Islamic finance best-suited to tackle crisis, says banker

Gulf Times:Doha Bank Group chief executive officer R Seetharaman was the key note speaker at the second annual Islamic Financial Intelligence Summit in London recently.He spoke on “Islamic infrastructure and Project Finance”.

Seetharaman highlighted the current global crisis, its impact on the functioning of the global economy, financial stability of the world economies, outlook on world economies in relation to the current financial crisis, and policy changes that are required at a macro-economic level.

He explained the changes in the economic profile of countries and blocs and analysed the financial leverage that had taken place in the West resulting in growth of hybrid products such as derivatives.

Seetharaman said 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. This has enabled the GCC states to grow as the fastest trade bloc in terms of GDP with estimated growth forecasted between 10% and 15% over the coming years. This is at a time when rest of the world’s growth is shadowed by the ongoing financial crisis,” he said.

Further, the GDP per capita income of the GCC states are amongst the highest today with estimated per capita forecasted at $32,000 for the fiscal 2009.
Seetharaman spoke at length on the principles forming the basis of Islamic finance that can help counter situations such as the crisis currently disturbing the global conventional financial markets.“Islamic finance in all respects is the only solution to the current global economic crisis,” he said.

He highlighted the transition of Islamic finance between 1970 and 2000 and spoke in detail on sukuks, which are the most popular Islamic project finance mode for funding “big-ticket” infrastructure projects.

On the opportunities existing for Islamic infrastructure and project finance potentials in the GCC region, Seetharaman cited key projects that have been planned in oil, gas and petrochemicals, healthcare, power and water generation, transportation and ports sectors as cases in point.

Seetharaman also spoke on the key challenges facing Islamic infrastructure and project finance such as the need for harmonisation, financial infrastructure, relaxation of non-supervisory restrictions, regional and global cooperation and greater capital mobility.