Diplomatic Pouch / October 16, 2014
By Larry Luxner
Amid great fanfare, the Saudi-based Islamic Development Bank marked its 40th anniversary Oct. 11 with a press briefing, an official ribbon-cutting, a luncheon and no less than four signing ceremonies attended by hundreds of diplomats, bankers, journalists and other dignitaries.
The three-hour extravaganza, hosted by Washington’s elegant Willard InterContinental Hotel, featured speeches about fighting poverty, illiteracy and disease — particularly the Ebola epidemic now ravaging parts of West Africa.
Dr. Ahmad Mohamed Ali, president of the IDB (not to be confused with the Washington-based Inter-American Development Bank), exhorted the bank’s 56 member countries to mobilize resources in the battle against Ebola. He said that the bank — in concert with the Organization of Islamic Cooperation — will meet in Jeddah, Saudi Arabia, to develop an action plan towards that goal.
Ali — speaking in generalities and offering few specifics — emphasized the “need to focus on addressing the challenges of political instability, strengthening fiscal stability, tackling youth unemployment and improving food security.” He added that “in the medium to longer term, there is a need to address other challenges like demographic transition, bridging the infrastructure gap, improving investment climate and the financial sector, and engaging in structural reforms to improve productivity and competitiveness.”
Ali was followed by two speakers: Sir Suma Chakrabarti, president of the European Bank for Reconstruction and Development (EBRD) and Geoffrey Lamb, chief economist at the Seattle-based Bill & Melinda Gates Foundation.
The Indian-born Chakrabarti emphasized EBRD’s role in Eastern Europe after the fall of communism, suggesting how that experience might apply to countries such as Egypt, Jordan, Morocco and Tunisia. And Lamb, an Irish citizen who was born and educated in South Africa, spoke mainly about the ongoing cooperation between the IDB and his foundation, especially in the areas of combating poverty and eradicating polio.
The IDB, established in December 1973, began operations in October 1975 with 22 countries and is headquartered in Jeddah. The bank has 1,128 employees and four regional offices in Kazakhstan, Malaysia, Morocco and Senegal. Country offices will soon be opened in Bangladesh, Egypt, Indonesia, Nigeria and Turkey.
The bank’s loans for the financing of roads, canals, dams, schools, hospitals, housing and other infrastructure are all done in conformity with Sharia law and Islamic banking principles. As such, they are interest-free, with the IDB recovering its administrative expenses by levying a service fee.
During its 40 years, the bank has established 10 special programs including the Investments Deposit Scheme, the Al-Quds Fund, the Export Financing Scheme and the World Waqf Foundation. Its vision is that by 2020, the bank will be a world-class development bank, “inspired by Islamic principles, that has helped significantly transform the landscape of comprehensive human development in the Muslim world and helped restore its dignity.”
The bank’s accounting unit is the Islamic dinar (ID), which is equivalent to one Special Drawing Right (SDR). Its authorized capital is ID 30 billion ($46 billion), and its subscribed capital is nearly ID 18 billion. The main shareholders are Saudi Arabia (24 percent), Libya (9 percent), Iran (8.5 percent), Kuwait (7.2 percent), Egypt (7.2 percent), United Arab Emirates (7.15 percent), Qatar (7 percent) and Turkey (6.6 percent).
In May 2013, the bank’s board of governors decided to raise authorized capital to ID 100 billion ($153 billion), and subscribed capital to ID 50 billion (about $76 billion).
Forecasting the outlook for the bank’s member countries, Ali predicted that their overall GDP would grow by 4.1 percent this year, up slightly from last year’s 3.9 percent. Sub-Saharan African member countries will see the fastest growth (6.6 percent this year, up from 5.8 percent in 2013), while for Asian member states, growth will remain flat at an average of 5 percent, and those in the Middle East-North Africa region will see average growth this year of 3 percent, up from 2.6 percent in 2013.
During the event, Ali oversaw the signing of four financing agreements with the African nations of Cameroon, Cotê d’Ivoire and Senegal. The ceremonies, conducted in French with cameras flashing and journalists scribbling on notepads, were the highlight of the day’s festivities.
Of the two accords signed with Cameroon, one provides $170 million in funds for a road linking Allama and Kribi. That road will enhance transportation facilities from the Port of Kribi while linking Cameroon with Equatorial Guinea, Chad and the Central African Republic. The second agreement with Cameroon, worth $33 million, will provide electricity to rural areas in accordance with the country’s national strategy. Both were signed by Emmanuel Djoumessi, Cameroon’s minister of economy, planning and regional development.
The $35 million agreement with Côte d’Ivoire — signed by the country’s minister of economy, Niale Kaba — is for a water supply project in the country’s eastern region. It will improve living conditions in three large cities. The fourth agreement with Senegal provides $10 million to eradicate malaria in that country by 2018. The accord was signed by Amadou Ba, Senegal’s minister of finance and economy.
Meanwhile, the Tokyo-based Japan International Cooperation Agency (JICA) inked an agreement with the IDB’s Islamic Corporation for the Development of the Private Sector to promote sharia-compliant transactions with a focus on sukuk (Islamic bonds). The deal seeks to develop Islamic money markets across the bank’s 56 member states.
Following the event in Washington, Ali jetted off to the South American nation of Suriname to announce construction of the bank-funded New Academic Medical Centre in the capital of Paramaribo. Future projects in the pipeline between the IDB and Suriname — the bank’s only member country in the Americas — total about $300 million.