haram area and exporting excess quantities to the Muslim poor around the world; Ensuring compliance with the religious and health requirements in the animals slaughtered within the framework of the project. Protection of the environment in the Holy Places by preventing meat waste therein. Gradual utilisation of the remains and distribution of their returns among the poor in Al Haram area. Project Management: The Project Management announces bids for the supply of sheep as well as for operation, maintenance and the transportation of meat, in addition to bids for the delivery of other support services for operation works. There are approximately 40,000 employees working for the project every year, including butchers and their assistants, veterinaries, Shariah supervisors, administrative staff and the technical team in charge of operation, maintenance, management and the provision of subsistence, medical 29

30 care, transport and housing. The Project conducts a thorough administrative preparation of these large groups and resolves the difficulties emanating from the management of such a large scale operation in a very limited period of time to perform a precise and significant task. Project employees are also trained technically on the equipment and machines in slaughterhouses in a very short period of time. In addition to the professionals existing in the Kingdom, contracts are signed with thousands of butchers and support employees from a number of countries, who are brought after passing practical examinations. With respect to Shariah supervisors, the project uses the services of the students of Dar Al Hadith in Makkah Al Mukarramah, the post-graduate students in Shariah colleges in Umm Al Qura University, the Islamic University in Al Madinah Al Mumawwarah and the Imam Mohammed Ibn Saud University in Riyadh. Concerning veterinaries, the project hires more than 800 veterinaries from the Kingdom and from abroad, in addition to final year students of veterinary medicine in King Faisal University and Al Qaseem University. In order to protect the pilgrims interest, the Council of Ministers of the Kingdom of Saudi Arabia issued a decision designating the Kingdom of Saudi Arabia s Project for the Utilisation of Hajj Meat implemented by the Islamic Development Bank, as the sole entity responsible for the issuance, sale and marketing of all types of vouchers of sacrificial rites (Hady, Tamatu, Qiran, Fidiah and Sadaqah). Halal Gelatine Project In order for the Kingdom of Saudi Arabia s Project for the Utilisation of Hajj Meat to make full use of all parts of the Hajj Meat, and after thorough studies on the extraction of gelatine and manufacturing of medical capsules from gelatine extracted from the skin and bones of sacrificial animals, the United Company for the Manufacture of Gelatine and Organic Materials was established to manage the factory. In conclusion, this great project constitutes an example of effective cooperation between the Kingdom of Saudi Arabia and the IDB Group. 30

31 IDB Group Headquarters

32 Islamic Development Bank Group B.O.Box 5925 Jeddah 21432, Kingdom of Saudi Arabia Tel.: Fax: