Turkey’s New Global Role

Turkey’s New Global Role
Henri J. Barkey Q&A, Available at: http://carnegieendowment.org/publications/index.cfm?fa=view&id=41952

With economic success at home, Turkey’s government has been flexing its muscles on the world stage and Recep Tayyip Erdogan seems likely to win a third term as prime minister next year. As Turkey moves toward national elections in 2011, analysts are questioning whether Erdogan’s demonstrated popularity will further embolden an increasingly assertive foreign policy or if a more democratic Turkey will find ways to reduce friction with the West.

In a Q&A, Henri Barkey analyzes how Turkish politics influence the country’s rise. Barkey says that the ruling party is now well positioned for the election and that a convincing victory could create the momentum necessary to redraft the constitution. Through sheer ambition, popularity, and political savvy, Erdogan has come to dominate Turkey in all its facets—domestic, foreign, and security. He has become the master tactician and Turkey’s single most determinant force. While the West is concerned that Turkey will continue its assertive foreign policy, it remains to be seen whether Erdogan’s domestic popularity may actually temper his populist rhetoric and policies.

What are the major issues in the national elections next year?
A major test for the ruling Justice and Development Party (AKP) and opposition parties was the referendum in September—the results constituted a significant defeat for the opposition. The main opposition party, the Republican People’s Party, elected a new leader just a few months before the referendum. While the party’s strategy was developed before he took the reins, he fared poorly in his first electoral test. And nearly half of the supporters of second largest opposition group, the nationalist National Movement Party, defected to the AKP.

The Kurdish party, the Peace and Democracy Party, on the other hand, also emerged a winner in the referendum. Despite doubts that the strategy would be effective, the party called for a boycott of the referendum to protest that none of the proposed changes would improve the Kurds’ situation. Again to the surprise of many, most of its voters heeded the party’s call. With the possibility that the constitution will be completely redrawn starting next year, Kurds may continue to rally around the party in the elections in hopes of presenting a united front on Kurdish demands.

The opposition’s decision to turn the referendum into a vote on the AKP—a major strategic error—leaves the AKP in great shape for the elections slated for next summer. And if the current projections hold, the government will be in a good position to deal with Turkey’s unresolved internal issues—including the Kurdish question—and rewrite the constitution.

Turkey’s strong economic performance has helped improve the AKP’s popularity as the ruling party is widely credited for its market-friendly policies. While there is unemployment in Turkey, the country managed the global crisis better than most and enjoys excellent economic prospects compared to the rest of the world. The opposition has yet to put forward a distinct and viable economic program with which it can dent the AKP’s commanding lead among voters reluctant to upset the current momentum. For the time being, the opposition is not giving the population reasons to support it. The Republican People’s Party, however, is in the midst of an attempted revival and cleansing of its most conservative elements. Whether the new leadership succeeds in injecting new blood and ideas will be critical to ending, in the medium term, the current one-party dominance of Turkish politics.

The one major issue that could alter the trajectory of the elections is the Kurdish question. While the AKP is not going to make any significant changes or offer proposals on the Kurdish issue before next year’s vote, it clearly wants to contain interethnic violence. There will undoubtedly be attempts to provoke fighting by all kinds of provocateurs intent on derailing the prospect of a peaceful solution. The government will need to show restraint and carefully manage the situation.

That Erdogan ultimately wants to be president is the open secret that everyone in Turkey is talking about. Currently, the president is selected by the parliament, but due to an amendment introduced some years ago, the next president will be selected by popular vote. Erdogan is thought to be interested in replacing the current Turkish parliamentary system—which concentrates all executive power in the hands of the parliament and its chosen cabinet—with a presidential system of sorts. To succeed, however, he must win the next election as convincingly as possible. A strong AKP victory will open the door for constitutional reform and Erdogan’s goal of becoming president with expanded powers.

A presidential system is not a foregone conclusion, however. There is likely to be a great deal of opposition from within the AKP to such a radical change in the constitution—particularly as it could diminish the importance of the party itself. Hence it is expected that Erdogan will try to carefully select future candidates for parliament with an eye on their willingness to ultimately support such revisions.

What was the significance of the September referendum?
The constitutional amendments voted on in September aim to further erode the military’s political influence and restructure the judiciary. The reforms include barring military courts from trying civilians, empowering civilian courts to try military figures for plotting to overthrow the government, and lifting immunity for the perpetrators of the 1980 military coup. In addition, there are provisions giving workers more labor union choices and allowing them to join more than one and adding new protections for women, children, the elderly, and the disabled.

Notably, changes were also made to the membership of the Constitutional Court and the High Judicial Council, which regulates judges and prosecutors. The changes are the direct result of the confrontation between the AKP and the judiciary, one of the bulwarks of the Kemalist regime in Turkey. Frustrated by its inability to dent the judiciary’s control—which derived primarily from the way judges and prosecutors were selected from a small coterie of ideological purist elements—the AKP pushed to widen the selection process and enlarge the main constitutional judicial bodies. One of the primary outcomes has been to give more say to the parliament in selecting membership. The number of seats on the constitutional court, for instance, was increased from 11 to 17. Ironically, the strongest bulwark to changing the constitution is the constitutional court itself which, in the past, has invoked its own interpretation of the immutable articles of the constitution, forbidding women wearing headscarves from attending university or simply manufacturing criteria to prevent a presidential candidate from getting elected.

All these provisions, however, are relatively minor and represent a tiny step toward serious reform. AKP’s timid constitutional gambit had more to do with its electoral ambitions and dominating the political discourse than changing the constitution. Turkey is in desperate need of a new constitution that brings the country more in line with Western models in Europe and the United States. The current constitution is a straightjacket that privileges the state over the individual. Turkey is a country of laws, but not the rule of law—laws are applied in an arbitrary fashion; it is not the infraction of the law that determines whether an individual is to be charged but that individual’s position in society. And laws have always been applied harshly to deal with opponents of the regime. Shortly after the results of the referendum were released, Erdogan committed to pushing for a complete overhaul of the current constitution—imposed by the military after the 1980 coup—after next year’s election.

While the referendum was specifically about all of these issues, in the end, the vote was more about the AKP. The 58-42 percent result surprised everyone as most observers had expected a tighter outcome. The opposition made a strategic calculation that discussing the individual reforms would be too difficult, so it erred on the side of the uncomplicated and decided to make the AKP the issue instead—and this backfired. Since the margin in favor of the amendments was even larger than predicted, the AKP emerged stronger ahead of next year’s elections and the opposition appears feeble.

Is there a divide between the secular establishment and religious-leaning government in Turkey?
The impression one gets about the division between secularists and Islamists in Turkey is misleading. Today, the fight is over Kemalism, the official ideology of the state, named after the founder and first president of the Republic of Turkey, Mustafa Kemal Ataturk.

Dominating Turkey since the 1930s, the ideology is nationalistic, self-reliant, xenophobic, and adamantly secular. Its problems have been mostly associated with the narrow and forcible way in which it was introduced and implemented over the years. But shortcomings aside, it has also fast-tracked the emancipation of women and has, even if indirectly, wedded Turkey to the West. Adamant supporters of Kemalism include the military, judiciary, universities, media, and some of the upper-middle class.

The problem with Kemalism is not necessarily its ideological components, but how its supporters operationalize it on a day-to-day basis. The 1930s ideology was rendered amazingly rigid by its original supporters, who were often inflexible, undemocratic, and intolerant of others. In many ways, the military, which took the lead in interpreting Kemal’s legacy, viewed everything through a narrow prism of internal security where everyone was a potential suspect and traitor. The lack of trust in its population is exactly the opposite of all liberal, Western constitutions. Successive constitutions and the political system constructed around this legacy have stunted democratic development in Turkey.

The September referendum is the beginning of the dismantlement of the ideological infrastructure of the Turkish state. The next step is to change the constitution, and whether the AKP will be successful in doing this remains an open question. But if it does not, the AKP will likely fill the authoritarian vacuum left by the retreating Kemalists. At the moment, there is too much power vested in Erdogan—precisely because he is so popular. The inherent authoritarian tendencies in the current political system that privileges party leaders and turns them into demi-gods is not conducive to democratic institutionalization.

As they consider a new constitution, the AKP and Erdogan have much to decide on balancing the expansion of rights for those with whom they disagree. This ranges from expanding the rights of those who have been marginalized by the current system while protecting the rights of persons who find themselves at odds with the AKP’s priorities—such as the traditional secular elites who fear that their way of life is under assault—to guaranteeing freedom of the press, irrespective of how unlikeable their owners may be in the eyes of the government.

How is Ankara handling the domestic Kurdish issue?
To its credit, the AKP launched the Kurdish opening—an attempt to solve a 26-year insurgency through political, cultural, and economic means rather than just military force—last year. But in the face of a domestic backlash and upcoming referendum and elections, the government backtracked and closed the door, at least temporarily. The hope is that with a strong electoral mandate, the AKP will finally take the steps necessary to resolve the issue.

Turkey is deeply divided over its Kurdish minority—which totals approximately 20 percent of the population—and moving toward a crisis point. The violent struggle for greater rights has been led by the Kurdistan Workers’ Party (PKK) and enjoys a great deal of support among Kurds. The situation is also evolving as the Kurdish population is no longer concentrated in the southeast, but spread across the country. There are as many as 3 million to 5 million Kurds in Istanbul alone, making it the world’s largest Kurdish city. This means the frustration is not contained to a certain region and conflict could erupt anywhere. Youth, in particular, feel alienated and are prone to violence.

The state has been unable to contain the struggle through security and military efforts. Kurdish leaders want official recognition for the ethnic group, cultural freedom, language rights, and a greater devolution of administrative powers in Turkey. The only way to truly address the issue is through constitutional change. This will mean that certain articles in the constitution that explicitly define Turkey as an ethnic state will need to be altered, the decision-making authority of local leaders will need to be strengthened, and the right to teach, speak, and make use of the media in one’s mother tongue will need to be protected.

These changes cannot be seriously contemplated until after the elections—and this is assuming the AKP wins. Until then, there is a great deal of tension and the Kurds aren’t patiently waiting. In the absence of any response from the central government, they are quietly creating the institutions that are separate and autonomous, although they are not calling for independence.

How is Turkey’s rising regional influence shifting its foreign policy and international interests?
Turkey’s assertive foreign policy and increasing overtures to non-Western governments—most notably Iran, as seen most recently when Ankara sided with Tehran in the United Nations Security Council against the U.S. push for tougher sanctions—are driven by ambition and economic aspirations.

Turkey wants to be a regional power and a global player by using its geopolitical advantages, economic strength, and historical and cultural links with the Muslim world. Today it is the world’s sixteenth-largest economy and aims to be among the top ten economies by 2023. Turkey’s dynamism and its willingness to engage internationally have given it a great deal of clout. In part, the Erdogan government has an overinflated sense of its global relevance and this unhealthy dose of hubris pushes Ankara to go too far at times. Turkey punched well below its weight for a long time, but now it’s punching well above its weight.

Opening new markets, deepening existing ones, and making the most of all commercial opportunities are also driving Turkish foreign policy. Turkey’s economy is export-dependent and Turkish businesses look to the government to help them with new markets.

This can be seen even in the case of Iran. The last thing Turkey wants is another conflict along its borders—like in Iraq—because instability can disrupt trade relations. Moreover, Turkey has also parlayed its new clout to bolster its trade relations with everyone in the Middle East, including Iran. Despite international sanctions, Erdogan has sought to use its support for Iran at the UN Security Council to improve commercial relations, calling for a tripling of the mutual trade in the next five years.

How is Turkey’s relationship with Europe evolving?
It’s important to remember that it will take around 20 years or more for Turkey to be ready to join the European Union. The referendum in September was only one small step for Turkey on the road to membership but it by no means represents the major change Europe still expects. In addition to a new constitution and Turkey’s adherence to the Copenhagen criteria, Ankara also needs to solve its Kurdish question.

Sensitive and complex changes will not happen overnight and the tough road ahead should not be underestimated. This means that politics in Europe today are in many ways irrelevant to Turkey’s EU accession. French President Nicolas Sarkozy and, to a lesser extent, German Chancellor Angela Merkel may resist Turkey’s ambitions for European integration, but they won’t be in charge in 20 years.

Whatever the Europeans say today, if Turkey continues to reform, solves egregious problems, and changes its domestic politics to be more tolerant and to resist authoritarian tendencies that come naturally to government and party leaders—which in the past has led to, for instance, unacceptable pressure on the press, it will be extremely hard for Europe to say no in two decades—so long as the continent is not in the economic mess that it is now. So while Turks are prone to use European leaders’ lack of desire to justify inaction, the country should want to make the changes regardless and show the world it is serious about reform. Then when the time comes, if Turkey has successfully implemented the necessary reforms, Europe will have a hard time refusing Turkey’s accession.

If the AKP convincingly wins the next elections, as expected, it will have a real opportunity to start tackling the hard problems facing Turkey. This could be good news for democracy in Turkey and its move toward Europe.

What is the status of U.S.-Turkish relations?
There is a great deal of angst and reflection in the United States in terms of its relations with Turkey. Given Turkey’s more muscular role on global issues, there is a bit of a backlash in Washington. Policy makers are concerned that Turkey will drift toward the East and work against U.S. interests. In reality, Turkey is not going anywhere. Turkey’s current stature in the region would suffer greatly if it is perceived to have broken with Washington. Both countries need each other.

The problem is that they have difficulty communicating with and understanding each other. While the United States has to adjust to the reality of Turkey under the AKP, Ankara has to learn to deal with the United States, which, as a global power, has numerous interests in far-flung places and is not solely focused on Turkey’s region. The United States must accept Turkey’s domestic transformation and how that manifests itself in the bilateral relationship—the elites the United States were used to dealing with, like the Istanbul-based business sectors and the military, are no longer calling the shots. Instead a conservative, pious, and yet market-oriented elite from Anatolia has garnered the levers of power.

For their part, the Turks have always exhibited a primitive and conspiratorial approach to Washington, which has caused them to misunderstand and misinterpret American interests. The best example of this was during the recent crisis over Turkey and Brazil’s mediation efforts on Iran’s nuclear program, when Ankara completely misread the Obama administration’s concerns regarding counter-proliferation efforts, desire to reduce the number of nuclear weapons, and sign the START agreement with Russia.

There are concerns that with Erdogan and the AKP’s current domestic strength, Ankara will become even more aggressive internationally. But this could go both ways. An Erdogan who feels more secure will be more comfortable and relaxed going into the election, so the inclination to go for populist, nationalist, and flamboyant policies may diminish. Exacerbating relations with Washington will not help him—except with nationalist elements on the margins—because the time is quickly approaching when the Turkish electorate will look for a leadership that is less combative, more mature, and more constructive. That’s a good sign for U.S.-Turkey relations.

Still, there is no guarantee that the two sides will see eye to eye on all issues. Turkish-American relations were always difficult and acrimonious even in the best of times, and the State Department is used to relying on the Pentagon to wield its influence there. What is different now is that the issues over which Turkey and America differ are far more numerous and complicated than in the past.

Best Regards

  • Mazaar Hadrat Abu Ayyub Al Ansari RA, Istanbul, Turkey. (Abu Ayyub Al Ansari RA was chosen by Allah SAW to host the Prophet at Medina during Hijrah. He passed away during the first attempt to open Constantinople by Caliph Muawiyah Ibnu Abu Sufian in 51AH). To know more about Abu Ayyub Al Ansari, click here


    Islamic finance needs regulatory reforms

    International Seminar Calls for Regulatory Reforms

    By: MUHAMMED PALATH Available at: http://www.radianceweekly.com/226/6208/DOES-THE-VERDICT-LEGITIMISE-MASJID-DEMOLITION/2010-10-17/Islamic-Finance/Story-Detail/International-Seminar-Calls-for-Regulatory-Reforms.html

    An international seminar on Islamic finance concluded in Kochi on October 6, raising immense scope for easing Indian regulatory system to adopt Islamic banking and insurance system. The three-day seminar was jointly hosted by Islamic Research and Training Institute of Islamic Development Bank Jeddah and Al-Jamia al Islamiya of Kerala with participation from various international institutions from different countries including USA, UAE, UK, Malaysia, Indonesia, Bangladesh and Qatar. Key industry players from Indian financial sector also participated in the seminar. The papers presented in the seminar and the discussions on Islamic financial regulations and instruments proved a step forward for popularising Islamic finance among the public and Indian financial experts.

    The inaugural session of the seminar was held at AJ Hall at Kaloor in the presence of huge gathering. Veteran Justice V.R. Krishna Iyer inaugurated the seminar. He said Islamic banking is promoting human values. A country like India with 50 per cent of population living below poverty line needs the financial system which considers human values. A banking system which considers mercy, justice and values is necessary. So Islamic banking is fit for our country.

    Islamic banking is not only for Muslims but for all community. It is free from exploitative mode of interest. It is practising the method of sharing of earned income between the participants in economic activities. So the people who believe in God should support the Islamic banking system, Justice Iyer concluded.
    The chairman of the Organising Committee and General Secretary of Indian Centre for Islamic Finance H Abdur Raqeeb chaired the session. He explained the present condition of Islamic banking and finance in India and the progress he has achieved in introducing it to the large segments of masses as well as to the authorities concerned.

    Many secular countries like Britain have made changes in their laws in favour of Islamic banking. If London, Paris and Hong Kong have chance to become hubs of Islamic finance, why not Mumbai and Cochin? he asked. The introduction of Islamic banking in India is for the development of the country. Dr. Muddassir Siddiqi, a renowned financial consultant, made the keynote address. He explained the present condition of Islamic finance in the world and added that opening the window of Indian regulatory system for Islamic finance will drive to flow of foreign direct investment to the country. It will promote growth of the nation. He also inaugurated the International Islamic Finance Academy to be started in Al Jamiya al Islamiya.

    The members of Parliament from Kerala E.T. Mohammed Basheer and M.I. Shanavas in their speeches explained their missions to the Finance Ministry for introduction of Islamic banking and offered all their support for the same. Dr. M Obaidullah (IDB), M.Y. Khan Mumbai, Syed Mohammed Bairy, Prof. K.A. Siddiq Hassan, H Jayesh, Munavir Ali Shihab Thangal, Hussain Madavoor, Bahavuddeen Kooriyad, T Arifali, Dr. Kanniyappan, and Dr. Abdussalam Ahmad also addressed the gathering.

    The five resolutions to change the Indian regulatory system to help introduce Islamic banking and finance in India were adopted in the seminar. One of them urges the Government of India to accept the recommendations of the Committee on Financial Sector Reforms (CFSR) of Planning Commission of India headed by Dr. Raghuram Rajan to introduce interest-free banking in the main banking sector for inclusive growth through innovation.

    Another resolution urges the Government to suitably amend Banking Regulation Act 1949 and taxation law to provide a level playing field for Conventional Banking as well as Islamic banking as done in several modern, secular and industrialised countries. Yet another resolution urged the Government to accommodate Shariah-compliant mechanism in Microfinance institutions which are mainly operating as NBFC’s along with conventional mechanism based on interest.

    One resolution urges the Reserve Bank of India (RBI) to open interest-free windows as a pilot project in few conventional banks which can operate within the framework of Indian Banking Regulation Act 1949.
    And the last resolution urges the Insurance Regulatory and Development Authority (IRDA) to amend the Insurance Act in order to introduce Takaful (Mutual Insurance).

    Mohammed Palath read out the resolutions and Thanveer Muhiyudheen, the convenor of the organising committee made the vote of thanks. The Business Session of the seminar started at Lemeridian Convention Centre on October 5. The first session was about Shariah compliance of Islamic financial products. Dr. Ausaf Ahmed, former head of research in IRTI Jeddah pointed out that as the minorities in the country Muslims are facing a lot of problems to invest their funds. He highlighted the relevance of providing adequate avenues for investment compliance for Islamic way of banking. Dr. Muddassir Siddiqi, Dr. Mohammed Daud Bakkar, Dr. Musthafa Khemira, Tawfique Al Mubarak, Rafeek Ahmad Sheik also presented their views on Islamic Shariah regulations in Islamic finance.

    The second session concentrated on developing framework for Islamic finance in India. Sunil Giduani, representative of Price Water House Coopers, an international financial service company, said Islamic banking is a rapidly growing phenomenon in the international financial market. The global market for Islamic investment products was growing at a remarkable pace of approximately 15 to 20 per cent per annum. After the emergence of the era of globalisation Indian financial sector opened up. Now foreign investors, both individual and institutional, are allowed to invest in India and Indian investors make similar investments abroad. The international financial market enjoyed the existence of Dow Jones Islamic Index. Malaysian financial market had Shariah index. In this scenario Indian financial regulatory authority also made enough steps to promote Islamic financial products. It will promote the flow of foreign direct investment and growth of the country, the speakers added. Prasanna Seshachellam, Abizer Diwanji, Mohammed Abdussamad also presented their papers in this session.

    The third session was a panel discussion on institutional feat for Islamic infrastructure financing in India. Khurshid Najmi from India Law Service was the chair for the session. H Jayesh (Juris Corp), M H Khatkatey (Bearies Amanah), Abizer Diwanji (KPMG), Robin Roy (PWC) and MA Mehaboob (Secura) also participated in the discussion. Islamic financial instruments are more suitable for infrastructure financing than the conventional interest based system. In Islamic finance various instruments including istisna, Mudaraba and Musharaka are best fit for infrastructure finance. Several projects in the country including Kerala and Maharashtra state governments are thinking on the way. India needs a jump in the infrastructure sector by constructing new roads, bridges, metros, railway lines etc. for the growth of the country. But financing is our problem. If we are ready to raise funds by using Islamic modes of financing, flow of funds from different nations can well be expected. So the governments try to increase infrastructure facilities by attracting funds by using these modes, the speakers concluded.

    The fourth session was about Islamic banking regulation. Aishanth Muneeza Malaysia, Rifqi Mohammed, Indonesia, Abdul Ghafar Ismail Bangladesh presented their papers on Shariah corporate governance, risk based supervisions, and Islamic banking reports about Middle East and Asia.
    The second day of the seminar opened with a panel discussion on marketing Islamic financial products in India. Dr. Shariq Nisar, Syed Alauuddin, Mazhar S Beary and MH Khatkatay were the participants. In the discussion the speakers pointed out the difficulties facing the marketing of Islamic financial products in the country.

    The sixth session was on Islamic Charity and Philanthropy, chaired by Mufti Talha Azmi from UK. Hidayathul Ihasan Malaysia, Syed Khalid Rashid Malaysia, Dr. Rahmatullah Mumbai and Dr. Waqar Anwar Delhi presented their views on Islamic charity system.

    The session on Islamic microfinance and co-operatives was a major highlight in the seminar. Microfinance is now recognised as a tool for financial inclusion and poverty alleviation by the world financial sector. But the interest rate charged by these microfinance institutions is too exploitative. Interest-free microfinance institutions developing in different parts of the world are more pro-poor than the conventional one. It helps to effect financial inclusion, poverty alleviation and economic empowerment, the session concluded. The papers presented in this session included different views and studies from different parts of the world. Interest-free nidhis from Kerala, Co-operative societies from Bihar, Micro takaful in Indonesia and economic empowerment study from Indonesia were presented. Dr. Mohammed Obaidullah chaired the session. Yulizar D. Sanrego Indonesia, Najmul Huda from Delhi, Muhammed Palath from Kerala, Ahmad Affandi Mahfuz from Indonesia and Arshad Ajmal from Bihar presented their papers.

    The business session was chaired by Dr. Rahmatullah. Dr. Mahmood Ahmad, Dr. Shariq Nisar, Miranthi Karthika Dewi and Ikramul Haq presented the papers. The papers included potential of Islamic banking, sukuk and capital markets, and takaful case study from Indonesia.

    There were three parallel workshops on different parts of Islamic finance industry in India like private equity and real estate investments in India by Anand Kakarla from PWC, structuring of Islamic finance in India by H Jajesh from Juris Corp and Non Banking Financial companies by Rohith Narula from KPMG. Many delegates were registered for these workshops; they made the sessions lively with active participation in the discussions.

    The valedictory remarks were made by the famous columnist MD Nalapat. He blamed the Government of India, especially the financial regulatory authority, for not adopting Islamic banking in our country. Acting against Islamic finance due to religious matters is not a good thing. If it has a capacity to contribute to Indian financial sector, it should be promoted. It is not promoting negative attitude for new inventions that have potentials to contribute to the country, he added.

    H Abdur Raqeeb chaired the concluding session. S Srinivasan, the executive director of Cochin Stock Exchange inaugurated the session. MY Khan, Dr. Abdussalam Vaniyambalam and Dr. Mohammed Obaidullah also made their concluding remarks. Thanveer Muhiyudheen presented vote of thanks.

    The three-day international event was a historical event in the country because it was the first largest international gathering in terms of numbers of participants, variety of delegates and peculiarity of sessions. The organisers expect this would be a milestone in the Islamic finance history of the country.

    Best Regards

  • Durham Castle

    Shariah Scholar on More Than 50 Boards Opposes Limit Plan

    Shariah Scholar on More Than 50 Boards Opposes Limit Plan: Islamic Finance

    By Dana El Baltaji and Haris Anwar – Available at: http://www.bloomberg.com/news/2010-11-23/shariah-scholar-on-more-than-50-boards-opposes-limit-plan-islamic-finance.html

    Restricting the number of boards religious scholars are involved in would curb growth in the $1 trillion Islamic finance market, says a Bahraini scholar who advises Citigroup Inc. and HSBC Holdings Plc.

    The Accounting & Auditing Organization for Islamic Financial Institutions, a Manama-based agency, said in August it’s considering guidelines on scholars owning shares in the institutions they serve and the number of advisory boards they can join, to reduce the risk of conflicts of interest. The top 20 scholars serve on 621 boards globally, said Zawya and Funds@Work AG, a Dubai-based research company.

    “Capping the number of boards will be devastating to the industry’s growth,” Sheikh Nizam Yaquby, who was born in 1959, said in an interview in Beirut on Nov. 4. “Sometimes people ask me, are you Superman? How can you sit on so many boards? I tell them it’s hard work.”

    Yaquby and Syria’s Abdul Sattar Abu Ghuddah ranked first among the top 20 experts, each serving on 85 boards of Islamic financial institutions, according to Zawya’s report. Yaquby is listed as serving on more than 50 boards, according to data compiled by Bloomberg.

    The Islamic finance industry, with assets the Kuala Lumpur- based Islamic Financial Services Board will almost triple to $2.8 trillion by 2015, is struggling to develop global standards and a centralized regulator for scholars. Banks and companies can’t find enough experts to meet demand for new Shariah- compliant products, creating a “bottleneck,” said Khalid Howladar, Dubai-based senior credit officer at Moody’s Investors Service, in an e-mailed response yesterday.

    Fragmented Industry

    “One scholar advising so many companies doesn’t help make an Islamic product universal,” Kaleem Iqbal, a senior executive vice president at the Pakistani unit of Bahrain-based Albaraka Banking Group said in a telephone interview yesterday from Islamabad. “Unless we adopt a more standardized model, the industry will remain fragmented.”

    Islamic institutions typically have their own panels of scholars who pass rulings, or fatwas, to determine that products comply with Shariah principles. Shariah scholars need to be experts on the Koran, commercial law and finance. Yaquby has a degree in economics and comparative religion from McGill University in Montreal.

    Mohamad Nedal Alchaar, secretary-general of AAOIFI, said in August that a shortage of experts means they tend to sit on several advisory boards simultaneously. The Bahrain-based agency also plans to address concerns that these scholars’ private companies receive preferential treatment from banks they advise.

    ‘Conflict of Interest’

    “There’s a potential case for conflict of interest, and a case of information leakage or perhaps competition impact,” Alchaar said. “We wanted to address the concerns in an unbiased manner.”

    AAOIFI, which has more than 200 members, sets accounting and auditing standards that are used in Bahrain, the Dubai International Financial Centre, Jordan, Lebanon and Qatar, according to its website. The agency said its guidelines have also been used to help frame policy in Indonesia, Malaysia, Pakistan, Saudi Arabia and South Africa.

    “What’s key is to create a robust framework in which the industry can thrive and grow,” said Yavar Moini, senior adviser of global capital markets at Morgan Stanley, in an interview in Dubai yesterday. “Clearly scholars’ expertise and representation on Shariah boards are an integral part of such a framework. Placing limitations in this regard will hinder the industry’s growth potential.”

    Declining Bond Sales

    Global sales of Islamic bonds fell 29 percent to $13.7 billion this year from the same period in 2009, according to data compiled by Bloomberg. Islamic law restricts investors to transactions based on the exchange of assets rather than money alone because interest payments are banned.

    Sukuk returned 11.7 percent this year, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index, compared with a 14.5 percent gain in developing markets, JPMorgan Chase & Co.’s EMBI Global Diversified Index shows.

    Pakistan’s central bank requires Islamic banks to appoint one scholar as a “Shariah adviser,” who is barred from serving at other financial institutions in the country, Karachi-based Saleem Ullah, director of the Islamic banking department at the State Bank of Pakistan, said in an e-mailed response yesterday.

    “The restriction is aimed at addressing the issue of conflict of interest and giving comfort to the banks regarding confidentiality of their business policies and product structures,” he said. The scholar can advise Islamic banks outside the country.

    No Restrictions

    Some Islamic banks also have Shariah boards and committees which have between three and seven scholars, Saleem Ullah said. There are no restrictions on how many boards scholars can serve on, he said.

    “If a country wants to put a limitation, it is up to them,” said Yaquby. “Countries have to question if there are enough scholars to put such limitations.”

    Chicago-based Failaka Advisors LLC, an advisory company which monitors and publishes data on Islamic funds, lists 253 practicing scholars worldwide in its 2008 report. There are now an estimated 600 scholars, said Yaquby. Among the top 10 are Mohammad Daud Bakar of Malaysia and Saudi Arabia’s Mohammed Elgari, according to the report by Zawya and Funds@Work.

    The difference between the average yield for emerging market sukuk and the London interbank offered rate was little changed at 341 basis points yesterday, having narrowed 32 basis points since Sept. 30, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. A basis point is 0.01 percentage point.

    The yield on Malaysia’s 3.928 percent Islamic note due in June 2015 rose two basis points to 2.71 percent today, according to prices provided by Royal Bank of Scotland Group. The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s narrowed 9 basis points to 384.8, according to data compiled by Bloomberg.

    Islamic financial institutions “want scholars who understand finance and banking, and can speak languages,” Yaquby said. “This is not a popularity contest. This is a multi-disciplinary specialization, which is rare to find.”

    Best Regards

  • With the grand Mufti of Bosnia and Herzegovina, Dr. Mustafa Ceric

    Unsung stars of Sharia investing

    Unsung stars of Sharia investing

    Individuals and institutions at the forefront of the market deserve recognition

    By Rushdi Siddiqui, Special to Gulf News Available at: http://gulfnews.com/business/banking/unsung-stars-of-sharia-investing-1.714951

    Dubai: One of the reality checks of Islamic finance, beyond the award winners, is appreciating the work of the ‘grind’ warriors of Islamic finance. These people cum institutions are the ‘unsung stars’ of this niche market, and they need to be acknowledged.


    There is much ‘cut and paste’ website coverage on Islamic finance, hence, same ‘news’ repeated on different venues. The need of the hour is analysis of the news and developments, including how conventional ‘instruments and policies,’ impact Islamic finance. If one is to take credence of critics saying much of Islamic finance is conventional products around an Islamic wrapper, then inclusion of conventional macro-economic date/rates/policies is a must.

    Bloggers, even with their limited resources and often one-person shops, in the Islamic finance place have done a commendable job on providing both coverage and analysis. The good work of Islamic Finance Resources, Shariah Risk Dot Org, IBFNet, Islamic finance group LinkedIn, and Islamic Finance Google group is acknowledged.

    [Open challenge to bloggers: how can Islamic fin-ance, especially at consumer retail, take advantage of the social networking phenomenon for awareness, education, and greater market penetration?]

    Furthermore, there is only a small minority of real journalists who have played the role of the ‘conscious’ of Islamic finance over the last 15 years. But only one journalist comes to mind, Mushtak Parker, and all of us in Islamic finance have been criticised by him via “Mushtak speak,” but “it’s all good.”


    There are community based champions of Islamic finance residing in many non-Muslim countries, and they have great passion for Islamic finance via “financial dawa”.

    Their objective is to encourage a level playing (tax and regulatory) field for the Islamic finance option, on investing, financing or insurance, for Muslims and non-Muslims in their home countries.

    These dedicated people, often working on a shoe-string budget, have not only the challenges of educating the home country regulators and the local populace within a push back politically charged environment, but also we see them attending and/or presenting, at Islamic finance conferences in the UK/EU, GCC and Malaysia/Singapore.

    We acknowledge institutions like US-based entities like American Finance House, IdealRatings, Devon Bank, and Guidance Residential, Canada’s UM Financial, Italy’s Assaif, Sri Lanka’s Amana Finance, India’s Bearys Amanah, UK’s IIBI and apologies to those left out inadvertently.

    In addition to institutions, there are Islamic finance academics, who do not receive the spotlight of scholars, yet their contribution, via research or constructive criticism, is no less important.

    In the US, Mahmoud Al Gamal (Rice University) and Pervez Ahmad (University of North Florida), the UK’s Rodney Wilson (Durham University), Malaysia’s Prof Balal Shanmugun (Monash University) and others contributed much through their authorship.


    Regulators are an important stakeholder in Islamic finance as they attempt to level the playing field for Islamic finance

    They act as “full disclosure consumer protection advocates,” and probably are the most important speakers at conferences, after the keynote.

    Due recognition must be accorded to central bank of Bahrain (CBB), Malaysia’s Securities Commission, the UK’s FSA, State Bank of Pakistan, and DIFC’s DFSA

    These institutions laid the foundation for Islamic finance within their respective countries and lessons for other countries.


    Muslim lifestyle market (MLM) encompasses not only Islamic finance, but extends to food (halal) and fashion, put differently, it’s a total package of faith, finance, food and fashion.

    Islamic finance ($1 trillion, Dh3.67 trillion) is globally recognised, yet halal ($640 billion) has the greatest market penetration amongst the 1.6 billion Muslims, and (Muslim inspired) fashion is an area that can only grow.

    For Muslims, Islam is a way of life, yet Islamic fin-ance is only one part, as there is also consumption of food according to proscribed rules and modesty of clothing.

    Today, the emphasis has been on Islamic finance, yet halal is actually a demand based industry.

    For example, if a Muslim has lost money in Islamic investments (funds), due to a market sell-off or inferior management skills, they may shy away from investments in the near future or become depositors.

    However, even in recession/down markets, Muslims will still consume food. They may consume less or purchase generic brands, but probably will not become “vegetarians”.

    Other entities

    Malaysia has done a remarkable job in promoting the halal industry, but due recognition must also be given to entities promoting halal like the UAE’s Al Islami, Ghanim Foods’ BruneiHalal, and the US’s Saffron Road, and information providers like Halalfocus, Dinarstandard, Crescent-Rating, and others.

    There are many unsung stars in Islamic finance, and if conference organisers do not recognise them, we acknowledged their contribution.

    Best Regards

  • Blue Mosque, Istanbul

    In Memory of Our Beloved Imam Muhammad Ibnu Idris Al Shafii

    The Last Poem of Imam Al Shafii

    ولما قسـا قلبي وضـاقت مذاهبي
    جعلت الرجـاء مني لعفوك سلمــا
    تعاظمني ذنبـي فلمـا قرنتــه
    بعفوك ربي كان عـفوك أعظمــا
    فما زلتَ ذا عفو عن الذنب لم تزل
    تـجـود وتعـفو منة وتكرمـــا
    فلولاك لـم يصمـد لإبلـيس عابد
    فكيف وقد أغوى صفيك أدما
    فيا ليت شعــري هل أصير لجنة
    أهنـــا؟ وأمـا للسعير فأندما
    فإن تنتـقـم مني فلست بآسي
    ولو أدخلت روحي بجــرم جهنمـا
    فإن تعف عني تعف عـن متمرد
    ظلوم غشــوم قاسي القلب مجرما
    ويذكر أيام مضت من شبابه
    وما كان فيها بالجهالة أجرما
    يقيم إذا ما الليل مد ضلامه
    على نفسه من شدة الخوف مأتما
    يقول حبيبي أنت سؤلي وغايتي
    كفى بك للراجين سؤلا و مغنما
    الست الذي غذيتني و هديتني
    ولازلت منانا علي ومنعما
    عسى من له الإحسان يغفر زلتي
    ويستر أوزاري وما قد تقدما

    When my heart hardened and my ways narrowed
    My hope of your forgiveness towards You was my approach
    I greatened my sin, yet when I compare it with your forgiveness
    My Lord your forgiveness was greater
    Yet, You forgive sins and still
    Generously and gracefully bestow and forgive
    Were it not for You, no worshipper would withstand Satan
    How and he already has lured your chosen Adam
    Alas! Would I be lead to paradise then I am a fortunate
    Or a remorse to hell I am lead
    Indeed not despaired if You avenged me
    Or into the core of hell You brought my soul
    And if You forgive me, a mutinous You forgive…
    A wrongful unfair pitiless criminal…
    He remembers the past youth days
    And what crimes of ignorance were committed
    Then, when the dark spread out
    Fearfully he mourns himself
    Saying my beloved You are my request and wish
    Sufficient You are for the hopeful to ask and gain
    Were not You who fed me and guided me?
    And still, You give me generously and bless me
    May You, to Whom my charity belongs, forgive me my faults,
    Pardon my sins and what came before.

    Obama’s Bribe: Palestinians Will Be the Losers-Again

    Obama’s Bribe: Palestinians Will Be the Losers – Again

    By Jonathan Cook – Nazareth. Available at: http://palestinechronicle.com/view_article_details.php?id=16425

    Watching the peace process between Israel and the Palestinians drag on year after year without conclusion, it is easy to overlook the enormous changes that have taken place on the ground since the Oslo Accords were signed 17 years ago.

    Each has undermined the Palestinians’ primary goal of achieving viable statehood, whether it is the near-trebling of Jewish settlers on Palestinian land to the current numbers of half a million, Israel’s increasing stranglehold on East Jerusalem, the wall that has effectively annexed large slices of the West Bank to Israel, or the splitting of the Palestinian national movement into rival camps following Israel’s withdrawal from Gaza in 2005.

    Another setback of similar magnitude may be unfolding as Barack Obama dangles a lavish package of incentives in the face of Benjamin Netanyahu in an attempt to lure the Israeli prime minister into renewing a three-month, partial freeze on Jewish settlement construction in the West Bank.

    The generosity of the US president’s package, which includes 20 combat aircraft worth $3 billion and backing for Israel’s continued military presence in the Jordan Valley after the declaration of a Palestinian state, has prompted even Thomas Friedman of The New York Times to compare it to a “bribe”.

    Israeli officials said yesterday they were still waiting to see a text of the deal worked out between Netanyahu and the US secretary of state, Hillary Clinton, in seven hours of negotiations.

    In addition to the concession in the Jordan Valley and the offer of combat jets that would effectively double the annual aid from the US, the deal is said to include a promise by Washington to veto for the next year any UN resolutions Israel opposes and to refrain, after borders have been agreed, from demanding any future limits on settlement growth.

    The signs are that Netanyahu will be able to secure the backing of his right-wing cabinet for a brief settlement freeze that this time, the US has indicated, will not include East Jerusalem.

    So far, in attempting to resolve the conflict, Obama has nearly exhausted his political capital. There were intimations this week that the White House could not afford further humiliation and was going for broke.

    The timetable for negotiations now calls for reaching an agreement on borders within three months — the duration of the settlement construction freeze — followed by a final resolution of the conflict within a year or so.

    Washington’s hopeful logic is that a renewal of the freeze will be unnecessary in three months because an agreement on borders will already have established whether a settlement is to be considered included in Israel’s territory and therefore permitted to expand or inside Palestine and therefore slated for destruction.

    In a similarly optimistic vein, the US apparently expects the problem of refugees simply to dissolve through the creation of a special international fund to compensate them. The right of return appears to be off the table.

    If these obstacles can be surmounted this way – a very big “if” – only one significant point of contention, the future of East Jerusalem, remains to be resolved.

    This is where things get more awkward. The US is not proposing that the three-month freeze apply to East Jerusalem, after settlement-building there caused friction between Israel and the US during the last moratorium.

    This concession and the outlines of a previous US peace proposal under president Bill Clinton hint at Washington’s most likely strategy. East Jerusalem will be divided, with the large settlement blocs, home to at least 200,000 Jews, handed over to Israel while the Old City and its holy places fall under a complicated shared sovereignty.

    In the face of this intense US-Israeli diplomacy, Palestinians are dismayed. They have described the agreement between the US and Netanyahu as “deeply disappointing” and are demanding from the White House similarly generous inducements to ease their path back to negotiations. The Arab League, which has taken a prominent role in overseeing the Palestinian negotiations, has also objected to the deal.

    The Palestinians fear they will be left with a patchwork of disconnected areas – what Israel has previously termed “bubbles” – as their capital.

    If the Palestinian Authority president, Mahmoud Abbas, can be made to swallow all this, which seems highly improbable, he will then have to contend with Hamas, the rival Palestinian faction, which can be expected to do everything in its power to disrupt such an agreement.

    And then there is Netanyahu. Few Israeli analysts think he has suddenly become more amenable to the US plans.

    Neve Gordon, a politics professor at Ben Gurion University in the Negev and author of an important study of the occupation, believes the Israeli prime minister is simply playing the part demanded by Obama.

    “He is taking the US ‘merchandise’ on offer, but will hold firm on key issues that guarantee the talks’ failure. That way he gets the credit for keeping the negotiations on track and lets the Palestinians take the blame for walking out.”

    This sounds suspiciously like a re-run of the last proper peace talks, at Camp David in 2000. Then, Israeli intransigence stalled the negotiations, but Yasser Arafat, the Palestinian leader, was blamed by the US and Israel for their collapse.

    The Camp David failure led to the outbreak of Palestinian violence, the second intifada, and the demise of the Israeli peace camp. Mr Netanyahu may be prepared to risk a repeat of both such outcomes from these talks if it means he can avoid making any real concessions on Palestinian statehood.

    – Jonathan Cook is a writer and journalist based in Nazareth, Israel. His latest books are “Israel and the Clash of Civilisations: Iraq, Iran and the Plan to Remake the Middle East” (Pluto Press) and “Disappearing Palestine: Israel’s Experiments in Human Despair” (Zed Books).


  • The Tomb of Sultan Muhammad Al-Fatih, Istanbul, Turkey

    Note (s): I recommend to all my weblog readers to read an illuminating book by Ali Muhammad Al Salaabi entitled Sultan Muhammad Al Fatih, The Conqueror of Constantinople, The Fall of the West and the East published by Al-Firdous, London in 2009. InsyaAllah, there will be another ‘Al Fatih’ to free Palestine from the Zionist. Perhaps, the cartoon about Sultan Muhammad Fatih as attached below can be a good entertainment for us and our children. Enjoy watching!