Key Note Speech of the Chairman, IDB Group, on the Occasion of 7th International Economic Summit of Russia and OIC countries Kazan Summit 2015 June 15-16, 2015 Kazan, Tatarstan, Russian Federation - Your Excellency Rustam Minikhanov, President of the Republic of Tatarstan - بسم الله ال رح م ن ال رح ي م السالم عليكم ورحمة الله وبركاته On behalf of the Islamic Development Bank Group, I would like to express my heartfelt thanks and appreciation to Your Excellency the President of Tatarstan, to your Government and to the people of Tatarstan for the warm hospitality extended to the Islamic Development Bank Group delegation. Our thanks also to the Summit organizers for inviting the IDB Group to this important and strategic forum, the Kazan Summit 2015. It is a great pleasure to be with you today in this beautiful city of Kazan. For us, Kazan is not only a large political, economic, educational, industrial, commercial and tourist center. It is the place where superb horsemen shaped a rich history of collaboration, cooperation, closeness and togetherness. Since the 10th century, under the Abbasid caliph al-muqtadir in Baghdad, Kazan has been modeling the leveraging of advantageous geographic positions on the intersection of major trading roads for connecting the West and the East. Trade has led the trans-cultural formation of the city weaving it from two cultures: Christianity and Islam. With the gilt-domed Annunciation Cathedral beside the large mosque in Russia, occupying symbolic pride of place inside the city s Kremlin, modern Kazan continues to be an important center of multinational culture. Today, it is more than legitimate that this 1000-plus-year-old but still this vibrant capital is a platform of positive interaction, synergy and friendship between Russian Federation and the Muslim world in the 21 st Century. It is highly fortune that your forum, KAZAN SUMMIT, gathers the pinnacle of investors, businessmen, scientists, analytics to initiate more bridges for sustaining the interpenetration and the fraternal relations here with more business and mutual economic benefits between Russian Federation and the OIC Counterparts. I would like to congratulate the organizers of the Kazan Summit for selecting an important and timely theme for this year s event, which is Islamic Finance for constructive global trade and investment. I am confident that the deliberations to take place today will provide valuable insights on the role, which Islamic finance can play in enhancing global trade and investments. I am sure that you will also be able to discover the opportunities, which Islamic finance can offer in
enhancing trade and investment within the Russian Federation on one hand and with the IDB Group member countries, on the other hand. I would like to concentrate on three directions in my statement today; namely, First: Islamic Finance:- Its merits and potential; Second: The Investment potential and Trade with IDB member countries; and third: What the IDB and each member of the IDB Group can offer. Islamic finance by its very nature is linked to real economic activity, based on either a trade activity or an investment activity. This financing of real economic activity discourages irrational borrowing by governments and private sector and ensures an optimum use of internal and external resources for socially and economically viable projects. The concept of risk sharing versus risk transfer leads to risk-based capital allocation thereby encouraging prudent lending behaviors. One of the key lessons to be learnt from the recent global financial crisis is that economic growth which is delinked from the real economy will ultimately be based on a weak foundation, causing economic instability and financial turmoil in the long run. In this context, Islamic finance offers a new approach wherein financial transactions are directly linked to the real assets and thus the real economy, emphasizing risk sharing and leading to the development of entrepreneurship and willingness for real investments. The application of risk sharing principles further supports this linkage, which helps in avoiding undesired speculation and instability, which we have seen in the past financial crisis. Islamic finance integrates ethical and moral values, making it attractive to both Muslims and non-muslims. It seeks to maximize both financial returns and socially responsible or ethical behavior. As such, the appeal for Islamic finance is worldwide, irrespective of geography and religion, and the benefits of Islamic finance are globally acknowledged. According to the recent report on Islamic Finance published by IMF during the World Bank / IMF Spring meeting 2015, the Islamic Finance is growing by 16% per annum and its assets are forecasted to reach USD 3.4 trillion by 2018. Also, as you are aware, in the last few years, various non- OIC member countries have issued Sukuk (Islamic Bonds), including United Kingdom, Hong Kong, and Luxembourg to name a few. In this regard, it is my pleasure to inform you that I will be heading this afternoon to Moscow at the invitation of Her Excellency the Chairman of the Central Bank of Russia to meet with Her Excellency and discuss the potential of Islamic Finance. I will assure Her Excellency of the commitment of the IDB Group to help in whatever way in supporting the introduction of Islamic Finance with different ways and means such as organizing seminars and workshops, exchanging of experts and benefitting from the experience of other countries within or outside the OIC. IDB is a pioneer in developing Islamic finance globally. IDB has assisted countries all over the world in developing the enabling environment for Islamic banking, capital markets (Sukuk), and Takaful (Islamic Insurance). It has played a leading role in establishing Islamic financial institutions and has equity investments in several such institutions. Moreover, IDB has launched several investment funds such as the IDB Infrastructure Fund 1 and 2. It also played a leading role in establishing and promoting Islamic infrastructure institutions and standard setting bodies (AAOIFI, IFSB, CIBAFI etc.). It has a dedicated research & training
arm in the area of Islamic finance (the Islamic Research and Training Institute, IRTI, a member of IDB Group). Furthermore, IDB enjoys close cooperation for Islamic finance development with multilaterals like World Bank, IMF etc. As a matter of fact, IDB Group has been helping in developing Islamic finance in Central Asia with the request of the concerned governments. For example, the Islamic Banking Law in Tajikistan passed by Parliament in May 2014, and the draft amendments in the Banking Law under preparation in Kazakhstan, and the Draft Sukuk and Takaful Law under preparation in Kyrgyz Republic, etc. As such, The IDB Group can assist the Russian Federation to develop a full-fledged masterplan for developing Islamic finance in Russian Federation, which may include details on feasibility, key challenges, road-map, opportunities, benefits of Islamic finance development in Russian Federation. Tatarstan could be promoted as the Islamic Finance Hub in Russian Federation. To address the second theme of investment and trade, I would like to say that Trade is the bridge that connect countries and communities. However, investment on the ground is the needed foundation in order for this bridge to be used. The strength of Islamic Finance is that it provides effective tools in both promoting investment and enhancing trade. The IDB Group has been spearheading development efforts for the past 40 years. During this time, IDB Group has approved a total investment and financing exceeding US$ 108 billion. About US$ 56 billion have been approved for trade financing and more than US$ 50 billion in project financing encouraging investment in real sectors of the economy in the member countries. I am pleased to inform you that since the early 1990s, with the partnership with the Coordination Group (The Arab national and regional development organizations), IDB Group has been investing and providing finance in the CIS region. The IDB Group has approved 365 projects in CIS countries amounting to US$ 5.86 billion in various sectors; mainly transportation, energy, agriculture, water supply, education, health, finance and capacity building. Just as an example, IDB has participated along with the other International Financial Institutions such as World Bank, Asian Development Bank and EBRD in the financing of the south west corridor highway project (about 2800 km) which connects Kazakhstan and other member countries in the region with China and Russia (Tatarstan) to Europe. Given the fact that a number of IDB Member countries in the CIS region are land-locked and double-landlocked, the IDB Group financing and investment focused on the transportation and energy sectors. This is in line with main objectives of the member countries, in order to enhance the economic and trade cooperation among the IDB member countries in the region and other countries outside the region. Undoubtedly, Russian Federation is an important player in the international economy: We cannot overemphasize the fact that this beautiful city of Kazan was part of the historic 4,000 miles silk route, which has been the major conduit of facilitating trade and investment between the East and the West.
As we all aspire to see Kazan as the gateway for the Russian Federation to the OIC Member Countries in Islamic Finance, we believe it is also well positioned to be the gateway for Investment and trade. The potential of exchanging experience with the Member Countries is enormous. In this regard, we were delighted to receive at the IDB Headquarters recently two big delegations of respected parliamentarians and businessmen from the Russian Federation seeking to enhance relations and cooperation among the Russian Federation and OIC Member Countries. I assure you of the readiness of the IDB Group to do everything possible to facilitate this cooperation and help in tapping the potential among the investors and the business communities both in the Russian Federation and the OIC Member Countries. The third theme I would like to address today, is what IDB and each Member of IDB Group can offer. I would like to make some practical offerings for future cooperation benefitting from IDB s knowledge, competency and experience in Islamic Finance particularly in the areas of resource mobilization, private sector development, trade, and investment insurance. First: One way of attracting investment utilizing Islamic Finance is by way of issuing Sukuk, which can be used to finance large infrastructure projects. The Sukuk market has grown exponentially over the years. In 2014, and according to a recent report by Earnest and Young, the total Sukuk issuance by various governments and institutions exceeded US$ 120 billion (source and quote). As I mentioned earlier, several non-idb member countries also have issued Sukuk last year. Given the vast infrastructure investment opportunities in the Russian federation, perhaps the Russian Federation may like to consider Sukuk issuance. IDB, with its track record of issuing Sukuk over USD 12 Billion since 2003, will be ready to share its experience in this field; in particular for the large infrastructure projects that integrate our member countries with the Russian Federation. IDB would be honored to pass on its knowledge in Sukuk issuance as a tool for the mobilization of financial resources from the international and regional Islamic Capital Market. Furthermore, IDB will be ready to provide any advisory services required to promote Islamic Finance Industry in the Russian Federation. The IDB Group team attending this Forum is ready to meet with concerned officials in Tatarstan and Russian Federation and identify any possible cooperation in supporting the Islamic Finance Industry. Second: The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), member of IDB Group has by design, geared to provide investment insurance cover to Investors interested in penetrating new markets within the ICEIC member countries. In that regard, the team from ICIEC attending this summit will be happy to provide investors from Tataristan and the Russian Federation with detailed information on the modalities and prospects for such cooperation. Third: The International Islamic Trade Finance Corporation (ITFC), acting as the IDB Group trade arm, would be willing to consider financing the import of merchandise from the region to ITFC Member Countries in Africa, Asia, and the Arab World. In this regard, I also would like as per the previous suggestion, that the team from ITFC present here discusses with the businessmen and businesswomen concerned with Trade in Tatarstan and the Russian Federation such possibilities.
Fourth: The Islamic Corporation for the Development of the Private Sector (ICD), also a member of IDB Group could provide technical assistance and advice to the business community in the region interested in developing and expanding their business in ICD Member countries. Fifth: IDB will be happy to cooperate in developing and reactivating the Awqaf through financing and capacity building. Also Awqaf institutions in IDB Member Countries are willing to cooperate in this sector which has played an important role in the development throughout our history. On this note, I would like to wish all the Summit participants successful deliberations over the next two days. I am confident that the distinguished panel of speakers present today and tomorrow will discuss the issues, which I have pointed out in much greater detail from all aspects. The connections between Islamic finance and promoting investment and enhancing trade will offer great opportunities for growth and prosperity for all. Once again, I would like to thank the Government and the people of Tatarstan for the great hospitality, and congratulate the organizers for the arrangement of such an important event. This strategic gathering will, no doubt, allow for thoughtful discussions on the promotion of economic and business relationships between the IDB member countries, Tatarstan and the Russian Federation. السالم عليكم ورحمة الله وبركاته you, Thank