ENSURING SUSTAINABILITY IN THE MUSLIM WORLD: EMPOWERING PEOPLE, LEVERAGING RESOURCES A World Islamic Economic Forum Special Commemorative Publication 2010 2 The 21st Century will be driven by openness, technology, connectivity, dialogue, and integration. It will be the age of possibility and opportunity. That is why the WIEF is relevant because it helps the Ummah adapt to that wondrous world. The Ummah can shape and have full ownership of the 21st Century.
Susilo Bambang Yudhoyono President of Indonesia and Honorary Fellow of the WIEF Foundation
PUBLISHED BY WIEF FOUNDATION World Islamic Economic Forum Foundation 2nd Floor, Kompleks Antarabangsa Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia T: +60 (3) 2145 5500 F: +60 (3) 2145 5504 E: [email protected] W: www.wief.org
DESIGNED BY PRICEWATERHOUSECOOPERS Level 10, 1 Sentral Jalan Travers Kuala Lumpur Sentral 50706 Kuala Lumpur, Malaysia T: +60 (3) 2173 1188 F: +60 (3) 2173 1288 E: [email protected] W: www.pwc.com/my
A World Islamic Economic Forum | Special Commemorative Publication 2010 3
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 4
06 SPECIAL MESSAGE
Dato’ Sri Mohd Najib Bin Contents Tun Haji Abdul Razak Prime Minister Malaysia 08 CHAIRMAN’S FOREWORD
Tun Musa Hitam Chairman WIEF Foundation 11 INTRODUCTION
Saving today, living tomorrow
Fazil Irwan Mohd Som Director Editorial and Business Development WIEF Foundation
Post-crisis response: Setting a smarter course for growth
Chin Kwai Fatt Managing Director PricewaterhouseCoopers Malaysia
A World Islamic Economic Forum | Special Commemorative Publication 2010 5
23 41 65 CHAPTER ONE: CHAPTER TWO: CHAPTER THREE: Growing tomorrow’s leaders Banking on finance Resources today and tomorrow
24 42 66 The future of financial ethics The promise of biotechnology: Empowering future leaders: Investing in the future What makes Gen Y tick Humphrey Percy Chief Executive Officer Sheriffah Noor Khamseah Al-Idid Former Special Officer to the Gita Wirjawan Bank of London and the Middle East Science Advisor Chairman Dr Natalie Schoon Prime Minister’s Department, Malaysia Indonesia Investment Coordinating Board Head of Product Research and Innovation Advocate Bank of London and the Middle East 28 48 78 Womenomics: Businesswomen as Islamic finance post-crisis Calm before the storm: The prospect drivers of economic growth of alternative energy Noor Ashikin Ismail Olive Zaitun Kigongo Senior Analyst Syed Ashfaq Peeran President KFH Research Limited, a wholly-owned President Uganda National Chamber subsidiary of Kuwait Finance House, AIP Private Power Limited, India of Commerce & Industry Kuwait 84 34 54 A greener world: The business The innovation challenge: road to climate action Women and youth: Nurturing the Developing talent in Islamic finance spirit of entrepreneurship Dato’ Johan Raslan Dato’ Agil Natt Executive Chairman Evelyn Mungai President and Chief Executive Officer PricewaterhouseCoopers Malaysia Immediate Past President and Founder The International Centre for Education All Africa Businesswomen’s Association in Islamic Finance Executive Chairman 93 Speedway Investments Ltd and 60 ACKNOWLEDGEMENTS Glendale Properties Ltd The value of Islamic funding: Issues on morality 99 Datuk Mohammed ADVERTISEMENTS Azahari Kamil Chief Executive Officer Asian Finance Bank Berhad
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 6
SPECIAL MESSAGE
Greetings to all participants of the 6th WIEF. various industries of the Muslim World as well as to engage in useful dialogue with the relevant experts As Patron of the World Islamic Economic Forum present. I hope that you will also make full use of (WIEF) Foundation, I am pleased to welcome the networking platform available during the Forum you to Kuala Lumpur for the 6th WIEF. This to explore trade and investment opportunities that is the third time that the Forum is held in this exist within the Muslim World and beyond. capital city since its inception in 2005. I have been made to understand that the 6th WIEF I would like to commend the WIEF Foundation for is the largest thus far in terms of the presence coming up with this timely Special Commemorative of Heads of State and Government, business Publication for the 6th WIEF as a useful source leaders, industry experts and practitioners, of background information on the issues to be academics and the media. discussed at the Forum.
With the theme “Gearing for Economic Finally, may I take this opportunity to wish the Resurgence”, the 6th WIEF is set to address Forum every success. various topical issues including education, Islamic finance and climate change which have been specially emphasised in this publication. These issues are particularly crucial as they relate to the sustainability of the Muslim World in the decades ahead. Dato’ Sri Mohd Najib Bin Tun Haji Abdul Razak I believe that the 6th WIEF would provide an Prime Minister excellent opportunity for participants to keep Malaysia abreast with current developments in the
A World Islamic Economic Forum | Special Commemorative Publication 2010 7
I hope that you will also make full use of the networking platform available during the Forum to explore trade and investment opportunities that exist within the Muslim World and beyond.
Dato’ Sri Mohd Najib Bin Tun Haji Abdul Razak Prime Minister of Malaysia
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 8
Chairman’s Foreword
It is a pleasure to be hosting the 6th to date. Kuwait represented the and we are expecting 2000 delegates World Islamic Economic Forum in first major inclusion of the Gulf to be present at the Forum in Kuala Kuala Lumpur this year. It took us countries into the WIEF fold, Lumpur. 6 years to be where we are today. joining the fray of the Southeast I remember those days when the Asian and South Asian business By now, the WIEF is known as a Forum used to be much smaller communities. Kuwait also had an credible platform not just for business with around 600 participants, and impressive line-up of world leaders networking across borders, but we literally had to go around asking attending the Forum: Presidents for a place to exchange ideas and other countries whether they were of Senegal, Afghanistan, Bosnia experiences on various issues close interested in hosting the World and Herzegovina; Prime Ministers to heart. With this 6th WIEF Special Islamic Economic Forum. The Prime of Kuwait, Bahrain, Malaysia, Cote Commemorative Publication, we hope Minister of Pakistan then, Shaukat D’Ivoire; King Abdullah II of Jordan to live by that reputation and set an Aziz, saw the opportunity and took and the Emir of Kuwait. agenda on one of the most pressing the first step to bring in the 2nd issues of the day – the sustainability of WIEF in Islamabad, Pakistan in 2006. Since then, we have recorded our shared world and its implication in During the 3rd WIEF in 2007, the major successes. The 5th WIEF in the decades ahead. Do enjoy the read Prime Minister of Kuwait came with a Jakarta brought together more than and a big day ahead at the 6th WIEF! huge delegation of businessmen and 1700 participants from both the government officials and explored government and business sectors. the opportunity to bring the Forum to Today at the 6th WIEF, we are Kuwait the year after. So there it was, pleased to announce the line-up of the 4th WIEF in Kuwait in 2008. the Sultan of Brunei; the Presidents The 4th Forum in Kuwait was of Senegal, Indonesia, Maldives, Tun Musa Hitam momentous in many ways. It was the Kosovo; and the Prime Ministers Chairman tipping point of our growing success of Malaysia, Pakistan, Bangladesh; WIEF Foundation
A World Islamic Economic Forum | Special Commemorative Publication 2010 9
WIEF believes that through business collaboration between different peoples, partnerships can be moulded, wealth can be created, the poor can be empowered and millions of people have the chance of putting food on the table for their families.
Tun Musa Hitam Chairman WIEF Foundation
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 10
This isn’t just about driving growth. It’s about staying in business.
Beth Comstock Senior Vice President and Chief Marketing Officer, GE
A World Islamic Economic Forum | Special Commemorative Publication 2010 11 Introduction
Saving today, living tomorrow Fazil Irwan Mohd Som Director Editorial and Business Development WIEF Foundation
Post-crisis response: Setting a smarter course for growth Chin Kwai Fatt Managing Director PricewaterhouseCoopers Malaysia
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 12
Often the idea of SAVING making sacrifices today, the act of TODAY, conserving and restraining - just simply saving the LIVING things we have today, to live a TOMORROW better tomorrow, is Fazil Irwan Mohd Som a rare commodity Director Editorial and Business Development in many societies WIEF Foundation across the globe.
But that scarcity is enough to put our shared earth in serious jeopardy. In the relentless pursuit of short-term gains, we have severely depleted earth’s finite resources, ravaging the forests and destroying wildlife’s endangered habitats. It is therefore no surprise that the earth’s reaction to this, in the form of global climate change, is equally abrupt. We may think that the increasingly frequent occurrences of tsunamis and earthquakes are isolated incidents but they are actually violent manifestations of earth’s dire state.
A World Islamic Economic Forum | Special Commemorative Publication 2010 13
It is therefore high time that we flawed pursuit of religious sanctity. Save Today, Live come to terms with the fact that But the underlying reason is simply the world is an interconnected the lack of emphasis given to Tomorrow - we are ecosystem. Every act committed education in many of these countries, on the planet will have its reflecting in the poor infrastructure in the business of repercussions far and wide, in and substandard quality of education, ensuring various forms and expressions. thus impeding the intellectual If we severely pollute the development of our children. As a sustainability environment and plunder earth’s result of all these, millions of children, in the Muslim resources, we can be sure to especially young girls, are deprived expect severe weather changes, of basic education that is crucial for World through the eventually leading to disasters that them to survive in an ever competitive empowerment of can destroy millions of lives. world. Many fall into insignificance; some fall into the unemployment trap its people and the The same concept can be and crime, some resort to terrorism to utilisation of its applied in the realm of finance. make sense of their failing world. We may think very little of the resources to work in impact that excessive debt The Muslim World is not excluded the right direction. financing would have on people’s from all these problems. It is thus livelihood, a child’s future, or even time to fight back and galvanise If we can achieve this, we can the fate of a whole nation. But the the comparative strengths that we go a long way. This book seeks answer is right here. The recent have to ensure the sustainability of to encapsulate that spirit. In the financial crisis is testimony to our own future. We have resources pages of this book, you will find how unbridled greed can destroy in our hands. We have a wealth of various authors, of various people’s lives and plunge whole natural resources in the form of backgrounds, all with an intimate nations into bankruptcy and invaluable mineral and energy experience in the areas of people financial turmoil. sources, and a vast spread of empowerment, Islamic banking, rainforests. We have the people; and sustainable resources. I hope Yet the same concept can be around half the population of the that with this light and easy read, applied to the most important Muslim World are women and 65% you will be able to join us in the aspect of our shared world - the of the total Muslim population are same spirit of change, to build a future generation. More often than below the age of 30, which makes better tomorrow for not, we jeopardize the future of us the youngest civilisation on earth, the Muslim World. our own children, through denying ready to take on the world. We have them the right to proper education. a strong ethical foundation in the Religious and cultural extremism form of Islam that has the capability play a major role in this process, of creating a sound and just global training young minds to shun financial system, serving the conventional education in the welfare of all Mankind. We just need the right philosophy to use these to our advantage.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 14
Few, if any, business leaders POST-CRISIS will forget the past 24 months. The global financial crisis RESPONSE: was the most serious many have experienced and these SETTING A financial pressures have not ebbed, particularly in the European market. As SMARTER COURSE businesses struggle to move 1 back to an even keel, I would FOR GROWTH like to share some useful “smart response” post-crisis Chin Kwai Fatt insights revealed by business Managing Director leaders around the globe in PricewaterhouseCoopers PricewaterhouseCoopers Malaysia 13th Annual Global CEO Survey.
The Survey looked at what measures Chief Executive Officers (CEOs) are taking in response to the global recession, how they view the post- crisis business environment and what changes they are making to adapt their organisations. We surveyed 1,198 business leaders from around the globe from September to November 2009 and conducted in-depth interviews with 27 CEOs from five continents.
What have we learnt? Global business leaders had to make dramatic changes to their organisations, including 1. This is an adaption of the reducing headcount, selling off assets PricewaterhouseCoopers 13th Annual Global CEO Survey 2010. and preserving cash. That experience
A World Islamic Economic Forum | Special Commemorative Publication 2010 15
has led many CEOs to rethink their Top-of-mind considerations to be confident about their near-term approach to risk in an increasingly revenue growth than those in North volatile world. It’s abundantly clear CEOs’ concerns have broadened America and 20% more confident how quickly a contagion can spread, beyond the economic crisis. A than their Western European peers. and how damaging it can be. CEOs protracted global recession remains In fact, 82% of Asian CEOs see now know they need to plan for their biggest worry, closely followed their company revenues growing. volatility, so they can see risks by concerns about over-regulation. Also, 49% expect headcount to coming, sidestep them, and position CEOs in Latin America, Central increase compared with 39% of North themselves for what follows. and Eastern Europe, and Asia are American CEOs. Over the longer-term more likely to be concerned about – a three-year period – CEOs are Rethink approach to risk threats centred on globalisation, about as confident of their revenue and reshape strategies and including exchange rate volatility, prospects as they have ever been in protectionism and macro-economic our survey. capabilities, have a Plan B imbalances. Restrained consumer spending, rising unemployment, To do that, CEOs have begun to Asia rapidly emerging to and regulatory reforms also remain be centre of growth in the reshape not only their strategies, significant concerns. but also their capabilities. It takes new world order strategic flexibility to address risk CEOs’ confidence at a deeper level. And it takes Underpinning this optimism is the organisational agility to respond level on their companies’ belief that Asia will be the centre of to volatility. That doesn’t mean revenue growth differ economic growth in the new world CEOs will become risk averse; depending on where order. Although CEOs view Western rather, they may become more they are Europe as currently the most popular deliberate in examining alternatives, region for an acquisition at 53% formulating a Plan B, and ensuring Although the majority feel that compared to 42% for Asia Pacific, they can execute on it. The result, 2010 will be better than 2009, this is expected to change very we believe, will be a smarter course most do not expect the recovery quickly over the next 12 months. for growth; a resilient path that will to start until at least the second Globally, the majority of CEOs produce a sustainable long-term half of 2010. While confidence has (82%) are expecting to grow their upside for organisations – along returned, CEOs are still cautious, businesses in Asia in the next 12 with their shareholders, employees, especially on short-term recovery. months. The crisis has quickened the customers and communities – Overall, 31% of CEOs are very change in the economic landscape while accounting for a range of confident in achieving revenue with emerging nations taking on economic, social and environmental growth over the next 12 months, more economic power than ever. forces that comprise both threats a significant increase from 20% Even before the crisis, it was no and opportunities. last year. However, where a CEO is secret that emerging markets were based, and where the company has of vital importance for many CEOs, operations, has a big influence on regardless of where they were based. Asia’s strategic advantage is seen confidence. CEOs based in Asia and in its people and resources, and its Latin America are 11% more likely ability to deal with crises.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 16
Risk and strategy To what extent do you anticipate changes to your company’s strategy, go hand in hand organisation or operating model?
Although optimistic about recovery, business leaders Approach to managing risk 15 43 41 globally are emerging with Investment decisions a healthy respect for risk, 18 48 33 volatility and flexibility and a Responding to changing different view of the growth consumer purchasing behaviours 17 55 26 imperative. Strategic flexibility and operational agility are seen Strategies for managing talent 21 50 29 to be key to future resilience and Organisational structure sustainable growth. (including M&A) 23 49 27
The survey responses signal that Focus on corporate reputation 33 43 23 and rebuilding trust risk management is becoming a permanent element of the Capital structure 37 44 17 strategic planning process with Engagement with your 42 41 16 84% of CEOs globally intending board of directors to change their risk management process more than any other 0% element of their strategy, No change Some change A major change organisation or business model. Other critical elements identified Source: PricewaterhouseCoopers, 13th Annual Global CEO Survey 2010 are investment decisions, responding to changing consumer purchasing As for Asian CEOs, they are now liquidity ample, in part because of behaviours (81% each) and being extra careful to manage uncertainty over the capacity of strategies for managing talent risk and financial health with 87% banks to lend when the time for (79%). Over 50% changes of them increasing approach to growth comes. About 78% of the are also expected in terms of managing risk and investment CEOs expect internally generated organisational structure (including decisions (80%). Sensing cashflow to finance growth, which is M&A), focus on corporate opportunity in new consumer habits, 7% higher than last year. reputation and rebuilding trust 85% of them expect to adjust their and changes in capital structure strategies in response to changing Asian CEOs continue and board engagement. consumer behaviours. Talent management also remains key on to be risk averse and their agenda (83% as compared to focus on consumer global’s 79%). In terms of capital behavioural changes and structure changes, the CEOs are talent management striving to keep debt low and
A World Islamic Economic Forum | Special Commemorative Publication 2010 17
Investment decisions (suggesting that there’s still over- While remaining vigilant on cost focus more on cost capacity in many sectors), but there structure, CEOs are reshaping are some areas that CEOs are not their businesses to position for efficiencies and talent paring back, notably, leadership, talent recovery by addressing their development development and climate change. risk management processes, focusing on organic markets or Whilst cost structures are being Companies in the US, Europe and the better penetration of the markets closely watched, CEOs are still UK led in cost-cutting measures over they know best and being more investing in areas they deem vital. the past 12 months, and they remain cautious and careful in rationalising CEOs need to make tough choices more focused on cost cuts in the short- expectations for growth in different about long-term investments in an term. Now the momentum is shifting to markets. Although R&D, advertising environment of tighter capital. More companies based in Asia with 93% of and capital investment are lower than three-quarters of CEOs plan CEOs in China and India, and 90% in on the list of investment priorities, more cost-cutting initiatives in the Korea, planning cost efficiencies over higher percentages of Asian CEOs next three years. Only 40% expect the next three years compared with the are planning to invest in these areas to increase their capital investments global average of 78%. compared to global CEOs’ census.
How do you plan to change your long-term investment decisions over the next three years as a result of the economic crisis? No change
Initiatives to realise cost efficiencies 1 3 41 37 17
Leadership and talent development 3 47 21 27
Organic growth programmes 1 6 46 18 28
Strategic technology 32 infrastructure or applications 1 6 43 16
R&D and new 32 product innovation 2 6 41 16
Advertising and brand-building 3 12 35 7 42
39 Capital investments 3 16 32 8
0% Significant decrease Moderate Moderate Significant increase in investment decrease increase in investment
Source: PricewaterhouseCoopers, 13th Annual Global CEO Survey 2010
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 18
Key talent agenda items • Redefine roles • Training and development • Staff morale and employee engagement programme
The crisis has taught the CEOs a few things – one of which is Companies in Brazil, India and China that organisations that are able to balance people retention and are leading in increasing jobs. CEOs, development against cost reduction measures will be well positioned regardless of geography, are concerned for the upswing. People and talent are at the heart of a high value- about their governments’ abilities to add economy and developing them is critical to the country’s and provide a skilled workforce, and there company’s long term competitive advantage. With Asia Pacific poised is emerging evidence of a growing to be an economic powerhouse, having the right people in place is more ‘talent gap’ in a number of regions. urgent than ever. The majority of CEOs worldwide (79%) also intend to increase their focus Hence, despite the focus on cost savings, headcount is expected and investment on how they manage to increase. The survey shows that while many companies are still people through change, which includes downsizing, more will grow their work force (39%) than cut them (25%) redefining employees’ roles in the over the next 12 months. This trend is more pronounced in Asia where organisation. They feel they need to investment in people is centered on training and development, and change their strategies for managing employee engagement. Specialists remain in demand - many parts of talent. The scale of these intended the world are still struggling to attract and keep talent. Over the long changes suggests that, for whatever term, businesses may live to regret the drastic headcount reduction they reason, existing practices did not have made during the downturn. support the business when the crisis hit.
A World Islamic Economic Forum | Special Commemorative Publication 2010 19
Regarding your people strategy, to what extent will you change your approaches to the following areas, as a consequence of the economic crisis? Don’t know/ refused Managing people through change 1 (e.g. redefining roles in organisation) 20 38 26 15
Training and development programmes 23 36 27 13 0
Staff morale and employee engagement programmes 24 34 26 15 1
Remuneration levels 38 43 14 4 1
Flexible working environments 39 34 18 7 1
Collaborations with networks of external specialists 40 35 16 6 2
Global mobility, including staff travel or international 43 34 15 6 2 secondments
Pension and healthcare arrangements 58 28 10 4 1
0% Changing Changing to Changing No change somewhat large extent significantly
Source: PricewaterhouseCoopers, 13th Annual Global CEO Survey 2010
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 20
Emergence of two Set 1: Consolidators Set 2: Adaptors distinct sets of CEOs - the consolidator and the Behaviour Behaviour adaptor • Two-thirds based in North America • 63% based in Asia Pacific and and Europe Latin America The smarter course for growth • Feel they are now on the right track • Undergoing significant change involves a better understanding for recovery, that the recession helped to create a new basis for of the consequences of risk, them ‘cut the fat’ and do what they sustainable long-term growth and rationalising growth and do better - being more innovative, investment plans to fit the smarter • Not making drastic changes - making collaborative and agile few changes to their strategies and Want to potentially lead over course. How CEOs are positioning • operations those taking a ‘business as their companies is, of course, • Far less concerned about threats to usual’ approach dependent on their particular business growth than Adaptors, but • Aggressively changing circumstances and mindset. exhibit greater antipathy to regulation operating models and • Cutting fewer costs and investing investment strategies and Interestingly, when we analysed relatively less in R&D, talent and restructuring CEO responses related to growth organic growth programmes than • More concerned over range threats, engagement with boards Adaptors of threats to growth – ability and dealing with regulation, we • Will concentrate on finding ways to finance growth, exchange found that two distinct sets of to keep existing customers in a rate volatility, energy costs and challenging environment supply chain security CEOs emerged from the other – Set 1: Consolidators; Set 2: Risk Risk Adaptors. Each set is applying differing strategies to the post- • Risk of not having the agility to adjust • Will be more resilient to change crisis environment. However, it is their operating model should new and are recruiting talent for the still too early to tell whether one players with innovative products longer term emerge May find it difficult to execute strategy will be more successful • and finance their strategy in than the other. In our view, a lending environment that is Consolidators and Adaptors expected to be more difficult represent archetypal strategies • May be in danger of changing that could both lead to lasting too rapidly before it is clear success, building on particular what the new environment will organisational strengths and look like environmental factors – yet, clearly risks remain for each. Source: PricewaterhouseCoopers, 13th Annual Global CEO Survey 2010
A World Islamic Economic Forum | Special Commemorative Publication 2010 Profile Chin Kwai Fatt 21 Managing Director PricewaterhouseCoopers Malaysia
In my view, with an increasingly volatile and inter-connected world, regardless of where they are located or how they are responding to growth threats, CEOs share a common need to strengthen the resilience of their organisations and yet remain agile to react at a moment’s notice, to survive.
No doubt, managing through these paradoxes is a difficult balancing act, but CEOs have learnt (and continue to learn) to gain more control over these newly appreciated vulnerabilities - internal and external. That means being continuously alert on threats and Chin Kwai Fatt is the Managing opportunities and yet having longer-term Director of PricewaterhouseCoopers foresight. This equates to incurring less Malaysia. He has more than 32 years financial risk while strengthening the of experience in consulting services in Malaysia and the Asia Pacific region. resilience of the company and maintaining investments in vital strategic building blocks Kwai Fatt has provided strategic and (including talent building). operational consulting services to clients across a number of industry sectors including financial services, oil and Finally, the strategic role of government gas, power, property, manufacturing, in providing a conducive infrastructure for ICT, retail and trading. Kwai Fatt is also business to grow is the pivotal factor to the a speaker at many forums covering development of any country’s long-term business challenges, globalisation and sustainable economic growth. Besides knowledge management. developing the hard (roads, bridges) and soft Kwai Fatt holds an honours degree (talent pool, governance and regulations) in Economics from University of Hull, infrastructures, governments could step up UK. He is a member of the Institute their collaborations with the private sector to of Chartered Accountants in England and Wales (ICAEW), the Malaysian create new sources of growth. Institute of Accountants (MIAA) and the Malaysian Institute of Certified Public Accountants (MICPA).
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 22
Chapter one
A World Islamic Economic Forum | Special Commemorative Publication 2010 23
Growing tomorrow’s leaders
Empowering future leaders: What makes Gen Y tick Womenomics: Businesswomen as drivers of economic growth Women and youth: Nurturing the spirit of entrepreneurship
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 24
Whether you label them Generation Y, the Net Generation or some EMPOWERING other designation, the people born in the 1980s and 1990s have all grown up and are eager to make FUTURE a mark on this world. What is fascinating about this age group is the stretch of their ambitions, how LEADERS: they go about trying to achieve them and what motivates their WHAT MAKES dogged pursuit. It is the distinction of this age group that a greater number from GEN Y TICK its ranks than previous generations aspire unabashedly to fly high and far and they expect to spread Gita Wirjawan their wings widely and hurriedly. Chairman And when they occupy positions Indonesia Investment of influence, many of them are Coordinating Board leveraging the resources of their organizations—whether private, public or non-profit—to try to make the world a better place.
From microfinance to environmental stewardship, from public education to public health, the ideals behind their tireless endeavors have inspired peers to champion causes of their own. The effect has rewritten the run-of-the- mill books on leadership.
A World Islamic Economic Forum | Special Commemorative Publication 2010 25
Such leaders, who have risen By necessity, Generation This is the face of our next meteorically but are still on an early Y has become a more generation of leaders. incline in their career development restless and rootless lot. They are purpose- arc, share certain traits. To begin with, they have been raised in an Highly adept at managing driven, globally oriented, intricately interlocking world, where time and multitasking pragmatic, efficient, the problems societies are facing and quick to jump into creative, technologically have become cross-cutting in nature opportunities to switch savvy and egalitarian. and far grimmer in terms of impact. roles and locations, many Although their numbers are in this age group highest in developed Growing up when talk of globalization was all the rage has are prized for their mobility economies, the best and made them more empathetic to by organizations with fluid the brightest of Generation world affairs and more embracing operational functions and Y also can be found of international influences. They ever-shifting geographic blazing new paths in have developed a precocious markets that need emerging economies. understanding that the solutions we flexibility to fully tap into seek for this evolving world require Let me offer Indonesia as an more lateral thinking, featuring the benefits of economies of scope and scale. example, simply because it is the the ability to adopt a decidedly country I know best. A couple of interdisciplinary, multicultural and profiles lend themselves to depict Exposed to increasingly multisectoral approach. the outstanding quality of this sophisticated technologies at an country’s young talent pool. At the same time, this greater early age, they can be counted on to think out of the box, knowing openness has sparked the fire Aldi Haryopratomo, aged 27, that the limits of what is currently of competition. For a seat at the snatched first prize this year at deemed possible can change world’s most renowned universities Harvard Business School’s Social instantly with innovation. And or a position in its most admired Enterprise Conference, where because these technologies often organizations, many have had to he is pursuing an MBA. He was work over diffuse networks, they compete not only against their recognized for PT. Ruma, a for- excel in collaborative, transparent compatriots but also against the profit social enterprise he founded and meritocratic settings, chaffing keenest minds from countries and with seed capital from Grameen under stale command-and-control cities some of them have never Foundation. before heard of. and seniority-based paradigms.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 26
PT. Ruma is a telecommunications These rising stars are undoubtedly attentive to the importance of microfranchise business that sells well on their way to helping education, tight budgets typically prepaid minutes and other services Indonesia become a more have resulted in the practice electronically via cellular phone. It is prosperous and more dignified of standardizing mediocrity. In currently serving 80,000 customers country. More encouragingly, Indonesia, even overcoming this bar through 2,000 suppliers, around there are more like them who are is complicated by the uneven 70% of whom had been living under capable and show promise but geographic distribution of qualified US$2.50 per day but now stand unfortunately have not had similar teachers and decent facilities. proudly as profitable entrepreneurs. educational or, by extension, professional experiences. Privately held entities can more Muhammad Zaky Prabowo, aged efficiently locate talent and better 26, resigned from McKinsey & The question, then, is how should leverage networks and arrange Company to join Indonesia’s we identify and develop these funding to facilitate their intellectual Presidential Delivery Unit (PDU). pockets of talent? development. However, to maximize This is a new cabinet position, the impact, the approach of formed to support the President I think philanthropy has philanthropic organizations should and Vice President of Indonesia in a greater role to play. In be to select a small group to managing the performance of their Indonesia, philanthropic support each year. ministers. Reporting to a daring organizations are reformer, he crafts action plans to The reasoning is that unclog bottlenecks and direct focus sprouting with a steadfast focusing on a few minds to issues of national priority. mission to widen so that they could become Indonesian access to Eventually, Zaky hopes to combine globally competitive may the best educational enable these hoped-for an MBA from Stanford’s Graduate institutions at home School of Business with a Master’s leaders to make significant and abroad. They are degree from Harvard Kennedy waves when they return, School of Government. He believes striving to fill a gap left lifting the livelihoods of this training will furnish him a largely unaddressed by more people than would toolkit to co-found a non-profit Indonesia’s education an approach that spreads organization inspired by Teach First system. and run businesses in the hospitality resources thin by trying to industry to spread Indonesia’s rich Emerging economies often lack fund the education of as and storied cultural heritage. the fiscal wherewithal to provide many applicants a globally competitive level of as ideally possible. education. Even for those more
A World Islamic Economic Forum | Special Commemorative Publication 2010 Profile Gita Wirjawan 27 Chairman Indonesia Investment Coordinating Board
Philanthropic organizations certainly need not go for broke in a valiant attempt to develop an Indonesian intelligentsia that would be commensurate with the size of the population. All they should do is identify a handful of talent that would value the privilege they had been given and pay it forward by answering the noble call for leadership.
Recipients of fellowships from philanthropic organizations—like Aditya Bahar, an undergraduate studying overseas at Malaysia’s Universiti Tenaga Nasional who has been an active member of the International Committee of the Red Cross (ICRC) Mr. Gita Irawan Wirjawan is Chairman of Indonesia’s Investment Coordinating Board in Indonesia—are not only earning stellar grades (BKPM). The Harvard-educated investment but also commit to the type of selfless service from banker has held key appointments in Goldman Sachs and JPMorgan, and was senior advisor which Indonesia will gain extra mileage along its to JPMorgan for Southeast Asia. Before his development path. appointment as BKPM’s Chairman, he was most recently Founder and Chairman of Ancora Capital, a Jakarta-based private equity fund, Encouragingly, the number of applicants for these a Commissioner of state owned oil giant, Pertamina, and an Independent Board Director fellowships who fit this profile has increased multifold. of Telekom Malaysia International. This indication soothes nerves because it is becoming Mr. Wirjawan has been involved in advising a tough search for talent. As the center for global the government and private sector in many growth moves from the West to East Asia in the Asian countries with respect to corporate restructuring, M&A and strategic sales. He has coming years, a knowledgeable and skilled labor force concluded several high profile transactions. will be a key ingredient to compete effectively in the Outside the world of business, his passion lies in philanthropy, education, golf and music. region over the long term. As a philanthropist, he has endowed scholarships for Indonesians to attend the best Far-sighted leaders in emerging economies are universities in the world, including Harvard, learning that greater strides toward this end goal Oxford, Cambridge, Nanyang Technological University (NTU), and Science Po. He is also in could be made if both public and private resources, the process of establishing 1,000 preschools including philanthropy, are deployed to scoop up and throughout Indonesia. An avid golfer, he has set up a prominent academy to groom future support their finest in Generation Y. By the end of their Indonesian golfers. And through Omega formal training, they can then take up positions of Pacific Production, he has produced a range of albums that has been critically acclaimed. influence and pave the way for others, extending the reach and deepening the impact of societal change. Mr. Wirjawan is a member of the Dean’s Leadership Council for both the Harvard Kennedy School and the S. Rajaratnam School of International Studies at NTU.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 28
Introduction
WOMENOMICS: Womenomics is a recent terminology not yet captured by most ordinary dictionaries, BUSINESSWOMEN it has been coined by women pressure groups and captured in a publication entitled AS DRIVERS “WOMENOMICS: Write Your Own Rules for Success,” by Ms Claire Shipman and OF ECONOMIC Ms Katty Kay1, where it is defined as woman power; or a movement that will enable GROWTH a woman to implement a work life she really wants; or simply, it is really women’s Olive Zaitun Kigongo power in the marketplace and President their ability to change the way Uganda National Chamber that we all work. Research of Commerce & Industry established that women have a huge amount of power in the marketplace, those companies, for example, that employ more senior women actually make more money. The Womenomics argument is that now the woman can take that power and use it to negotiate for a model that works for most women. For the case of Uganda, the idea of Womenomics is true and real, but remains a struggle.
1. Ms Claire Shipman is the senior national correspondant of ABC’s Good Morning America while Ms Kathy Kay is the anchor of BBC World News America.
A World Islamic Economic Forum | Special Commemorative Publication 2010 29
With WOMENOMICS, In the words of The Economist, growth, particularly in the the end result is seeing a “Forget China, India and agricultural sector. Women woman reaching a career- the Internet - economic produce up to 80% of life (Work–Life) balance that growth is driven by the the food produced in the has ensured achievements women.” Ms Shipman and Ms developing world, thus and enjoyment for her Kay also demonstrate that even holding the potential for in all the following four in challenging economic times, their countries’ growth. women are more valuable than areas: her work/business, ever to the bottom line of the A case for Uganda her family and children, business world, and that talent is her network (friends) and what is needed in the business In Uganda, with a population of world today. finally herself (present 30.7 million people,15.66 million and future),” - which female and 15.04 million male (2009 General outlook has resulted in business midyear demographic estimates), 45% of Micro and small Enterprises women being the real In general, women’s economic (MSE) are owned by women and drivers of growth. participation is critical to long-term women contribute 50% of the growth and poverty reduction. national GDP (Ministry of Finance). Take for instance women in Uganda When women can start a business and other African developing or earn an income, their families countries, women are holding and communities flourish. Women influencial positions. Uganda takes are often more likely than men to 15 the position of the first African spend extra income on health care country to have a president for the and education for their children. Population Chambers of Commerce, which I, Businesses Some studies estimate 10 owned Mrs. Olive Kigongo hold, and I must that women invest up say it has been an interesting and yet a rough path. to 90% of their extra income in their families, 5 Women are holding powerful and compared to only 30-40% effective factories and business for men. On a national 45% 50% premises.This has not been an easy 0 scale, women are key Female Male road, as stated earlier, given the drivers of economic several chains and challenges put Source: Ministry of Finance and Planning around the business world, case in point, the women in business.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 30
The Ugandan business women Some of the other supports young upcoming were able to be in the driver’s seat interventions are: business people to penetrate of the growth vehicle because of a the market as they improve their number of government interventions 1. The Uganda National production and build a wider as well as individual efforts Chamber of Commerce location and market base. This which have availed a conducive and Industry (UNCCI), scheme is mainly financial and environment. These have included is the largest and through trainings; also, the educational, social, governance, UNCCI always had the Young political and economic factors. oldest (over 70 years) Achievers Award (YAA), where The education sector has seen a independent private it awards those who have number of interventions at lower, sector organization, in managed to make an impact on middle and university levels which Uganda, with a country- the nation through innovation included entrepreneurship and wide branch network, is and creativity. Last year, among actual affirmative action, which for those who received the award headed by a woman. The the women, has helped to acquire was Ms. Santa Anzo of Arapapa UNCCI serves as a facilitator confidence, knowledge and skills at Consultancy Limited. She is for individual business women the same opportunity as their male now a well-recognised fashion as well as women associations counterpart. Many of the female designer, and has showcased her by empowering women through graduates who do not join the fashion line in the world’s leading advocacy to government and formal sector end up in business. fashion metropoles such as by organizing trade fairs purely On the political front, 30% of all Paris and San Francisco, just to for women. It also facilitates in political seats have been reserved mention a few. helping these women create specifically for women, thereby 4. Affirmative Action - To empower added value to their products, in giving them a very strong advocacy women further; purely women order to give them an advantage voice at high policy levels. trade associations like Uganda for attending international fairs, Women Entrepreneur Association and also so they can have access The social scene has also seen Ltd (UWEAL) are in place to to international markets for their women excelling; for instance the advice, train and guide women in products. 2009 coveted Pearl of African (PAM) the best ways of doing business. 2. The UNCCI also spearheads as Awards for all musicians (male and 5. Uganda Export Promotion Board a voice for business people, and female) in the Country was won by introduced a gender perspective is able to connect them to other a female. to the National Export Strategy interested investors in order where there is deliberate effort to develop their productivity to assist business women to and compete favourably in the break into the international export market. market especially in the areas of 3. The UNCCI also has a Young crafts, diary, coffee and tourism. Entrepreneur scheme which
A World Islamic Economic Forum | Special Commemorative Publication 2010 31
We have seen the business women very much empowered with knowledge, skills, information, enhanced confidence levels, local and international market access, ability to handle the Work–Life balance more effectively and profitably, and thereby becoming the main drivers of growth.
Olive Zaitun Kigongo
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 32
6. Uganda Investment Authority Effects of the built networks (UIA) set up a UIA Women These strong networks have worked Entrepreneur Network, where collectively to: women are trained in business skills and guided on ways of • Establish forums for women to • Establish contacts with women raising and managing funds. work together as entrepreneurs. internationally in various business 7. Many women associations are • Perform budget analysis and organizations. propelling women in business in budget tracking (revenue and • Support grass root women by various area such as rural and expenditure). Budget process, marketing their products. urban. real budget, budget expenditure, • Establish credible leadership and 8. Many banks have introduced and budget tracking have share best practices. Women In Business (WIB) implications for business with a • Encourage some to start their programs whereby they bearing on returns on investment savings and credit schemes. encourage business women to for our members. • Fully participating in promoting borrow under specifically tailored • Business Governance: this is private sector development and products like, Land Loans, where we democratise the way act as the spokeperson for all Improve Your Business Loans, business is done in Uganda. We organizations promoting women Secured Loans, Unsecured do this through sensitizing our in business. Loans (slightly lower amounts), members on bidding processes, Saving and Credit Co-Operatives All obstacles that previously advocating for transparent (SACCOS) (where a group of hindered Ugandan business women procurement processes, women act as security/collateral from progressing were dismantled. equity in taxation systems and for each other when taking These include the inability to borrow administration. business loans), Investment due to lack of security/collateral • Facilitate participation of women Clubs (where women form clubs (here some banks have introduced in international events and trade of around 5-10 people and invest Land Loans for land which can missions. as a group in the bank and amass be used as security/collateral, • Provide an effective forum a substantial amount of invested whereby they lend to groups and through which government and wealth). The WIB has a training the group members act as security/ donor agencies can consult on component whereby women collateral for other fellow members; ‘women in business’ issues. are trained in financial literacy, even unsecured loans have been • Provide training in various marketing, operations and other introduced lately in moderate business skills. business skills. Introduced are amounts). the mentoring and coaching sessions for women.
A World Islamic Economic Forum | Special Commemorative Publication 2010 Profile Olive Zaitun Kigongo 33 President Uganda National Chamber of Commerce & Industry
The Effect of all these efforts
We believe that a vibrant and collaborating community of business members could be established, linking several business opportunities in and outside Uganda, growing and collaborating, transforming lives, communities and the nation.
We have seen the business women very much empowered with knowledge, a variety of skills, information, enhanced confidence levels, local and international market access, ability to handle the Work–Life balance more effectively and profitably, and thereby becoming the main drivers of Growth.
However, Comrades, we are faced with a Olive Zaitun Kigongo assumed her current changing business world driven by knowledge and position as President of Uganda National communication i.e. information and communocations Chamber of Commerce and Industry (UNCCI) in December 2001. During her Uncci career, technologies, languages and public relations. What is Ms Kigongo, a Ugandan National, a business the status in our countries? We must be ready to hop woman; prior to becoming President of Uncci, on the bandwagon. How prepared are our institutions she is Managing Director – Mosa Court apartments, Managing Director-homes Ltd, to adapt to these demands from the business world? Managing Director-global Village investments to date. Outside Uncci she has held high-level In conclusion, as we meet to explore trade and positions in key official and private sector organizations including Patron Young Achievers investment opportunities between our countries and Awards, East African Business Council (EABC), nations, I wish to mention that for a long time now, Union of African Chambers of Commerce there has been a misconception about women’s and Industry, Agriculture and Professions (UACCIAP), World Islamic Economic Forum importance in the world economy. This is evidenced (IAP), Centre for Arbitration and Dispute by the very low numbers of women in, for example, Resolution (CADER), Economic Policy Research CEO positions of trade and business sector firms. Let Institute (EPRC), APRM National Governing Council- (National Planning Authority (NPA), us join our hands together and get to see a different Business, Technical, Vocational Education and now and tomorrow for women in business. Training (BITVET) - National Council for Higher Education (NCHE), and Uganda Red Cross Society (URCS). Ms Kigongo graduated with a BA in interior design, Rhodec International UK. She also has a Diploma in Hotel Management, Utalii College, Kenya.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 34
WOMEN AND YOUTH: NURTURING THE SPIRIT OF ENTREPRENEURSHIP
Evelyn Mungai Immediate Past President and Founder When we think of entrepreneurs, All Africa Businesswomen’s Association do we think only of robust and pushy males? Do we assume Executive Chairman that the rough-and-tumble life Speedway Investments Ltd and of a business owner is too much Glendale Properties Ltd to handle for a ‘mere’ woman, who couldn’t possibly make it in that ‘man’s world’ of survival of the fittest and the fastest? Do women lack the confidence and the boldness that their masculine counterparts possess? And what about young people, whether young men or young women? Are they too immature and inexperienced, too impetuous? Do they still lack the staying power that entrepreneurship demands?
A World Islamic Economic Forum | Special Commemorative Publication 2010 35
My view is informed by my own or doctors, our reputation is for lobbing new products and services history. Let me start by mentioning being practical, down-to-earth, no- into our markets on the optimistic my great grandmother, Wanjiru, who nonsense folk. The sort of people assumption that people will want in early colonial Kenya became a who do well in business. to spend their hard-earned money property developer. Clearly she had buying them. what it took, and in circumstances What drives us? I guess it’s what that make today’s environment drives any business person, male or But while we are indeed dreamers, appear quite Utopian. As for me, female, young or old. Some think it’s we are far from being mere I became an entrepreneur when the sheer desire to make money, to dreamers. We are not the kind to I was in my late twenties, not too accumulate wealth. But of course dream merely in our sleep, and we long after our country gained its whereas that’s part of it, whereas are not among those who die with independence. Those were still very without sustainability you can’t keep their dreams unfulfilled. When we much less women-friendly days than going, it’s far from the whole story. dream we are wide awake, carefully we see today. I once read a study that showed worrying about the things that can the most important and the and will go wrong. And when we Are Wanjiru and I so unusual? If commonest characteristic have failed to predict accurately – as you were to ask me, I would say among successful we invariably do! – we are not put we are not. I grant you that like so off. We still believe in our dreams, many women she and I were very entrepreneurs was doggedly overcoming obstacle after determined characters, not put curiosity. It’s not immediately obstacle, setback after setback. off by obstacles that stood in our obvious, but the more I thought We entrepreneurs keep way. But that is surely true for all about it the more I understood why going long after other more that was so. entrepreneurs, for those successful reasonable people would in any field, whether women or men, and of whatever age. As we entrepreneurs look have given up. We need to around us and see what be deeply unreasonable I happen to be from a culture that is is, it leads us to imagine people, people who defy known for being entrepreneurial. Our what is not but might be. the laws of gravity and people are said to be hard working, many other conventional not averse to taking risks, and We spot gaps and think wisdoms. unafraid of setting up businesses for of them as opportunities. ourselves. Business is, you might Our curiosity leads us Yet even we know when to say, in our blood, in our culture – it’s to explore that better eventually call it a day, however late a very normal thing for us to do. So possible future, that new in the night it may by then be. We we just do it. Just as other cultures way of doing things. We know when to accept defeat… but are renowned for developing only so we can learn from the failure successful professors or lawyers are experimenters and innovators, so we can know how to do better with our next venture.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 36
So far then, my thesis is an entrepreneur? Above and on encouraging and this: when it comes to all, I firmly believe it recognising achievement. I entrepreneurship, don’t means doing whatever should point out that this approach think about any special it takes to develop the offers the additional benefit of gender or age differences. confidence of our young teasing out which characters My great grandmother didn’t, and are more likely to thrive as men and women. Sadly, entrepreneurs and who would do I don’t believe I did. I am however many of our educational very ready to accept that we may better as researchers or engineers be somewhat unusual in having institutions manage the or nurses. For we surely are not the courage to go it alone, with no exact opposite. The more years saying that everyone or anyone boss or protector, just us and the students are subjected to in school should aspire to an entrepreneurial market, us and our competitors. the more timid, the more compliant, life. Just more than presently do, the more dependent they often and those who are most likely to do The question that arises is become. It is why many of the most well at it, whether male or female. how we can go beyond that successful entrepreneurs are not relatively small proportion of the university graduates – I suppose Here let me recognise Junior population that naturally emerges they’ve stopped short of over- Achievement (JA), an organisation as entrepreneurs. How can we analysing why good ideas cannot that is active in numerous countries, nurture that spirit more broadly? work… and they never developed including Kenya. JA works with the expectation of working in a volunteer professionals from First, how can we do so among smart office in some safe, white- businesses that go into high schools young people, for whom there collared job! and introduce students to the world is such a shortage of employed of business. The young people not work, and where such large And how do we develop only learn the life skills, not only are numbers are unemployed? How confidence? Not by they taught the basics of accounting do we inject all the things it takes and marketing and other functions, simply trying to overcome but they are also challenged to to enable someone to stand on weaknesses wherever their own feet and build a viable come up with a product and selling business of their own? we see them; not by it. What a great way to find out if hammering poor results entrepreneurial life is for you. It’s easy to say the answer and just telling the poor In some societies being an is education. But what victim to ‘pull up their entrepreneur is considered more kind of education socks’. Rather, there dignified and prestigious than in breeds the strength of must also be emphasis others. For a long time the British character needed to on helping young people aristocracy looked down its refined survive and prosper as to play to their strengths, nose at mere ‘traders’ and those
A World Islamic Economic Forum | Special Commemorative Publication 2010 37
We are all brothers and sisters, and if this planet of ours is to develop sustainably we are all challenged – women and men, young and old, from all parts of the planet – to empower and enrich ourselves and each other, and to reach out to one another.
Evelyn Mungai
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 38
in ‘commerce’, in direct contrast Let me now reflect a little more on the For being an to their American cousins, whose special challenges that many women entrepreneur inevitably entrepreneurs have provided admittedly still face. Yes, more and involves circulating in the great the United States with some more of us are taking the opportunity community, mingling with of its great role models. (Just for education for granted. And yes, like in the US you can country after country has introduced the market of ideas and proudly state that you’re legislation that improves our lot, products and, above all, giving us the right to own land, to people. a salesperson, while in take out loans and so forth. Yes too, Kenya, for instance, you more men are losing their chauvinistic Even where women’s rights and have to call yourself a prejudices. But in many parts women’s education have come business development of the world, and particularly a long way, it’s not to say that executive!) in more conservative rural the path to owning and running a areas, women are still seen business is assured. Rights and an adequate education offer necessary With Margaret Thatcher (a grocer’s as members of a weaker daughter, as it was often pointed conditions… but not sufficient ones. out), Britain discovered the spirit and altogether inferior So what else must be in place to and joy of enterprise, and finally lost gender. The absence of fill the gap? First, as I have stated its Victorian upper-class hang-ups proper rights for millions before, confidence. And whereas about making profits. The likes of of women, our distinctly many women have been forced Richard Branson and Alan Sugar – inferior status in society, I by their circumstances to become extremely tough and resilient, it and women like Anita Roddick of must admit, continues to Body Shop – became respectable does not automatically follow that members of the establishment, face the 21st century as a they have developed the self- were honoured with knighthoods major global challenge. assurance – the cheekiness, I might and other accolades, and were add – required to launch a brand brought in to advise government It is only once these basic societal new venture out of nothing. mandarins on how to become more inequities are addressed that we businesslike. There is nothing as can hope that a larger proportion Again though, the power of role powerful as such role models to of potentially suitable women can models is massive. And today we encourage more young people to aspire to becoming entrepreneurs. see more and more successful and aspire to a life of entrepreneurship, In cultures where women are seen celebrated businesswomen, in all and these days several members of as mere dependents in the family, parts of the world, among many the British Royal family champion where they are deprived of education cultures – including some where sales on behalf of UK PLC. or confined to the home, there is no women have only recently emerged chance they can remotely consider a from living in a much more sheltered life in business. environment.
A World Islamic Economic Forum | Special Commemorative Publication 2010 Profile Evelyn Mungai 39 Immediate Past President and Founder All Africa Businesswomen’s Association Executive Chairman Speedway Investments Ltd and Glendale Properties Ltd
Along with role models, the two other key components of gap-filling are mentoring and networking. Readers of this book do not need me to go into what these entail or why they are vital to the further actualisation of women in society – and not least in what can otherwise be the very lonely life of a businesswoman.
I wish to conclude by appreciating the wonderful ways in which the World Islamic Economic Forum is supporting the global development of women in business. For if the impact of local role models is great, if local mentoring and networking provide powerful support for women entrepreneurs, the significance of inter-regional and Throughout her entrepreneurial career, Evelyn Mungai has been a champion for women’s inter-cultural mingling is disproportionately greater. In economic empowerment. She launched her today’s global village, there is no stranger, no one whom career in the early 1970s, and established one of we can afford to say is from an alien culture. We are all the first companies in Kenya to offer recruitment services. She then became the pioneer in brothers and sisters, and if this planet of ours is to develop the design industry in the region, through the sustainably we are all challenged – women and men, establishment of Evelyn College of Design, which young and old, from all parts of the planet – to empower last year celebrated its 33rd anniversary. More recently she has added property development to and enrich ourselves and each other, and to reach out to her business portfolio, and as a Rotarian she is one another. active in rural community development.
She is the Founder and Immediate Past Some see us living in a world of scarcity, where we must President of the All Africa Businesswomen struggle and fight over the inadequate resources available. Association (AABA), an organization which Such people believe the more others have the less there promotes the economic empowerment of women in Africa, and was the first woman is for ourselves and our people. But others, and I myself member and Vice Chairperson of the prestigious included, believe in a theory of abundance. We know that continent-wide organization of leading African through partnerships of many kinds we leverage resources, businesspeople, the African Business Round Table (ABR), a private sector initiative, body of benefitting together from our joint endeavours. We women the African Development Bank (ADB). must partner with other women, but just as much with men too. And we elders in our communities must mentor the She has co-authored a book on women achievements “Kenya Women Reflections” and next generations, even as we learn from them as inverse was a publisher of Presence Magazine for over mentors. We all have much to offer and much to gain. ten years, a publication aimed at educating and empowering women. In 1993, Evelyn Mungai was awarded the Lincoln University President’s In such ways the life of the entrepreneur becomes less Award for Excellence in Business and Finance. lonely, less risky… and far more fulfilling and enjoyable. In 2006, the President of Kenya recognized her What great encouragement for more people to join us. with the Order of the Grand Warrior (OGW), in recognition of her numerous and significant contributions to the country’s development.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 40
Chapter two
A World Islamic Economic Forum | Special Commemorative Publication 2010 41
Banking on finance
The future of financial ethics Islamic finance post-crisis The innovation challenge: Developing talent in Islamic finance The value of Islamic funding: Issues on morality
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 42
The current economic crisis THE FUTURE may have led to popular belief OF FINANCIAL that the financial 1 services industry ETHICS is generally based on exploitation and Humphrey Percy greed. However, Chief Executive Officer an exploration of Bank of London and the Middle East economic thought Dr Natalie Schoon shows that the main Head of Product Research principles of finance Bank of London and the Middle East are derived from the ethical principles surrounding money, usury, private property and justice in economic exchange which have been debated for a long time. In this section, we explore early economic thought, the current crisis 1 This is an abridged version of sections 3.1, 3.2 and 14.2 and the future of of Schoon, N (2009) Islamic Banking and Finance, London: financial ethics. Spiramus Press
A World Islamic Economic Forum | Special Commemorative Publication 2010 43
1. Early economic thought and financial ethics
In ancient times As time went on and trade routes commercial activities expanded, forms of trade finance were generally not public developed and, as early as the 13th century BCE, the concept of trade enterprises but were insurance was introduced in Hittite actively run by the rulers Anatolia and Syria. Anyone killing and other parts of the elite a travelling merchant was not only such as the officials of obliged to pay compensation, but the temples and palaces. also to replace the goods he had The profits did not belong with him. Partnerships were set-up between neighbouring countries, to the public but were trade flourished, economies typically kept by the elite developed and concepts of demand to enhance their own and supply and a just price became financial position. The important factors. officials of temples and palaces were closely associated with It is from this time that four interlinked the royals of the time, had good themes started to surface: private access to information regarding property, justice in economic economic opportunities in local exchange and usury, with money or and distant markets which they the value thereof, linking all of these obtained from their extensive together. These have since been network and hence were best researched by Greek philosophers, positioned to run businesses, theologians and Islamic scholars although there is evidence of alike at different times over the past independent merchants who would millennia, since economics was act either on their own behalf or deemed to be a branch of ethics as agent for King or temple. Most which is in turn a branch of theology. importantly, however, they had Not until after the reformation and access to the capital required to the subsequent division of State and invest in trade and enterprise. Religion did economics become a science in its own right.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 44
Money and usury Private property
During the 4th century BCE, The ban on interest did Private property and religion has Aristotle was of the opinion that however not end debt long been a contentious issue. money was a medium of exchange, finance, it simply made Within the Abrahamic faiths, but did not have an intrinsic value of property is typically deemed to be its own since it was merely a human it more complicated and owned by God with man having social invention which has no utility resulted in the application “stewardship” and any property in itself. Following that, it was fairly of different structures with should be made available for public easy to argue that “a lender of the same economic effect. use. Although the same view is money loses nothing of worth when to date held by Islamic scholars, lending it out”. The change of society away from the Christian Church amended being largely agricultural, the its position in this respect in the Although there is no unambiguous growth in international trade and early 5th century CE and began to basis for the ban on usury in the increasing segregation between accumulate significant amounts of Christianity, in the early centuries the State and Religion, resulted in property. In the 13th century many CE theologians such as Thomas the ban on usury being revisited theologians started to turn against Aquinas and St Bonaventure and by the middle of the 17th the riches of the Church and started argued that the ban on usury was century it was generally abolished to insist on vows of poverty. On absolute and without exception. throughout Western Europe. The the other hand, a large number of The debate on the value onset of the industrial revolution, theologians believed that private of money and usury has lead Adam Smith to argue that property did not have any moral preoccupied philosophers capital should be seen as a factor implications but, on the contrary, had positive effects in stimulating and theologians such as of production just like land, labour and building and therefore has a economic activity and hence general Aristotle and Ibn Rushd cost or rent associated with it. He welfare. This did not mean all private for many centuries. However, did however argue that the enterprise was endorsed, and purely although Christian clerics were return should not be based seeking profit for the sake of it was prohibited from lending at interest still considered to be a serious sin. since the 4th century CE, the ban on usury but should only In Islamic economics the notion of was not extended to the general reflect the risk and any stewardship still exists and property public until the 12th century, by opportunity cost. Within should be applied to enhance which time the general perception Islam however, the ban on economic activity. was that lending at a fixed interest interest is deemed to be rate was unholy since it resulted absolute and unqualified, in significant social inequality. a point that is to date still maintained.
A World Islamic Economic Forum | Special Commemorative Publication 2010 45
Justice in economic exchange 2. Modern economics and financial ethics
Justice in economic exchange Modern economic theory starts the balances in micro and macro deals mainly with the issue of the in 1776 with Adam Smith and his economics. All economics determination of a “reasonable epic tome “An Inquiry into the questions arise because Nature and Causes of the Wealth people, companies and price”, and has long been based of Nations” in which he builds on the general perception that further on early economic thought. governments want more profits are acceptable as long as Smith identifies several factors of than they can get. Within the entrepreneur is not motivated production beyond pure labour economics, this inability to by pure gain and the profit (only such as land and capital. This is satisfy all wants is called more or less a direct result of the just) covers the cost of his labour. scarcity. As a result, every entity Industrial Revolution which led in an economy is continuously to a shift from largely agricultural It is however not all that simple. At the time faced with the question of utility, or societies to societies focussed on of the Ancient Greeks, Aristotle advocated on what do we spend our (limited) trading and production. Capital that “a just exchange ratio of goods would resources. becomes an important factor of be where the ratio (or price) would be in production and Smith recognises proportion to the intrinsic worth of each of In modern economics, demand that there is a cost associated with the goods in the transaction”. This implies and supply govern the price of a its use. At the same time, State that no importance is given to demand and goods. Increasing globalisation and Religion started to become supply. The Romans, on the other hand, heavily impacts the price at which more and more segregated due to viewed a just price to be any price agreed some goods become available and which the influence of the church between contracting parties, without any profitability guides the majority of on the economy significantly consideration for intrinsic value. enterprises. “Justice in economic reduced. Smith strongly believed exchange” is still a basic principle in the invisible hand which During the 12th and 13th century, the underpinning demand and supply guides the free market and consensus under Christian theologians was theories. Outsourcing of services demonstrates how self-interest that the price of a good is determined by and the production of goods to low encourages the most efficient its “usefulness” to one of the contracting cost overseas locations is a good use of resources in a nation’s parties, which again implies the application example of this. Within the overall economy with public welfare of demand and supply mechanisms. The economy, banks have a specific being a by-product. His free just price was accepted as the natural, function which is associated with the market concept and demand and exchange-established price. Eventually the provision of financial services. For supply theories laid the basis for view that in a competitive market, buyers conventional banks, this translates current economic thinking which and sellers will not transact at a price that is into the provision of a financial in addition focuses on principal- not acceptable to either one of the parties, intermediary function and to extend agent problems, utility functions became generally accepted. investment expertise to clients. and market efficiency governing
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 46
3. The future of financial ethics
Socially responsible investing, In addition, some investors actively also known as sustainable or avoid investing in any businesses that ethical investing, encompasses are involved with alcohol, tobacco, an investment strategy that gambling, and weaponry and defence. seeks to maximise both financial Highly leveraged investments are return and socially responsible also avoided since these generally or ethical behaviour. Faith involve an element of interest income or payment. These principles underpin and conscience are Islamic Finance, but equally apply to probably the most ethical investments and are typically important factors for also adhered to by credit unions and building societies. The industries that individuals to make individual investors wish to avoid will ethical investment depend on their individual preference decisions, and and view on ethical investments.
generally, socially As a direct result of the current responsible investors financial crisis which started in favour investments that September 2008, there is a renewed interest in financial ethics and social promote environmental responsibility of financial institutions, stewardship, consumer and there is certainly an expectation protection, human that financial ethics and the adherence to basic principles associated with rights and diversity. these will warrant a much larger role in financial regulation in the future.
A World Islamic Economic Forum | Special Commemorative Publication 2010 Profile Profile Humphrey Percy Dr Natalie Schoon 47 Chief Executive Officer Head of Product Research Bank of London Bank of London and the Middle East and the Middle East
Humphrey joined BLME in August 2006 Natalie joined BLME in April 2007 as as Chief Executive Officer. Humphrey Head of Product Research. Prior to this has more than 30 years of banking Natalie was at Barclays Capital where experience focusing on treasury and she worked as a senior consultant global markets and during his career to on the Basel II programme. Natalie date has worked at J. Henry Schroder has worked in international financial Wagg, Barclays Merchant Bank, organisations such as ABN Amro and Barclays de Zoete Wedd and West LB Gulf International Bank. She began where he held positions including CEO, her career in Islamic Finance whilst Managing Director, General Manager, working in Bahrain, Kuwait and Dubai and Head of Global Financial Markets. during the 1990s. Natalie holds a PhD Humphrey is experienced in building in financial analysis (thesis subject: new functions and product areas, and Residual Income Models and the has managed start up businesses within Valuation of Conventional and Islamic both BZW and West LB as well as Banks) and is an accredited trainer for founding his own business in 2002. the Islamic Finance Qualification which she teaches globally.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 48
In less than a decade, the Islamic Finance industry has ISLAMIC evolved to become an essential part of the international financial system. Islamic assets are FINANCE POST- estimated to have grown from USD150 billion in CRISIS the mid-1990s to around USD1 trillion in 2009. The tremendous growth has Noor Ashikin Ismail been mainly driven by abundant Senior Analyst liquidity flows from the recycling KFH Research Limited, a wholly-owned of petrodollars, encouraging subsidiary of Kuwait Finance House, Kuwait demographics, as well as the active role played by some jurisdictions around the world to promote the development of Islamic financial markets in their respective countries. Islamic financial institutions have also started to tap new growth opportunities in other regions and form cross-border linkages. Given that Islamic Finance has become part of the global financial system, several countries are now in the race to become Islamic financial hubs, including established financial centres such as London, Hong Kong, and Singapore.
A World Islamic Economic Forum | Special Commemorative Publication 2010 49
Islamic Banking However, the sector is not totally This is due to Islamic banks’ insulated from the crisis. The lower risk profile, given that it is Islamic banks have been largely indirect effects of the global financial more difficult for Islamic financial shielded from the US subprime and crisis to Islamic banks include the institutions to use leverage, as structured credit crisis, given the drying up of interbank liquidity well as the conservative approach following reasons: market and declining investment to financing as the risks are banking revenues. The reduction shared with the investor. We • The ban on interest. Any in global liquidity has reduced the expect the value of assets predetermined payment over ability of banks to raise financing managed by Islamic and above the actual amount of in international capital markets. principal is prohibited, as interest New sukuk issuances were either banks to grow to USD4 (or the intrinsic value of the delayed or priced slightly higher trillion by 2020, as the money) is deemed unlawful by to reflect rising debt volatility, the world’s Muslim population Shariah. slight drop in investor demand, grows larger and as more • The ban on uncertainty or as well as concerns over sukuk non-Islamic jurisdictions speculation. Uncertainty in defaults. Despite this, the Islamic around the world warm up contractual terms and conditions Banking sector has been to the concept of Islamic is forbidden. However, risk taking able to maintain stability is allowed when all the terms and Banking. conditions are clear and known owing to ample liquidity, to all parties. safer debts (backed by Sukuk • The ban on financing certain an underlying asset) economic sectors. Financing and relatively high profit The sukuk market was not spared from the effect of the global of industries such as weapons, margins. Islamic banks seemed financial crisis. After expanding pork, and gambling is deemed to be more resilient to the ongoing robustly in 2007, the sukuk market unlawful by Shariah. crisis than their conventional experienced a marked slowdown in • The profit- and loss-sharing counterparts because direct 2008 and 1H09 due to the following principle. Parties to a financial investment in subprime assets and reasons: transaction must share in the its derivatives is prohibited. risks and rewards attached to it. • Challenging market conditions • The asset-backing principle. The awareness of Islamic Banking and drying up of liquidity Each financial transaction must has increased after the recent • Wide credit spreads and refer to a tangible, identifiable financial crisis. Given the volatility shortages of USD funding in underlying asset. of the financial markets, more issuing countries individuals and corporations have • Challenging economic started to invest in Islamic Banking environment in the GCC and Shariah-compliant products. countries, particularly in the UAE
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 50
Nevertheless, as overall market conditions improved, the primary sukuk market rebounded in 2H09. Third quarter issuance was up by 162.5% year Long-term prospects for the sukuk over year, and 61.9% quarter on quarter, to USD8.8 billion, followed by a market are expected to remain strong issuance of USD8.1 billion in 4Q09. These were in comparison to strong, given increasing popularity USD2.2 billion in 1Q09 and USD5.5 billion in 2Q09. For 2009, total global of Shariah-compliant products, the sukuk issued amounted to USD24.6 billion, 60.1% year over year, higher than governments’ support for Islamic the USD15.3 billion raised in 2008. Finance, huge investment and financing requirement in the GCC Global Sukuk Issuance Trend (2000-2009) and Asia, and issuers’ desire to tap investors from the Middle East and 35,000 Muslim Asia. In addition, sukuk is 30,000 still far superior as compared to 25,000 conventional bonds, underpinned by 20,000 the following factors: 15,000 USD mln 10,000 • Fairness and transparency. The 5,000 financier and customer share 0 the risks and rewards based on 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 an agreed profit-sharing ratio. The roles and responsibilities Source: Zawya, S&P, IFIS, Bloomberg, KFHR of the parties to a contract are also explicitly disclosed and For 2010, we project global sukuk issuance to continue its upward trend, given transparent. the strong pipeline of around USD50 billion, characterised by the following: • Asset-backed transactions. Islamic financial transactions • 2010 sukuk market will be expected to help to revive the must be backed by an underlying driven by the recovery in global global sukuk market as they tangible asset or legitimate economic activities, low interest provide the necessary benchmark productive activity. This rates, continued sovereign fund pricing for the private sector to discourages over-exposure of raising to support economic gauge investor appetite in 2010. the financing facility beyond the growth as well as revival of • We also expect increased value of the underlying asset, private sector projects. participation from conventional and hence provides continuous • We expect more sovereign investors. For instance, the UAE’s security to the investors. issuers in 2010, which include Ras Al Khaimah’s 5-year USD400 • Ethical investment. Islamic potential debuts from Japan, million sukuk issued in 2009 was Finance prohibits the charging or Hong Kong, Thailand, Australia, distributed to the Middle East paying of interest, and imposes Kazakhstan and Russia. (47%), Asia (34%) and Europe restrictions on unethical and • Sovereign sukuk issuances are (19%). speculative financial activities.
A World Islamic Economic Forum | Special Commemorative Publication 2010 51
Takaful Average Return on Equity for a Sample of GCC and Malaysian Takaful Operators
Takaful companies have 12 GCC Malaysia been largely protected from the direct impact 8 of the global financial 4 crisis, as they are mainly located outside the areas 0 ROE (%) that are most affected by 2005 2006 2007 2008 2009E -4 the crisis. However, given that takaful companies -8 form part of the global Source: Ernst & Young insurance industry and Note: In the case of Malaysian takaful companies, high dominance of investment rely on global reinsurance accounts produced a lower but relatively stable rate of return as compared to other asset pricing, they are not classes. The GCC takaful companies, on the other hand, invested large amount in asset totally immune from the classes that produced higher rates of return but with higher risks, such as equities. crisis. The indirect impact The longer-term outlook for the industry on the takaful operators Nevertheless, the global financial crisis is expected to remain positive, given is mainly in terms of lower is expected to bring some positive that takaful is a viable alternative to returns-on-equity which outcomes to the takaful industry. As conventional insurance for the world’s negatively impacted the international insurers implement more 1.5 billion Muslims. Growth of the policyholders’ fund and discipline in pricing, this is expected industry will also be supported by caused takaful operators to have a positive impact on Muslim strong demographic growth, increased to lose additional income. markets, which will benefit takaful awareness, rising income levels and a The GCC experienced companies directly. Given the dynamism growing desire to consume Shariah- a sharper decline as and vitality of Islamic banks, we expect compliant products. The takaful market compared to Malaysia, the takaful industry to continue to grow is expected to increase from USD550 given that equities formed moving forward. Expect the takaful million in 2000 to USD7.5 billion by the second largest asset industry to benefit from the recovery of 2015, underpinned by the growing component of the takaful sukuk and equity markets. The release of Muslim middle class worldwide and companies. Islamic Financial Services Board’s (IFSB) Guiding Principles on Governance for relatively low insurance penetration rate. Takaful (Islamic Insurance) Undertakings The potential for takaful is therefore in Dec 09 is expected to result in a enormous, given that insurance robust corporate governance framework penetration in most Islamic countries and lead to further transparency and does not exceed 2% of GDP, as clarity in this industry. compared to 12.4% in the UK, 9.4% in the US, and 2.8% in emerging markets.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 52
Conclusion
As market conditions begin Overall, we believe that the potential to improve, expect investors, for Islamic Finance far outreaches The longer-term both international as well as the global crisis and has vast outlook for the regional, to increasingly look for opportunities to grow further, given industry is expected Shariah-compliant investment the following factors: opportunities which are more to remain positive, transparent and ethically • Strong demand for Shariah- given that takaful is structured, and hence reduce the compliant products and a viable alternative risks that caused the financial investments point to immense to conventional crisis and the collapse of major potential for further growth of the banks. We expect to witness industry. insurance for the growth and development of • Encouraging demographics and world’s 1.5 billion new and innovative ways of the proactive measures taken by Muslims. Growth of investment products. jurisdictions worldwide to promote the development of Islamic the industry will also However, given that Islamic Finance. be supported by Finance is closely linked to the • Industry growth will be strong demographic real sector, unexpected adverse strengthened further by growth, increased developments in the real sector improvements in the Islamic awareness, rising may adversely affect business Finance industry architecture, activities and the performance development of government- income levels and of Islamic banks. Risks to the backed Islamic financial centres a growing desire to Islamic Banking sector include as well as greater awareness and consume Shariah- high exposure to assets, which global technological development. compliant products. underlying value, credit quality • Government-linked/ top tier and liquidity are uncertain companies in the Middle East The takaful market is (namely real estate). It is therefore and emerging Asia (financial, real expected to increase crucial for Islamic financial estate, oil & gas and transport from USD550 million institutions to have in place sectors) are looking for funds on in 2000 to USD7.5 effective and good governance the back of massive infrastructure practices, strengthen their risk and construction projects in the billion by 2015. management systems and regions. manage their investment portfolio • By 2020, the total Muslim diligently for the industry to population would have increased remain resilient in trying times. to an estimated 2.5 billion from 1.5 billion currently.
A World Islamic Economic Forum | Special Commemorative Publication 2010 Profile Noor Ashikin Ismail 53 Senior Analyst KFH Research Limited, a wholly-owned subsidiary of Kuwait Finance House, Kuwait
About KFH Research
Established in 2007, KFH Research Ltd is the world’s first Islamic investment research arm to be established by an Islamic Bank. A direct subsidiary of Kuwait Finance House, KFH Research plays a crucial role in linking the Gulf Cooperation Council countries with the rest of Asia and other emerging Islamic financial markets. The research house produces a wide range of publications which covers an analysis of macroeconomic and sector trends, country- specific issues and trends, currency movements, commodities, developments in Islamic capital markets as well as sovereign and investment products. Our award winning research has won the following awards: Noor Ashikin Ismail is a Senior Analyst at KFH Research Limited, a wholly-owned subsidiary • Best Research in Islamic Finance, Master of Islamic of Kuwait Finance House, Kuwait, one of the Funds Award, world’s largest Islamic banks. She is one of the Islamic Fund World 2007 pioneer members of the global Islamic research house. She undertakes research and produces • New Provider for Islamic Finance Research, KLIFF reports on the global Islamic finance industry, 2008 Islamic namely the Islamic banking sector, Islamic Finance Awards bonds or sukuk, as well as potential markets for Islamic finance. Prior to this, she was attached • Best Islamic Research Company, Islamic Finance to Cagamas Berhad, Malaysia (National News Awards Poll 2008 Mortgage Corporation) and garnered broad • Contribution to Research in Islamic Finance 2009, experience in various areas of the Company’s activities including product development, International Islamic Finance Forum Dubai treasury, and corporate planning and strategy. • Best Islamic Finance Research House, The Asset She has written numerous papers and articles Triple A Awards 2009 for various journals and organisations (such as World Bank) on Cagamas’ experience in Islamic Finance developing a secondary mortgage market in • Best Islamic Research Company, Islamic Finance Malaysia. Noor Ashikin holds an MBA (Finance) News Awards Poll 2009 from the University of Western Sydney, Australia and a BA (Hons) Economics from the University of Manchester, United Kingdom.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 54
Islamic finance has become a viable THE INNOVATION and competitive form of financial intermediation that CHALLENGE: has been able to meet the differentiated requirements of our economies. In an DEVELOPING environment of rapid change, a key factor that TALENT IN will influence the future prospects of the Islamic financial services industry ISLAMIC FINANCE will be the investments to build the foundations on Dato’ Agil Natt which further progress can President and Chief Executive Officer be achieved. Investing The International Centre for in the future, in research Education in Islamic Finance and development and in the development of talent and expertise will be the differentiating factor that will contribute to the effectiveness, resilience and competitiveness of the industry.
Tan Sri Dr. Zeti Akhtar Aziz Governor of Bank Negara Malaysia and the Chairman & Chancellor of INCEIF
A World Islamic Economic Forum | Special Commemorative Publication 2010 55
A highly qualified and skilled Framework for human capital pool of talent in Islamic Finance: development in Islamic Finance Key driving factor
The fast pace of innovation in global Islamic Finance education global Islamic financial services financial services in general and essentially is not exclusively the industry. Secondly, it would also be for the Islamic financial services domain of Muslims only. Shariah meaningful to leverage the talent sector in particular, will demand a in particular, propagates development programme in order rapid and continuous infusion and intrinsic principles which to establish a leading training, upgrading of skills. Historically, educating and research institution Islamic Finance has sourced are in line with universal in the Muslim world, instead of professionals from conventional values that are inclusive confining to the limited task of bankers and practitioners. If the and not exclusive in nature. churning the required number of strength of the Islamic financial In any effort towards human capital personnel in Islamic Finance. services industry is to be sustained, development or capacity building for there is a strong need to have a new any organisation there are specific Thirdly, it should also be useful breed of professionals who not only strategies that need to be observed. to develop a very authoritative understand the Shariah, but also These specific strategies include: reference point for all Islamic modern finance and the practical Finance issues, especially in aspect of the business. ensuring the Shariah–compliant Objectives nature of products and overall With the firm commitment to build operations and processes of the human capital, the challenge is to Islamic Finance institutions. This is Right High formulate the appropriate strategies candidates quality indeed very necessary if we are to Key programmes and mobilise the resources Strategies produce Islamic Finance personnel necessary to produce results in Talent who will be acceptable to all Development that will enhance the intellectual parties globally. capital of the industry. This will Best require the combined efforts from resource Best Collaboration between academic & industry practice persons modules all stakeholders and involve a Role of Academician holistic approach that coordinates the strategies for human resource The principle objective of the talent Theory management and reinforced development programme is to by strategies for organisational produce the required number of Shariah Practical development. This will also involve talent supply, in Islamic Finance, putting in place the appropriate that is truly qualified to perform Role of Shariah Advisors Role of Practitioners processes and structures. the various tasks expected in the
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 56
In any talent development The body of knowledge then The resource persons or teachers endeavour, where a huge is built upon those aspects of on the other hand, should be well number of qualified people Shariah that are relevant to Islamic tested. They must have excellent are to be churned out within Finance. This foundation is further track records in education and a short period, the quality of strengthened by the core or hard training so that we can be very talent development programme knowledge of economics, finance, certain of obtaining the desired must be very high indeed. There banking, takaful and management. outcome of such training. The most should not be any compromise Once the candidates have gone ideal would be having resources in terms of standards and quality through the foundation and the that are well-versed in the academic of training. Over and above core subjects, they are provided and conceptual knowledge as well the acquisition of skills and with the skills and competencies as having rich industry experience. competencies, it is of paramount that are most currently needed The acute shortage of such importance in this instance, to by the industry. It is to be noted resources may require a good mix inculcate in the trainees, a very that issues pertaining to Islamic of expertise from the academia positive attitude and strong Ethics and Values as well as as well as industry. Expertise with commitment towards developing Shariah will continuously be industry experience is very essential the Islamic financial services pursued from the beginning till indeed to provide the trainees with industry comprehensively and in the end of the programme. It is the required industry practices. a structured manner. highly recommended that the Indeed, to ensure that there will be curriculum contains all these excellent trainers in the required The right mix of modules and elements so as to have a good numbers there may be a need syllabus is essential to produce balance between the various to have a special programme for the kinds of skills, competencies concepts which are well treated resource persons (train the trainers and attitudes of the candidates. academically, combined and programme). By having such The programme design should integrated with the technical and programmes, the acute shortage be buttressed by Islamic professional elements as practised of well-trained resources could be Ethics and Values that form the in the industry. This combination is reduced if not overcome. foundation for the whole talent essential to ensure that candidates development programme. are industry ready the moment they complete the programme. Whatever talent development programme that will be required in the future will be more of an improvement or advancement in nature to ensure currency of knowledge of the candidates.
A World Islamic Economic Forum | Special Commemorative Publication 2010 57
The selection of candidates to be unlearn what they have learnt. It is important to have financial trained must be those suitable What is more important is their innovation that adheres to the for the task. They must not only ability to understand the concepts requisite principles of Shariah. have the potential to acquire the and perform the required tasks. In this manner, Shariah-based required skills and competencies Indeed the most important is that innovation would contribute but more importantly the right the candidates must have the towards sustainability of the attitude towards performing right type of attitude in tandem industry with Islamic financial the required task in the right with the demands for the Islamic products that have distinct and most efficient way. This Finance industry. By allowing value propositions with in-built is essential because the old admission of graduates from all strengths. To achieve this adage “People are the disciplines, this will certainly enrich objective, it is important to have most important asset” the Islamic Finance industry in strong initiatives that promote the future. The industry is one Shariah-based innovation in is so wrong. People are of service in nature and hence Islamic Finance. In Malaysia, not the most important would require a tremendous the establishment of the asset. The right people amount of interpersonal skills to International Shariah Research are. In this particular case the attract customers as well as to be Academy for Islamic Finance candidates to be accepted for competitive in the future global (ISRA) is aimed at engaging in training must be those who are market place. Shariah-based applied research sincerely committed towards in Islamic Finance. In this regard, understanding and appreciating In a highly globalised financial synergies between academia the relevant Shariah principles in market, research and innovation and practitioners can provide a order to fully implement them in are equally important as the key platform for greater engagement their future tasks. differentiating factors to remain focusing on applied research. competitive. Research These candidates should in Islamic Finance have obtained a first degree has traditionally been in any field of study. Industry driven by industry and experience has shown that background in relevant fields business needs, and such as Economics, Banking, less attention has been Finance, Accounting, Shariah, paid to developing a or Law can be an advantage comprehensive analytical but not essential. In some cases framework based on the they can be a disadvantage 1. New Issues in Islamic Finance & economic principles of Economics, Progress & Challenges (2009, because they tend to refuse to Wiley Finance) by Hossein Askari, Zamir 1 Islam . Iqbal and Abbas Mirakhor.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 58
Leveraging on Malaysia’s Conclusion talent development solution in Islamic Finance
The establishment of the In meeting this objective of The growth of Islamic Finance International Centre for Education in providing a total talent management is expected to accelerate Islamic Finance (INCEIF) thus comes solution for the Islamic financial further in line with the increased from the recognition of this need to services industry, INCEIF continues global expansion in demand invest in human capital to advance to offer the world’s first professional for Shariah-compliant financial the industry forward to greater certification on Islamic Finance, products and services. To heights. Bank Negara Malaysia has the Chartered Islamic Finance sustain and support the future allocated an endowment fund of Professional (CIFP) programme. The growth of the industry, one of RM500 million for this purpose. The CIFP modules offered have been the important prerequisites is objective of INCEIF is to produce designed by renowned experts in the development of the talent high-calibre practitioners and their respective fields and have and expertise that is needed to professionals in Islamic Finance as been developed in full consultation drive innovation and to raise the well as specialists and researchers with local and international industry performance of the industry to in the disciplines of Islamic Finance. players in order to ensure their greater heights. INCEIF will leverage on the wealth relevance to the requirements of the of experience of the Islamic Finance industry. INCEIF also offers post- industry, both in Malaysia and graduate programmes in Islamic abroad, to provide its graduates Finance that will include specialised with value added insights and Masters and Ph.D. programmes perspectives, in particular for their in the various Islamic Finance research programmes. Malaysia’s disciplines. To date, there are 1339 experience in Islamic Finance for number of registered students from over two decades will also provide 64 countries including the United a training environment, including Kingdom, France, Bahrain and Qatar internships for developing Islamic as well emerging economies like Finance professionals. Kazakhstan and South Africa.
A World Islamic Economic Forum | Special Commemorative Publication 2010 Profile Dato’ Agil Natt 59 President and Chief Executive Officer The International Centre for Education in Islamic Finance
Dato’ Agil is the President and CEO of the International Centre for Education in Islamic Finance (INCEIF). Set up by Bank Negara Malaysia, INCEIF is expected to address The establishment of the global need for human capital in the Islamic financial services industry through the International Centre its Chartered Islamic Finance Professional, for Education in Islamic Masters and PhD programmes. Prior to joining INCEIF, he was the Deputy Finance thus comes from President and Executive Director of Malayan Banking Bhd, Malaysia’s largest banking the recognition of this need group. His long and illustrious career with the Maybank Group comprised of Chief Executive to invest in human capital Officer and Director of Aseambankers Malaysia Bhd and Head of Investment Banking to advance the industry Group in Maybank. He was also instrumental in setting up an Islamic capital markets unit forward to greater heights. and a research arm. From 1990 to 1995, he was the Regional Chief Representative of Bank Negara Malaysia has Kleinwort Benson Ltd, overseeing activities in allocated an endowment Malaysia, Indonesia and Thailand. fund of RM500 million for this purpose.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 60
What are the values attached on which THE VALUE Islamic Banking is developed? Its basic OF ISLAMIC principle regards prohibition of Riba (“usury” or “interest”), FUNDING: which is founded on concepts of simple ISSUES ON morality and common sense and these principles are universal MORALITY to the non-Islamic reader as well for usury Datuk Mohamed Azahari Kamil was forbidden in both Chief Executive Officer the Old and the New Asian Finance Bank Berhad Testament of the Bible, even Shakespeare and many other literary greats vented themselves against this cruel practice. These have been the basic principles of Islamic Banking right up to modern times, when, in a structured way, the banking systems put the essence represented by religious creeds into practice, applying it to the financial world.
A World Islamic Economic Forum | Special Commemorative Publication 2010 61
Islam prohibits giving and taking of and instead, defines a universal of investors to the institution as interest, no matter if the loan is in standard by which actions may be partners whereas that of conventional the form of money or commodities; deemed moral or immoral, as Islam’s banking is that of creditor-investor. In regardless of the purpose - for moral system also guides the human a partnership arrangement, meeting consumption needs or for race in how to achieve it, at both an the bank acts as a co- production; whether the loan comes individual as well as a collective level. from a person or an institution like owner of the borrower’s a bank and whether the interest Islamic worldview encompasses both house or, in the case of a is charged at a simple rate or on the al-dunya and al-akhirah. in which business loan, a partner in a compounding principle. For the the dunya aspect must be related in the client’s business, thus faithful, this is a good enough a profound and inseparable way to it is imperative that in the reason to avoid transactions the Akhirah-aspect, in which the latter bank’s interest that the involving interest as submission to has the ultimate and final significance. their belief. Hence in performing ibadah one must business succeeds or that also do the best in their work in this the house is not foreclosed Thus, Islamic Banking is expected world without implying any attitude upon. Islamic Finance must look for not only to avoid interest-based of neglect or being unmindful of the other ways to help borrowers rather transactions, prohibited in the dunya aspect. In this respect, than squeeze them. Islamic Shariah, but also to avoid the Islamic economic unethical practices and participate system is based on keeping The capital mobilization and actively in achieving the goals and in view certain social allocation of funds in the Islamic objectives of an Islamic economy. perspective must adhere to the objectives for the benefit of values ordained by Allah through The word “morality” comes from human beings and society. the Quran and Sunnah as the the Latin word moralitas meaning This is through its various main source whilst the function “manner, character, and proper principles which guides of reason and experience help in behaviour”. Morality generally human life and ensures free making an economic decision. refers to a code of conduct, that an enterprise and trade. Islam stresses on equality individual, group or society hold as and justice in all aspects, authoritative, in distinguishing right An Islamic banker would thus have in short, Islamic business from wrong. to also be concerned with the moral is governed by Divine implications of the business venture Islam as a comprehensive way of principles covering values for which money is advanced. He life encompasses a complete moral such as fairness, equality has a much greater responsibility as system that is an important aspect the very fundamental concept of the and morality dating back of its world-view. Islam holds that Islamic financial system is the relation over a thousand years. moral positions are not relative,
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 62
Islamic economics is a study of Morality in Islam addresses every fulfil the contracts which ye have choice; Allah has stocked the aspect of a Muslim’s life, from made; and to be firm and patient, resources in earth and heavens greetings to international relations. in pain (or suffering) and adversity, available in unlimited quantity. It is universal in its scope and in and throughout all periods of panic. The limitation for mankind is the its applicability. A Muslim’s good Such are the people of truth, the knowledge to explore the resources, moral behaviour is an attribute Allah-fearing.” methods of obtaining them and their that the Prophet Mohammad usage – extravagance and wastage. (SAW) possessed. His teaching The key to virtue and good conduct When the resources are scarce, the illuminates the lives of the people is a strong relation with God, who choice must be made on priority and with the right virtue and good sees all, at all times and everywhere. obligatory goods and services, which manners, to create in them He knows the secrets of the hearts in Islamic economics, faith provides brightness of character and to fill and the intentions behind all actions. the rules of the game in any decision their laps with the pearls of good Therefore, Islam enjoins moral making of economic activities. Thus, conduct. As such the value of behaviour in all circumstances be it an individual not only lives morality in Islam is very high. in worship or muamalat activities for himself, but his scope of The Prophet (SAW) said: “That on (financial transactions); God is activities and responsibilities the Day of Judgement there will be aware of each one when no one else nothing weightier in their balance is. It may be possible to deceive extend beyond himself to than their good moral character”. the world, but it’s not possible to the welfare and interests The Qur’an in Surah Al-Baqarah, deceive the Creator. of society at large. There are verse 177 emphasized the belief basically three components of an that righteousness and piety References: Islamic economic paradigm: is based, before all else on a true and sincere faith: “It is not 1. Hasan, Zubair (2007): 1. That as vicegerent, man should righteousness that ye turn your Introduction to Microeconomics seek the bounties of the land that faces Towards East or West; but An Islamic Perspective, Pearson, God has bestowed on humanity it is righteousness- to believe in 2. Rosly, Saiful Azhar (2008):Critical (Quran 33:72). From the wealth Allah and the Last Day, and the Issues on Islamic Banking and thus obtained, he should enjoy his Angels, and the Book, and the Financial markets own share. Messengers; to spend of your 3. Article, Islamic Financial System, 2. That he should be magnanimous to substance, out of love for Him, iiu.edu.my. others and use a part of the wealth for your kin, for orphans, for the 4. Contribution of the Islamic so obtained also for the benefit of needy, for the wayfarer, for those worldview towards corporate his fellow-beings. who ask, and for the ransom of governance, 2003-2004 3. That his actions should not be slaves; to be steadfast in prayer, 5. The worldview of Islam, wilfully damaging to his fellow- and practice regular charity; to June 13, 2007 beings 6. Morality and Ethics in Islam, 2009
A World Islamic Economic Forum | Special Commemorative Publication 2010 Profile Datuk Mohamed Azahari Kamil 63 Chief Executive Officer Asian Finance Bank Berhad
Morality in Islam addresses every aspect of a Muslim’s life, from greetings to international relations. It is universal in its Datuk Mohamed Azahari, 48, graduated from the scope and in its Institut Teknologi Mara (UiTM) in Shah Alam with a Diploma in Banking in 1980 and subsequently applicability. obtained his BBA (Finance) from the Western Michigan University in 1982. He obtained his MBA (Finance) from the Central Michigan University in the US in 1984.
He started his career with the Malaysian French Bank in 1984 as a Credit and Marketing Officer, after which he joined Malaysian Industrial Development Finance Berhad in 1985 as a Project Officer. In 1988, he joined MIDF Corporate Consultancy Services Sdn Bhd as a Manager, Public Issues and Marketing. From 1989 to 1992, he was attached to Bapema Corporation Sdn Bhd as a Senior Manager, Investment and Corporate Planning. From January 1993 to May 1993, he was the Assistant General Manager of Business Development for Island and Peninsular Berhad. From June 1993 to March 1994 he was attached to Kimara Equities Sdn Bhd as an Executive Director, after which he joined PB Securities Sdn Bhd in April 1994 as a Corporate Institutional Dealer until October 1994.
In November 1994, he established JMF Asset Management Sdn Bhd assuming the role of Managing Director. In September 2005, Amanah Raya Berhad acquired 70% of JMF-Asset Management and Datuk Mohamed Azahari was appointed Managing Director of the newly-formed entity AmanahRaya-JMF Asset Management Sdn. Bhd. In June, 2008, Datuk Mohamed Azahari took on the role of Managing Director and Chief Executive Officer of AmanahRaya Investment Bank Ltd, Labuan. Thereafter, Datuk Mohamed Azahari is the first Malaysian to be appointed as Chief Executive Officer of Asian Finance Bank, the third foreign Islamic Bank, on August 20, 2008.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 64
Chapter three
A World Islamic Economic Forum | Special Commemorative Publication 2010 65
Resources today and tomorrow
The promise of biotechnology: Investing in the future Calm before the storm: The prospect of alternative energy A greener world: The business road to climate action
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 66
THE PROMISE OF BIOTECHNOLOGY: INVESTING IN THE FUTURE America gets Sheriffah Noor Khamseah Al-Idid more than half its Former Special Officer to the Science Advisor, economic growth Prime Minister’s Department, from industries that Malaysia and Innovation Advocate barely existed a decade ago - such is the power of innovation, especially in the information and biotechnology Industries.
The Economist, April 2001
A World Islamic Economic Forum | Special Commemorative Publication 2010 67
A Business Case for Fig 1a: Global Biotech Revenues from 1989 - 2009 Biotechnology – A Multi-Billion Biotech is on track to become a US$100 billion Dollar Business industry by the end of the decade
US$89.7 billion revenue was $50b $100b charted by publicly traded biotech 28 years 5 years companies in 2008, a growth 100 of 12% from the previous year, of more than US$80 billion in 2007. This update was released by Beyond borders: Global 50 Biotechnology Report 2009, US$b launched at the annual BIO International Conference, BIO 2009 held in Atlanta, USA. This report charts the development of the industry in the prior year, 0 2008, as well as key trends. 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Revenue was US$73.4 billion in 2006, US$63.1 billion in 2005 Source: Ernst & Young. Forecast assumes 14 percent annual growth rate and no major acquisitions of biotech companies. and US$54.6 billion in 2004. The biotechnology sector is expected The US continues to trailblaze the biotech sector generating US$66.13 billion, to become a US$100 billion an equivalent of 73.8% of the total biotech revenues in 2008, followed by industry before 2010. (Fig 1a) Europe with revenues of US$16.5 billion (18.4%), Asia-Pacific US$4.97 billion (5.5 %) and Canada US$2.01 billion (2.2%).
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 68
A Business case for Biotechnology – Large Market Capitalization
In comparison to other economic Fig 1b: Historical Biotech Market Capitalization 1997- 2006 sectors, biotechnology has achieved astounding market $490 $490 capitalization (see Fig 1b). $500 $441 The US biotech market cap $400 $382 increased from US$109 billion in $400 $334 1997, and after dipping slightly $312 in 2001 and more in 2002 had $300 surged to US$500 billion in 2007 $224
for the first time in its history, ($billion) $200 $149 setting this new mark on 17 $109 April, 2007. $100
$0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: Burrill & Company
In view of the significant revenues generated by well as the enormous market capitalization of biotechnology companies, there is thus tremendous business and economic imperatives for Islamic companies and nations to venture and invest in biotechnology, and in particular for governments of Islamic nations to strive to develop and promote a vibrant ecosystem that supports biotechnology business and industry comprising agricultural biotechnology, medical/health biotechnology, industrial and environmental technology. In Europe these sectors are respectively referred to as Green Biotech, Red Biotech and White Biotech.
A World Islamic Economic Forum | Special Commemorative Publication 2010 69
The Socio-Economic Case for Top Ten Biotech Countries Biotechnology
The biotechnology sector, a multibillion In its Global Biotech Report; 2005 Ernst &Young had ranked countries dollar global industry, continues to arrest by the number of biotechnology companies, and listed the 12 Top the attention of government, industry Biotechnology Countries (as shown in Fig 2a). The United States is and investors, globally and nationally. the leader followed by Canada, Germany, United Kingdom, Australia Although it is high risk in nature and is and France. Other Asia-Pacific countries amongst the top 12 biotech capital-intensive, biotechnology offers countries include China and India. the potential of creating new jobs, new companies and enhancing economic Fig 2a: Top 12 biotechnology countries in 2005 by Ernst & Young growth for nations and governments Global census: Top 12 biotechnology countries as well as attractive high returns on investments for businesses and investors. Number of biotechnology companies (public and private companies) In addition to economic growth, world 1,600 leaders are also turning to biotechnology 1,400 to address other basic issues. With the 1,200 global population expected to 1,000 escalate to 9 billion by 2050, 800 many are turning to solutions 600 promised by biotechnology to 400 address global shortages of 200 food, energy and clean water. 0 US Canada Germany UK Australia France Sweden Israel China & Switzerland India Netherlands Additionally governments are also Hong Kong investing in biotechnology to help offset Source: Ernst & Young rising healthcare costs driven by aging populations. The United States is a trailblazer in the biotechnology sector which is largely driven by innovation. As researchers and scientists compete to Thus in tandem with global development, establish and promote innovation to create revolutionary and blockbuster many Islamic countries could consider biotech products, sufficient food and energy supply, regional and national shifting from their present natural resource governments are simultaneously pursuing to attract international and and agriculture based economies to local biotech companies and investors to locate, operate and invest knowledge based ones as part of a in their nations and regions (see Fig 2b) through establishing dynamic strategy to enhance economic growth, National Innovation Ecosystems that support innovation in research in addition to reducing and eradicating and development (R&D) in financing as well as at the firm and national poverty and unemployment. level. Additionally great efforts have been put in to build and establish successful biotech clusters and biotech hotspots.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 70
Fig 2b: Biotechnology a Global Business Investment
The global biotechnology clusters map. Countries coloured in brown rank highly in the Growth Competitiveness Index 2004–2005, World Economic Forum. Black circles represent selected biotechnology and life-sciences clusters
USA: 2 largest UK: 3 major bioclusters France: 10 biopoles (clusters) bioclusters in the world & 4 emerging clusters. & 8 genopole. Government Germany: 4 bioclusters & 7 other major clusters. US$3 billion in to provide US$500 million for government investment of Billions of dollars in government funding for company creation. US$900 million for 2001-2005. funding. new programme.
China: 2 bioclusters government funding up to US$500 million for Agbio (2005).
Japan: 3 major bioclusters Canada: 6 major government funding up to bioclusters. Government US$2.4 billion in 5 years. funding was US$1.5 billion in 2002.
Australia: 5 clusters Source: Andrea Rinaldi EMBO reports 7, 2, 133–136 (2006. Figure adapted from image supplied by government funding include William Hoffman, MBBNet, University of Minnesota, Minneapolis, MN, USA. Bioclusters information US$2.9 billion over 5 year from New Economy Strategies, 2003; The Brookings Institution Center on Urban and Metropolitan Policy, 2002 and article on Global Bioclusters published in Biospectrum issue 12 August 2003
A World Islamic Economic Forum | Special Commemorative Publication 2010 71
We have to devote the necessary resources to scientific and technological research and development, including biotechnology. We must further encourage innovation among our people and ensure that we introduce new developments into our productive activities.
Thabo Mbeki President of South Africa
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 72
Strategy for the Islamic Countries : Action agenda for establishing and promoting innovation and investments in biotechnology for enhanced economic growth
Technological revolution In view that Modern Biotechnology However many Islamic countries fueled by three has revolutionized a number of are still confronting a number of areas of innovation: the economic sectors including constraints and challenges in their agriculture, health and industrial efforts to build a vibrant biotech information technology, sector as well as contributed industry. As a consequence, many biotechnology and significantly to enhancing economic Muslim countries rank relatively nanotechnology have not growth for many nations that have low in innovation as well as in reached the shores of invested in and developed this sector, biotechnology. many Islamic countries it is imperative that Islamic nations and the industrial sector strive to develop and invest in this Thus there is a critical imperative strategic sector. for Islamic countries to review best in a large number of practices in biotechnology and in Islamic countries is Presently there are significant efforts innovation to develop and promote growing at a very slow underway by Islamic countries to these as a strategic means to help pace as many of these develop and promote biotechnology, shift their economies from a low countries rely mainly on and this is indeed evident from many income to an innovation-led and regional and international forums higher income economy. an agro-based economy. and dialogues, including Islamic Conference of the Ministers of Higher To set the stage for achieving Education and Scientific Research, success in this sector would ISESCO, COMSTECH, OIC General require Islamic nations to review Secretariat, Islamic Development the best practices adopted by Bank (IDB), OIC Statistical, Economic selected countries advanced in this and Social Research and Training sector. This section below offers Centre for Islamic Countries (SESRIC) an insight on the prescription for that have deliberated on the need as success to promote and develop the well as earmarked biotechnology for biotechnology sector. investments and development.
A World Islamic Economic Forum | Special Commemorative Publication 2010 73
1. Establishing Innovation in Biotechnology
In recognition that the US Fig 3a: Biotechnology Innovation Lifecycle trailblazes in the biotech sector which is largely driven by The Innovation Lifecycle: Creating Churn innovation, this section reviews the Biotechnology Innovation Knowledge Technology Lifecycle developed and Creation Transfer advocated by the New Economy • Incubation & • Proof of Concept Testing Research Parks Strategies (NES), a think-tank • Licenses • Venture Capital • Patents • Clinical Trials based in Washington DC • Universities & Research • Collaborations & Institutions (see Fig 3a). Partnerships • Federal R&D • Regulatory Approval • Regulatory Conception Formation
• Environment Maturity Growth • Business Planning • Industry Consortia & • Job Creation partnership • IPOs & Gazelles • Industry R&D • Labor Market/ • M&A Activity Graduates • Product Pipeline • Value-add • Economies of Scale
Clusters & Networks Commercialization
Source: New Economy Strategies (NES), USA
How are biotechnology industries built? The innovation lifecycle by NES spotlights on the critical components necessary to support and promote the development and promotion of the biotech sector. It is recommended that policy and decision-makers as well as businesses formulate strategies to introduce these critical components to support the biotech sector.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 74
2. Build Successful Biotech Clusters or Biotech Hotspots
A Report titled “The Biopharma Landscape in Norway: Current Status and Future 1. World-class R&D with Commercialization Opportunities,” 26 September 2007, prepared by the Boston applied focus constitutes Consulting Group (BCG) had identified key success factors in establishing the base of all bioclusters. successful biotech industry after conducting international benchmarking of several 2. Having access to both established biotech hotspots (see Fig 3b). These include: private and public capital, including seed capital and venture capital is essential Fig 3b: Success within biotech is not an easy task to successfully pursuing the best new ideas. A stepwise approach is required 3. A broad supply of research and management talent. The Resources report had articulated that Global biocluster “Successfully bringing a Characteristics • World-class R&D and new product to market universities Commercial system • Attracts headquarters of requires business and life - Multinational companies science experience”. Characteristics - VC and other investors • World-class R&D and - Complementary services Early 4. Collaboration with Commercialization universities and specialists • Specialization within • Intense rivalry among the triple-helix model Characteristics several fields companies • R&D within specialized fields • Large scale industrial encompassing partnership R&D system • Focus on translating science activities Examples: among academia, to commercial products • Strong connection with California Characteristics • Attracts FDI and export universities, industry and Massachusetts hospitals and industry • R&D within specialized fields ideas/products venture capital • Cooperation with universities • Intense rivalry among being key. and hospitals Example: companies 5. Suitable Tax regulation • Export ideas for Medicon Valley commercialization France Example: and incentives also Cambridge Example: contribute towards Norway enhancing success of Time bioclusters. Emerging bioclusters Established bioclusters The report had also made Source: Boston Consulting Group (BCG) comparisons between successful emerging bio- clusters and established bioclusters (see Fig 3b).
A World Islamic Economic Forum | Special Commemorative Publication 2010 75
3. Establish Networks between Stakeholders of Biotechnology
In addition to ensuring all Fig 3c: Networking amongst stakeholders is critical to components of biotechnology enhance success of bioclusters innovation as outlined in the Lifecycle are developed and The Case for Bio-Clusters promoted, the NES had also advocated the need to establish networks. On a similar note, BCG Venture Local federal capital authorities had also promoted for a strong Media connection with universities, biotech agencies industry and venture capital, in (technology transfer) addition to establishing bioclusters. Information Start-ups, broker Thus forging links and networking developing with all important biocluster and established Marketing companies companies stakeholders is paramount for Patent lawyers enhancing success of these bioclusters (see Fig 3c).
Big pharma Universities, Lawyers Research Institutes
Source: Biotechnology in Europe: An Overview and Examples, focusing on Germany by Armin Rump, Tokyo University, 26 January 2002
It is envisaged that when regions and nations are able to develop successful biotech clusters transforming them into biotech hotspots, these regions and nations will emerge to become preferred biotech investment locations and thus will be able to attract biotech companies and investors to locate, operate and invest in these localities, ultimately developing and promoting a dynamic biotech sector thus generating interest, income and growth for these regions and nations.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 76
Thus Islamic countries striving creating regional networks and to develop the biotechnology dialogue forums to share best sector must accord priority in their practices and be updated on new efforts to establish and promote financing structures as well as new innovation in this sector and business models necessary to formulate subsequent strategies develop and promote the biotech and game plan to advance this sector, in their pursuit to shift sector aimed at establishing food their economy to a high-income and energy security, enhancing Innovation-led economy. It is thus health and quality of life for the within this context that I would Ummah as well as strengthening like to recommend that an Islamic economic growth. business and industry forum focusing on financing and building Although strategy for biotech business be introduced development of biotechnology in to provide a strategic platform for Islamic countries, as promoted achieving such an objective. by a number of Islamic forums and dialogues constitutes a As awareness on the financing significant step forward, in and business of biotechnology particular for enhancing biotech is one of the key factors R&D and promoting the biotech that can help develop and industry, however progress in promote biotechnology in the biotech financing and business developing Islamic countries, development is still trailing behind it is recommended that for the in many countries and regions. following and subsequent World Islamic Economic Forum (7th Presently, new global rules are Forum and beyond) financing as affecting the movement of people, well as building biotechnology knowledge, technology and businesses be introduced for finances and as such, Muslim discussions and dialogue amongst scientists, businesses, financiers economic, business, financial and and industrialists should consider industry leaders and communities, as well as scientists and researchers of the Islamic nations.
A World Islamic Economic Forum | Special Commemorative Publication 2010 Profile Sheriffah Noor 77 Former Special Officer to the Science Advisor Prime Minister’s Department Malaysia
Islamic countries striving to develop the biotechnology sector must accord priority in their efforts to establish and promote innovation in this sector and formulate subsequent strategies and game plan to Ms. Sheriffah, a Physics graduate of the Imperial College of Science and Technology, London advance this sector University had served as Special Officer to the First aimed at establishing Science Advisor to Malaysia’s 4th Prime Minister. She had authored two high-tech financing Strategy food and energy reports, Strategy for Enhancing Venture Capital Industry in Malaysia, 1999 and Strategy for security, enhancing Enhancing Business Angel Financing in Malaysia, 2001, which were accepted by the Ministry of Finance and recommendations incorporated into health and quality of Malaysia’s 10-year Financial Sector Plan, launched life for the Ummah as by Bank Negara. She had assisted Multimedia Development well as strengthening Corporation (MDeC) in the promotions of the Multimedia Super Corridor (MSC) overseas as well economic growth. as nationally and MOSTI in the development of the biotechnology sector.
As an advocate of Innovation, Ms Sheriffah has written articles on best practices on Innovation and Biotechnology in The Edge and Malaysian Insider, Malaysian Business and Technology Business Review and is in the final stages of completing her draft books on: (1) Innovation - The Critical Imperative for Corporate, National and Global Competitiveness, (2) Biotechnology International Best Practice and (3) Financing Biotechnology - The Indian Experience.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 78
As the years have passed since mankind began using coal as a CALM BEFORE means for producing electricity by using boilers with steam turbines as prime movers to operate generators, THE STORM: there has been a steady growth of coal as a source of energy. Similarly, as oil production proliferated and THE PROSPECT natural gas was discovered, this became a second means of utilizing an additional fuel source to generate OF ALTERNATIVE electricity, and to fuel motor vehicles. With this, the stage was set from the early twentieth ENERGY century for the world to be seduced by the charm Syed Ashfaq Peeran of using cheap sources of President energy and convert these AIP Private Power Limited, India to products that improved mankind’s quality of life manifold. Just imagine a world without electricity and motor vehicles and you will grasp what I mean.
When I began writing this piece, I thought about it and decided against the usual assistants to an author of such writings – graphs, numbers, statistics and pictures. We are hit with these ad nauseam so, here I am writing the old fashioned way, in a narrative style. I am sure it will work, because the subject is such! Now, back to what I said in the beginning - imagine a world without electricity and motor vehicles and
A World Islamic Economic Forum | Special Commemorative Publication 2010 79
you will grasp what I mean. Then will be China and India combined, Take coal; for every calorie imagine a world where we have no twenty years from today. Are we available as raw energy in more coal, oil or gas, and that is ready for that? Do we have time to coal as used for electricity the ‘Perfect Storm’. Will it ever be be ready for it? I do not think so. there? Perhaps not in our lifetimes, production, only 50% or so but, then again, perhaps not too In the previous paragraph, I have is delivered as electricity. far away either. I said, no statistics, made it look too much like a The rest is lost in the but, I do need a few simple ones. ‘China, India and USA’ world. production cycle. Then, in China and India have commenced That was simply for emphasis countries like India, only 60% or their walk towards being developed as the picture becomes clearer so reaches the consumer because economies. This walk will turn into without too much data. Now, of transmission and distribution a slow run, then a canter and finally imagine that another 25% of the inefficiencies. Then, what does a sprint before breasting the tape in world has also climbed out of its the Indian consumer do? He uses the race to be yet another member present state of being undeveloped the electricity to light up his home of the developed societies. What to being developed. That only using an incandescent light bulb will that mean? Here it is: there worsens the scenario, and that is that has been the same, with only will not be enough coal, oil also a likely outcome. Whether we incremental changes since it was and gas to feed the hunger believe in the impact of CO2 on introduced in 1800! Imagine! No the climate or we don’t is hardly of of the Chinese and the imagination for 210 years! This will consequence in what I am trying to be immediately put down as an Indians by, take your pick, deal with in my statements. What exaggeration. It is. But, statistically 2030 or 2040 or 2050. It I am stating is that the world just there are still more 1800 style light doesn’t really matter, because any of does not have three of the key bulbs in use than are fluorescent, these dates is too close for comfort. commodities namely coal, oil and compact fluorescent and definitely Why do I say this? By 2030, gas in so much abundance to feed more than light emitting diodes. It 50% or so, of the world will the energy appetite of the world as does not stop here. It carries on be populated by Chinese it will be in 2030 or, as I stated into inefficient motors, wiring and 2040 or 2050. and Indians, say 3.5 billion can you imagine, that mainstay of every Indian middle class home that people. Earning US$ 6,000 per To further reinforce my statements wants instant hot water for a bath capita, a number that even the most let me also let you know that – a ‘geyser’ which is only a heating conservative of economists will despite all the developments that element wrapped around with agree is within the realm of reality. have taken place in the fields of insulation that is then heated using This will result in a combined GDP electricity and transportation, an electric current to heat water. as large as US$ 21 trillion. The USA there has been only incremental is a US$ 14 trillion economy today, improvement in the efficiency of so, there we have it, 1.5 times USA usage of these basic fuels.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 80
So, here we have it: We mine be quite long but, let us examine use this as your starting point, coal to carry it using the solution from production side the metric for measurement is diesel electric engines to demand side management. set. That which can be naturally Production of electricity can be renewed is renewable. It is in freight trains to then from many sources: wind, solar, as simple as that. So, what is inefficiently produce geothermal, biomass, biogas renewable? The first, most electricity that is then etc. Similarly, in transport: hybrid obvious choice is: solar. Let us inefficiently delivered to cars, bio-fuels, electric powered create circumstances in which the consumer who then vehicles, fuel cells and expanded we encourage all persons who heats a coil to heat water mass transit systems. This multi- do anything to create affordable pronged strategy is imperative as and adaptable technologies using to have a bath with. there aren’t enough researchers, solar energy keeping in mind that I leave it to you to work out the research institutions and above all renewable also means that the inefficiency. But, let me help you. finances to right the wrongs built raw materials used in propagating For every calorie in raw coal, by up over 200 and more years. these technologies are equally the time it is hot water only 0.18 of renewable and available cheaply that calorie reaches the consumer Let the discourse on this subject and in abundance. The last as hot water! not be subverted by one lobby thing you want is to replace one versus another. There is not enough shortage with another! The sun is With this, I hope I have time for a leisurely debate as to available in abundance, and so we established in your minds that what is the ‘best’ idea. Rather, the must make sure that we have the it has taken mankind 210 years time is for us to embrace all ideas harnessing tools and technologies to reach a point that it has that deliver us from the clutches available in abundance. That must propagated gigantic inefficiency of dependency on the three major be our mission. across the globe and made it so sources of raw energy: coal, oil cheaply available that mankind is and gas. How do we go about The next, which we have around truly addicted to this cheap yet doing this? Time is a great teacher. us, but, which, like the light inefficient usage of raw energy. Whenever mankind has been hit bulb, we have not utilized really by a collectively damaging issue, it efficiently is water. Yes, water as So, what do we do? In my has risen to the occasion. Let it be a source of energy. The obvious opinion, we do everything. so in this case too. first use is hydroelectricity. We need to examine whether we are We must work to continuously There is an opportunity for all using water truly efficiently in improve the cycle of usage of in creating the virtuous cycle of the production of electricity. It is coal, oil and gas. At the same time the energy needs of the future. highly doubtful as here, as in the we must accelerate the invention It is contained in that nice word: case of the incandescent light of alternates to these forms of ‘renewable’. The moment you bulb, the scale of power plants energy in every way. The list can
A World Islamic Economic Forum | Special Commemorative Publication 2010 81
The last thing you want is to replace one shortage with another! The sun is available in abundance, and so we must make sure that we have the harnessing tools and technologies available in abundance. That must be our mission.
Syed Ashfaq Peeran
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 82
may have become massive, but, This author has seen the anomaly This can be expanded across the the technologies are essentially of diesel being used to power a world to create the programmes the same as these were in the generator in a cluster of villages and incentives to strip away all nineteenth century! So, there is to supply electricity whilst the incandescent light bulbs and massive scope for improvement. biomass is burnt in the fields to replacing these with LEDs. In a similar prepare them for the next sowing! manner all motors and inefficient Harnessing of the wind is an prime movers are replaced. Then ongoing project around the world. Let me turn to the demand there are global incentives created to There is great scope for an even side. In an earlier example (the create new technologies to replace greater, speedier expansion of this hot water ‘geyser’) you saw the all inefficient technologies that use resource. It is quick to install and is worst possible use of electricity electricity. Similarly, a deep focus on a well proven resource, but, in areas is there. That is a pointer to the mass transportation would remove around the world where it could be demand side inefficiencies that the need to expand the usage of harnessed, there are barriers to its need improvement. We need automobiles in countries like China entry. These must be addressed to think this through till and India, where there is a mad race and the barriers removed. There we reach a truly virtuous on to manufacture more automobiles. must also be a well laid out Let me go back to the USA analogy strategy to replace inefficient wind circle: Solar electricity and compare it to the China and India turbines with more efficient ones delivered with the least scene in 2030: Every second, by giving incentives to owners of loss in delivery, used with a Chinese or Indian adult inefficient wind turbines to replace the highest efficiency. will own an automobile. these through renovation and Say, solar as a dual modernization schemes. That would mean a total of source of heating (and 1 billion automobiles! One In the same manner, we could deal cooling) and electricity does not need to spend too with other resources that are proven production and then this much time with a calculator and available, but, need to have solar electricity being to know that this will be technology infusion and scaling up. used for lighting using simply unsustainable. And, this An example is the direct gasification the most efficient light is without accounting for the 1 billion of biomass to use a resource sources, light emitting automobiles the rest of the world for decentralized generation of will have by then if we continue with electricity. In countries like China diodes (LEDs). business as usual. Therefore a deep, and India that have massive deep look at mass transportation agriculture and it is expensive to solutions is as urgent as the need to lay grids to remote areas, this is an look at alternate energy. idea whose time has come, but, not enough attention is paid to it.
A World Islamic Economic Forum | Special Commemorative Publication 2010 Profile Syed Ashfaq Peeran 83 President AIP Private Power Limited, India
So, we have seen that there is a storm in the offing, in an atmosphere of uneasy calm. We have also seen that there are ideas to deal with it, but, is that all? No. Along with this comes the most difficult issue of all. The politics of it and associated with that the social engineering that will be needed to turn people into believers that there is indeed a storm coming and that there are solutions to be developed at a speed that is much faster than what it took to reach this stage of development in the history of mankind. Whichever Syed Ashfaq Peeran, (61 years), married, 2 daughters and a son. Masters in Chemistry, way this plays out, it will no longer be worked in the paper industry and fertilizer a problem in isolation or a problem of manufacturing and marketing Company. Set rich versus poor or of the haves versus up the first land based marine power plant run on heavy fuel in India. the have-nots. This will be everyone’s problem, because in a broad sense, Briefly advised Swede Corp (Swedish Govt) the world would have an overwhelming on country entry before teaming up with a group to set up first private sector port and a majority of haves and a small minority of large shipyard with Japanese Govt assistance. have-nots by 2030, 2040 or 2050. I do Simultaneously explored cutting edge not believe we have the luxury to wait technologies in the field of solar (then film) and batteries, new generation for production. 200 years for solutions. These will need Now with another group, currently developing to come in decades, not centuries. around 10,000 MW of power (thermal, Hydel and other renewable sources), in six states of India in various stages of planning/ Given this, and the hope that I have implementation. been convincing enough, I believe that by the time you have read this far you Have an M.O.U. with one of the top five American Corporations to develop Smart Grid would have become a true believer in Technologies (to improve grid efficiencies alternate energy and its efficient usage. by reducing losses), Solar-thermal and other alternative energy sources. Associated with an organisation running over 200 colleges/ schools for Muslims, another for promotion of Urdu language. Inter faith dialogue and protection of the weak and under privileged are other passions.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 84
COP15 or the 2009 United Nations Climate Change A GREENER Conference in Copenhagen was a great disappointment to WORLD: THE many. In my mind, however, Copenhagen was not so much a disappointment as a hopeful BUSINESS ROAD reminder. First, the world has never been so aware of climate TO CLIMATE change issues. The failure of governments to ACTION come to agreement on matters involving complicated policy Dato’ Johan Raslan and financing issues too is Executive Chairman hardly surprising – the good PricewaterhouseCoopers news is that this failure reminds Malaysia those of us in business that we can no longer wait around for political powers to do what is necessary.
Our leaders, still reeling from the global financial crisis unfortunately, do not have the capacity to fast-track climate management measures. Instead, it falls on companies to take the lead in addressing an issue, the repercussions of which, affect our future and our children’s future.
A World Islamic Economic Forum | Special Commemorative Publication 2010 85
We cannot prevent man made climate damage. Depending on the speed and ambition of our actions, we cannot only stabilise the global climate system but fuel a series of new industrial ventures and create sustainable future economic growth. We still have the possibility to turn climate risks into new opportunities.
Erik Rasmussen Founder of Copenhagen Climate Council CEO and Editor-in-chief of Monday Morning
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 86
What does a greener world mean?
In my and my organisation’s view, Within the PricewaterhouseCoopers being green goes beyond planting (PwC) network, we are taking steps to trees and recycling. It’s about building seriously address climate concerns. a sustainable mindset into every PwC UK’s initiatives to measure and aspect of your business and life. reduce their climate impact include: ensuring their new state-of-the-art As far back as 1987, the landmark building located at More London Report of the Brundtland Commission Riverside will have 60% lower carbon defined sustainable development as emissions than a typical compliant “development that meets the needs office building; reducing energy of the present without compromising consumption by 16%; and lowering air the ability of future generations to travel CO2 emissions by 20% through meet their own needs”1. Or, to borrow increased usage of video conferencing a phrase from Walter R. Stahel2 for facilities. Sustainability forums to help businesses, it is about thinking ‘cradle their supplier chain learn from each to cradle3’ – in which every portion of other and commit to reductions in a product’s lifecycle is created with their environmental impact are also an the aim of ensuring it can be reused ongoing programme4. over and over again.
I particularly like the cradle to cradle concept, as it resonates with our most basic human instinct to preserve ourselves. Even for organisations which are in the business of making 1. The Brundtland Commission, named after its Chair Gro Harlem Brundtland, was convened by a profit, this is applicable because the United Nations in 1983 to address concern about the accelerating deterioration of the human sustainability is all about ensuring our environment and natural resources, a problem which was global in nature and required all nations long-term survival. Add to that the to establish policies for sustainable development. The Report of the Brundtland Commission deals with sustainable development and the change of politics needed for achieving that. evidence of alarming and potentially 2. Walter Stahel is a Swiss architect who has been influential in developing the field of sustainability. devastating consequences of 3. Cradle to cradle (C2C) design is a holistic economic, industrial and social framework that climate change (see table 1), and seeks to create systems that are not just efficient but essentially waste free. C2C Certification is a the call for sustainable business is protected term of McDonough Braungart Design Chemistry (MBDC consultants), in which products further accelerated. and services are designed based on patterns found in nature, eliminating the concept of waste entirely and creating an abundance that is healthy and sustaining. 4. Annual Report 2009: Doing the right thing, PricewaterhouseCoopers LLP
A World Islamic Economic Forum | Special Commemorative Publication 2010 87
Table 1: The impacts of climate change
Floods, droughts, hurricanes climate change alters the frequency and severity of extreme weather events 40 million exposed to coastal flooding about half of those affected by flooding reside in major cities like New York and Shanghai, where food supplies, agricultural systems, economic livelihoods and health complications will arise as a result
Potential slowing of global economic output by 3% Lord Stern predicted that a 2 to 3 degree rise in temperature could cause this, and poor countries would be hit hardest.5
50% risk of exceeding 5°C global temperature change in a business-as-usual scenario
Extracted from “Risk, Responsibility & Opportunity: The CEO’s guide to climate action”, PricewaterhouseCoopers & Copenhagen Climate Council, 2009
5. Lord Stern (British economist and academic, and Chair of the Grantham Institute for Climate Change and the Environment at the London School of Economics) made this prediction in his Review on the Economics of Climate Change.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 88
The business leader’s role
The fact is, business is both immediate pain. And as PwC’s a part of the problem and the 13th Annual Global CEO Survey While solution. Today’s business which surveyed almost 2,000 governments leaders need to contend with the CEOs worldwide discovers, more implications of climate change, CEOs expect that tackling climate provide the which continue to evolve as we change will lead to new products necessary policy learn more, while looking out for and services for their companies the potential upside (and yes, than lead to significant expenses. framework (for there is one). Here are a few addressing suggestions for how: So, just how do we capture the opportunities? It is a combination climate change), Seize growth opportunities of encouraging innovative the real solutions thinking; truly comprehending Here’s the business case for climate change - from its risk and must come from businesses: According to PwC opportunity to the regulatory and business. research as part of the Vision technological considerations; and 2050 project, the scale of looking at the matter through the additional business opportunities eyes of your consumer. Yvo de Boer, until recently, that might arise as the effect of Executive Secretary of the United moving towards a sustainable One of South Korea’s leading Nations Framework Convention world could be around US$3-10 energy providers is creating on Climate Change trillion per annum in 2050 at green plastic from carbon dioxide today’s prices, or around 1.5- (CO2), a main contributor of 4.5% of world GDP in 20506. global warming. Today, they are cooperating with a local university Yes, tackling the issue of to convert CO2 into polymer, climate change and adapting a raw material for plastic. By our business strategies to capturing CO2, they aim to reduce 6. Vision 2050 is a project of the World incorporate sustainable thinking carbon emission levels while Business Council for Sustainable Development will incur cost. But these are commercialising environmental- (WBCSD), in which 29 WBCSD member short-term. It is clear that the friendly materials. The company’s companies developed a vision of a world well long-term benefits of avoiding President predicts that they will on the way to sustainability by 2050, and a pathway leading to that world. PwC was one catastrophic climate change secure 1,000,000 tonnes of carbon of the 29 companies. consequences will outweigh this emission each year, bringing them USD5 billion of profit annually.
A World Islamic Economic Forum | Special Commemorative Publication 2010 89
Business as influencer
Business leaders Many CEOs are already attuned medium enterprises too have the have a great deal of to the significance consumers are ability to shape legislation and beginning to place on organisations’ public thinking, and partner with power due to our ability behaviour. Nearly two-thirds of people in ways that affect positive to influence the vast CEOs in Western Europe, Asia- change. Industry collaboration web of people our Pacific and Latin America expect to too is a powerful influencer of businesses engage gain reputational advantage from change. For example, with the their climate strategies7. Equator Principles8, banks commit every day like our to responsible project financing suppliers, customers, An example of proactive influencing where they will not provide loans employees, investors in action is how one of Malaysia’s to projects if the borrower will not and regulators. leading mobile communications or is unable to comply with the companies is working with its respective social and environmental suppliers to ensure they are living policies and procedures. Financial up to environmental, ethical and institutions which adopt the Climate responsible business principles. Principles9, make a commitment to By introducing a code of principles actively manage climate change by for suppliers, the telco makes sure minimising their carbon footprint, that its vendors are aligned towards reducing climate change risks helping the environment and and allowing the development reducing carbon footprint. of climate-change related opportunities, amongst others. If businesses can leverage the unique reach that simply ‘being in business’ brings, then all businesses – big and small – can make a difference. Small and
7. 13th Annual Global CEO Survey 2010, PricewaterhouseCoopers 8. www.equator-principles.com 9. www.theclimategroup.org/programs/the-climate-principles/
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 90
Listen to Generation Y Collaborate to influence policy
I also believe that the leader who listens is A key theme that emerged from the World one who will come away enriched with a Business Summit On Climate Change10 different perspective. was the crucial need for new alliances or partnerships with government to enable low In the same way the carbon technology innovation (a low carbon Internet phenomenon has taken economy is key in minimising the emissions of GHG, a main contributor to global warming and the world by storm, we see climate change). Even if we are disappointed today’s Generation Y (Gen Y) with the inability of administrations to come shaping and changing the way to a global agreement, we must recognise businesses function. It may be a that governments are the only party with the necessary scale and resources to push more subtle impact but it is there. us towards a low-carbon future. Through legislation and regulation, governments exert a At PwC, we have taken the cue from our stronger influence on environmental practices 2009 survey of PwC’s Gen Y employees. than any other force motivating businesses11. In the survey titled “Malaysia’s Gen Y unplugged”, our Gen Y told us that Which is why we business leaders need to sustainability and climate change concerns flex our vocal muscle. We need to share our will significantly influence their choice of ideas with our political leaders and regulators employer. Today, our firm has made a start to help them create new policies. These with environmental initiatives which keep our policies must be stringent enough to ensure business responsible, our people happy and low carbon requirements, while being flexible our office green. and encouraging so that businesses choose to pursue that path. If we do not try, then the failure to combat climate change is as much ours as our government’s.
10. On 24-26 May 2009, over 500 business leaders from some 40 countries met with leading experts, government officials and NGO representatives at the Summit in Copenhagen. The objectives were to mobilise private sector engagement in the development of future policy framework on climate change. The Summit was convened by the Copenhagen Climate Council and PwC collaborated with them to produce a summary report of the working sessions for policy makers. 11. Appetite for change: Global business perspectives on tax and regulation for a low carbon economy, PricewaterhouseCoopers, 2009
A World Islamic Economic Forum | Special Commemorative Publication 2010 Profile Dato’ Johan Raslan 91 Executive Chairman PricewaterhouseCoopers Malaysia
Our responsibility to Generation Y
We can choose the green and sustainable path to look out for our businesses’ own interests, or we can do this because we are responsible leaders who have a regard for how we affect our people and the communities we operate in.
Personally, I would like to do this to ensure that our children, who 20 Dato’ Johan Raslan is the Executive Chairman years down the line will be in of PricewaterhouseCoopers Malaysia and has experience in audit and business advisory services the seats we now occupy, will both in Malaysia and the United Kingdom. have the same opportunities Known for his points of view on corporate governance, corporate reporting, corporate that I do. I want to leave them responsibility and sustainability, Johan is a member of the Securities Commission Audit with a world which is thriving, Oversight Board (AOB) Implementation Steering Committee to provide guidance on policies and not fighting to survive. procedures of the AOB and a Board member and Audit Committee Chairman of Putrajaya Corporation. Today’s Gen Y are tomorrow’s leaders. But more importantly, they are the A member of the Board of Kuala Lumpur Business Club, Johan also chairs the Institute of Corporate ‘game changers’, the people who are Responsibility, Malaysia, a network of companies already shaping the trends we see committed to advancing responsible business practices. He is also a member of the Board of today. Their affinity for all things green Trustees of Tun Suffian Foundation. means climate change is not just In recent years, Johan has assisted the Central something to think about. Business Bank with its flagship Islamic finance initiatives must take the lead on climate change, to position Malaysia as a leading Islamic finance centre. He is a member of the Central and incorporate it into the fabric of our Bank’s International Advisory Panel of Labuan companies now. International Offshore Authority.
An Eisenhower Fellow, Johan is Adjunct Professor of University Malaya, Vice-President of Malaysian Institute of Certified Public Accountants and Council Member of the Malaysian Institute of Accountants. He is a also member of the Institute of Chartered Accountants in England and Wales, and is immediate past Chairman of the Financial Reporting Foundation.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 92
It takes one person, making one phone call, one meeting, one handshake, to make partnership in the Muslim world a reality.
King Abdullah II of Jordan 4th WIEF, Kuwait, 2008
A World Islamic Economic Forum | Special Commemorative Publication 2010 93
Acknowledgements
The World Islamic Economic Forum (WIEF) Foundation wishes to acknowledge the following for their support and contribution towards the 6th WIEF:
Prime Minister of Malaysia Chairman of WIEF Foundation for their messages
The Authors for their invaluable time and effort in providing the insightful articles and for sharing their wealth of knowledge for the benefit of readers.
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 94
6th WIEF Forum
Platinum Sponsors
Gold Sponsors
PRINTING Spot Colour TOYOCHEM MO-7548 O/S PETRONAS Green Pantone 3268 C (Printed on Coated Stock) 3272 U (Printed on Matt-Coated Stock) 3278 U (Printed on Uncoated Stock) Process Colour YELLOW 50 CYAN 90
PAINTING Automotive Paint ICI P376-13080
PRINTING Process Colour Black 100
PAINTING Automotive Paint Silver Sponsors ICI Black 122 or equivalent
PNB logo
PNB logo reversed white
A World Islamic Economic Forum | Special Commemorative Publication 2010 95
Partners
Official Airline Official Car Global Knowledge Global Public Relation pwc
Technology Technology Supporting Hotel Exclusive Souvenir
Media Partners
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 96
WIEF Foundation
Corporate Members
Corporate membership is one of the most effective ways in which corporations and philanthropic organisations can associate themselves with the global platform and outreach of the World Islamic Economic Forum. By becoming a corporate member, corporations can maximise their branding potential and align themselves with the noble precepts of the World Islamic Economic Forum.
spot color process color
PA NTONE 277M PA NTONE 533M
pwc
A World Islamic Economic Forum | Special Commemorative Publication 2010 97
International Advisory Panel Members
Tun Musa Hitam Mr. Ebrahim Patel Mr. Omer Cihad Vardan Chairman Chief Executive Officer Chairman World Islamic Economic Magellan Investment Management Independent Industrialist Forum Foundation (WIEF) South Africa and Businessmen’s Malaysia Association (MUSIAD) Mr. Essa Al-Ghurair Turkey Tan Sri Dr. Mohd Noordin Vice Chairman Wan Mohd Zahid Al-Ghurair Investments Mr. Salahuddin Kasem Khan Chairman United Arab Emirates Chairman Universiti Teknologi Mara SEACO Taskforce Malaysia Mr. Ian Buchanan Bangladesh Senior Executive Advisor Dato’ Dr. Norraesah Mohamad Booz & Company Sheikh Saleh Abdullah Kamel Chairman Australia President Embunaz Ventures Sdn Bhd Islamic Chamber of Commerce Malaysia Sir Iqbal Sacranie and Industry Chairman Saudi Arabia Dr. Abdulaziz Othman Altwaijri MCB Charitable Foundation Director General United Kingdom Mr. Tanri Abeng Islamic Educational Scientific and Founder and Chairman Cultural Organisation (ISESCO) Mrs. Olive Zaitun Kigongo Executive Centre For Global Leadership Morocco President Indonesia Uganda National Chamber of Mr. Allal Rachdi Commerce & Industry Mr. Tariq Sayeed Director General Uganda Chairman Islamic Center for SAARC Building Committee Trust Development and Trade Pakistan Morocco Dato’ Vaseehar Hassan Director Dallah Albaraka Group Malaysia
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources 98
A World Islamic Economic Forum | Special Commemorative Publication 2010 99
Advertisements
CIMB Sime Darby PricewaterhouseCoopers Qatar Islamic Bank Asian Finance Bank Iskandar Investment Petroliam Nasional (Petronas) UEM The Coca-Cola Company Permodalan Nasional Berhad Lembaga Tabung Haji Lembaga Kemajuan Tanah Persekutuan (FELDA) Proton Malaysia Airlines
Ensuring sustainability in the Muslim World: Empowering people, leveraging resources
Looking for sustainable deals? Talk to us.
Sustainable deals are important. Contact: Mohd Anwar Yahya Ultimately, wins require strategic planning, Senior Executive Director investment and support — before, during and Paran Puvanesan after the ink is dry. Executive Director That is why clients appreciate our unique position [email protected] to work with them at every stage of their deal and Tel +60 (3) 2173 1188 a relationship that sees them through. Global Knowledge Partner Our cross-border strength, knowledge and World Islamic Economic Forum resources in Southeast Asia Asia has seen our clients reap the potential of the region. Underlining every deal, is the fact that pwc.com sustanability is a key value.
PwC
© 2010 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the individual members of the PricewaterhouseCoopers organisation in Malaysia each of which is a separate legal entity or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. CS03093
PLANTATIONS
PROPERTIES TRAVEL
CONSTRUCTION HALAL FOODS
LITYAN HOLDINGS
INFORMATION TECHNOLOGY BANKING
LEMBAGA TABUNG HAJI 201, JALAN TUN RAZAK, 50400 KUALA LUMPUR TEL: (603) 2054 2000 / 2054 2233 / 2054 2400 FAX: (603) 2161 6484 / 2163 2308 / 2164 0436 Email: [email protected] www.tabunghaji.gov.my CM X CM
&%,$!x HUMBLE BEGINNINGS PIONEERING MINDSx BREATHING CHANGE THROUGH INNOVATION
&%,$! WAS ESTABLISHED ON ST *ULY AS A DEVELOPMENT AUTHORITY TO UNDERTAKE AND CARRY OUT LAND DEVELOPMENT PROJECTS TO PROMOTE AND ASSIST ECONOMIC SOCIAL RESIDENTIAL MANAGEMENT OF LAND DEVELOPMENT AREAS AND TO CARRY OUT MODERNIZATION OF THE AGRICULTURAL SECTOR
3INCE ITS INCEPTION OVER YEARS AGO &%,$! HAS DESERVEDLY AMASSED ENVIABLE REPUTATION EXPERIENCE IN LAND DEVELOPMENT AND PLANTATION MANAGEMENT AND IS REPUTED FOR ITS ROLE IN PROVIDING LAND FOR THE LANDLESS
&%,$! HAS GONE TOWARDS GREATER DIVERSIFICATION OF DOWNSTREAM ACTIVITIES )T HAS CAPITALISED ON NEW VENTURES FORMED MUTUALLY PROFITABLE ALLIANCE OF TRADING PARTNERS 4HE FORMATION OF &%,$! (OLDINGS 3DN "HD HAS SUCCESSFULLY TURNED &%,$! INTO A WELL INTEGRATED PLANTATION COMPANY WITH A COMBINATION OF UPPER STREAM AND DOWNSTREAM ACTIVITIES THROUGH ITS SUBSIDIARIES ASSOCIATED AND JOINT VENTURE COMPANIES
0LANTATIONS $OWNSTREAM &%,$! 0LANTATIONS 3DN "HD &%,$! +ERNEL 0RODUCTS 3DN "HD &%,$! 0ALM )NDUSTRIES 3DN "HD &%,$! 6EGETABLE /IL 0RODUCTS 3DN "HD &%,$! 4ECHNOPLANT 3DN "HD &%,$! /IL 0RODUCTS 3DN "HD &%,$! !GRICULTURAL 3ERVICES 3DN "HD &%,$! -ARKETING 3ERVICES 3DN "HD &%,$! &ARM 0RODUCTS 3DN "HD $ELIMA /IL 0RODUCTS 3DN "HD &%,$! 4RANSPORT 3ERVICES 3DN "HD
-ANUFACTURING 3ERVICES &%,$! 2UBBER )NDUSTRIES 3DN "HD &%,$! 0RODATA 3YSTEMS 3DN "HD -ALAYSIA #OCOA -ANUFACTURING 3DN "HD &%,$! %NGINEERING 3ERVICES 3DN "HD &0- 3DN "HD &%,$! 0ROPERTIES 3DN "HD &%,$! *OHORE "ULKERS 3DN "HD &%,$! 3ECURITY 3ERVICES 3DN "HD &%,$! "ULKERS 3DN "HD 0LANTATION 2ESORTS 3DN "HD &%,$! 4RAVEL 3DN "HD
&%$%2!, ,!.$ $%6%,/0-%.4 !54(/2)49 &%,$! 4EL s &AX &%,$! (OLDINGS "ERHAD 4EL s &AX
Adopting the Equator Principles: the future direction for Islamic banking
The adoption of the Equator Principles brings to the fore the Need to know more about the Equator ethically important Islamic values of social and environmental Principles and how it can be incorporatated into sustainability into the business model of Islamic banks. Bridging the strategy and credit process? Talk to us. Islamic ethical values with conventional ones, it can help: Mohammad Faiz Azmi Global Islamic Finance Leader • Alleviate the Islamic Finance acceptance in non-OIC countries PricewaterhouseCoopers • Manage credit and operational risks of project financing Malaysia • Move Islamic banks to the next level of competitiveness by [email protected] demonstrating a more comprehensive and differentiated T: +60 (3) 2173 1188 ethical approach in doing business Geoff Lane Partner It’s another way of articulating Islamic banks’ values in a way that Sustainability and Climate Change is understood by the global community and their customers. PricewaterhouseCoopers UK [email protected] T: +44 (20) 7213 4378
Andre Abadie Director Sustainable Finance PricewaterhouseCoopers UK Co-author of Equator Principles [email protected] pwc.com T: +44 (75) 9035 2428
© 2010 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the individual members of the PricewaterhouseCoopers organisation in Malaysia each of which is a separate legal entity or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. Cs03129 PwC Permanent Secretariat World Islamic Economic Forum Foundation 2nd Floor, Kompleks Antarabangsa Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia T: +603 2145 5500 F: +603 2145 5504 W: www.wief.org E: [email protected]