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GLOBAL GOVERNANCE AND TRANSPARENCY THROUGH ETHICAL FINANCE CAN ONLY RESOLVE THE CURRENT GLOBAL FINANCIAL CRISIS
The second annual Islamic Financial Intelligence Summit took place on 6th November 2008 in Victoria Park Plaza, London, United Kingdom organized by the Financial Times group. The summit focused on ethical financing, review of issues pertaining to Islamic financing, exploring potentials of Islamic investments, sukuk's sustainability, examination of new ideas, challenges and opportunities to further develop the expanding Islamic infrastructure and project finance sector and finally understand the role of regulators, exchanges, and industry organizations from a practitioner's perspective. The summit is being attended by renowned bankers, analysts, economists, regulators, sharia-scholars, legislators etc., across the globe. Mr. R. Seetharaman, Chief Executive Officer - Doha Bank delivered the key note speech, on 'Islamic infrastructure and Project Finance'. Speaking on the occasion Mr. Seetharaman highlighted the current global crisis, its impact on the functioning of the global economy, the financial stability of the world economies, the economic outlook on the world economies in consideration to the current financial crisis and the policy changes that are required at a macro-economic level and financial/monetary level to come out of the current financial crisis. Further, he also explained the changes in the economic profile of countries and blocs. He analyzed the financial leverage that had taken place in the west resulting in growth of hybrid products, like derivatives, the creative accounting practices evolved on account of these hybrid-products etc.
Mr. Seetharaman continued elaborating how GCC has emerged as a role model for transformation on economic and social fronts. 'The increasing energy demand world over has enabled the GCC states to generate considerable fiscal surplus thereby substantially improving the balance of payments position which has further enabled the GCC states to grow as the fastest trade bloc in terms of GDP with estimated growth forecasted between 10%-15% over the coming years even though rest of the world's growth are shadowed by the ongoing financial crisis. Further, the GDP per capita income of GCC states are amongst the highest today with estimated per capita forecasted at USD 32,000 for the fiscal 2009. It is the long-term vision upon which key policy initiatives have been taken to diversify the predominantly oil based economies to also infuse significant thrust on non-oil sectors. This has resulted in massive infrastructural creation and industrial expansion. This prudent deployment of fiscal surplus in multi-sector development has changed the face of GCC completely since 2000. Further, GCC as a bloc has unified stand on most of the key issues be it currency union, controlling of inflation, management of its liquidity etc. Regular coordination through multiple forums, working towards common issues among the GCC states are making this bloc stronger day by day' he said. Mr. Seetharaman elucidated the principles forming the basis for Islamic Finance that helped in countering situations like sub-prime currently disturbing the global conventional financial markets. Thereby, Mr. Seetharaman highlighted the fact that Islamic Finance in all respects is the only solution to the current Global Financial Crisis as well as making it the ethical solution preventing future financial crisis. Mr. Seetharaman also highlighted the transition of Islamic Finance since 1970s until 2000s. He also emphasized the growth of Islamic finance within the GCC region, Asia Pacific region and the globe as a whole drawing attention on the multiple models and forms by which Islamic infrastructure and project finance deals operates currently.
Mr. Seetharaman dealt in detail on Sukuks, being the most popular Islamic project finance mode for funding 'big-ticket' infrastructure projects, structuring of Sukuks etc. Dwelling on the opportunities existing for Islamic Infrastructure and Project Finance potentials in the GCC region, Mr. Seetharaman highlighted on the key projects that have been planned in oil, gas & petrochemicals, healthcare, power & water generation, transportation and ports sectors. The potential existing for Islamic project finance to fund these were also explained in detail by Mr. Seetharaman. Mr. Seetharaman finally explained in detail the key challenges for Islamic Infrastructure and Project Finance, namely, need for harmonization, need for financial infrastructure, need for relaxation of non-supervisory restrictions, need for regional and global cooperation, and the need for greater capital mobility and said that these challenges are been currently addressed on a progressive basis.
To conclude, Mr. Seetharaman said 'Islamic Infrastructure and Project Finance has attained key significance in the regional and international financial markets due to its growing demand on account of its strong and ethical fundamentals, however to integrate these with the global financial markets strong efforts to develop various standards, namely, legal, regulatory, accounting and corporate governance frameworks are required at a faster pace. Such integration would help in resolving the current global financial crisis at much faster pace'.
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