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Archive for united nations general assembly

Islamic financial system shows inherent resistance to global crises

Pakistan is a fast growing country with regards to Islamic finance. Starting from scratch in 2002, it is now about 8% of the local banking industry.

Islamic finance is one of the fastest growing segments of the global financial industry. In 2008 the size of the global Islamic banking industry was estimated about $820 billion. Now it is closer to $1.35 trillion according to Global Islamic Finance Report (GIFR), and is expected to cross $1.6 trillion before the end of the current fiscal year.

The Islamic financial industry now comprises 430 Islamic banks and financial institutions and around 191 conventional banks having Islamic banking windows operating in more than 75 countries, according to the GIFR.

Pakistan is also a fast growing country with regards to Islamic finance and growth has been phenomenal. Starting from scratch in 2002, it is now about 8% of the local banking industry.

While Islamic banks play roles similar to conventional banks, fundamental differences exist. The central concept in Islamic banking and finance is justice, which is achieved mainly through the sharing of risk. Stakeholders are supposed to share profits and losses, and charging interest is prohibited.

There are also differences in terms of financial intermediation, the paper notes. While conventional intermediation is largely debt based, and allows for risk transfer, Islamic intermediation, by contrast, is asset based, and based on risk sharing. One key difference between conventional banks and Islamic banks is that the latter’s model does not allow investing in or financing the kind of instruments that have adversely affected their conventional competitors and triggered the global financial crisis. These include toxic assets, derivatives, and conventional financial institution securities.

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Analysis done by the IMF suggests that Islamic banks fared differently, if not actually better than conventional banks during the global financial crisis. Factors related to the Islamic banking business model helped contain the adverse impact on their profitability. In particular, smaller investment portfolios, lower leverage, and adherence to Shariah principles—which precluded Islamic banks from financing or investing in the kind of instruments that have adversely affected their conventional competitors — helped contain the impact of the crisis when it hit in 2008.

The study used bank-level data covering 2007−10 for about 120 Islamic banks and conventional banks in eight countries — Bahrain, Jordan, Kuwait, Malaysia, Qatar, Saudi Arabia, Turkey, and the United Arab Emirates. These countries host most of the world’s Islamic banks (more than 80% of the industry, excluding Iran) but also have large conventional banking sectors. The key variables used to assess the impact were the changes in profitability, bank lending, bank assets, and external bank ratings.

While the study showed that Islamic banks were able to better withstand the initial impact of the crisis, the following year (2009), weaknesses in risk management practices in some Islamic banks led to a larger decline in profitability compared to that seen in conventional banks. The weak 2009 performance in some countries was associated with sectoral and name concentration—that is, too great a degree of exposure to any one sector or borrower. In some cases, the problem was made worse by exemptions from concentration limits, highlighting the importance of having a neutral regulatory framework for both types of banks.

Despite the higher profitability of Islamic banks during the pre-global crisis period (2005–07), their average profitability for 2008–09 was similar to that of conventional banks, indicating better cumulative profitability and suggesting that higher pre-crisis profitability was not driven by a strategy of greater risk taking. The analysis also showed that large Islamic banks fared better than small ones, perhaps as a result of better diversification, economies of scale, and stronger reputation.

Islamic banks contributed to financial and economic stability during the crisis, given that their credit and asset growth was at least twice as high as that of conventional banks. The IMF paper attributes this growth to their higher solvency and to the fact that many Islamic banks lent a larger part of their portfolio to the consumer sector, which was less affected by the crisis than other sectors in the countries studied.

However the post-crisis years have also shown where the Islamic banking sector is relatively weak. It lacks as efficient a structure for liquidity management as seen in conventional banking. The IMF report also recommended that the sector needs a stronger supervisory and legal infrastructure, including bank resolution.

The paper also recommended that Islamic banks and supervisors work together to develop the needed human capital, saying expertise in Islamic finance has not kept pace with the industry’s growth.

Published in The Express Tribune, December 17th, 2012.

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UN tells Israel to let in nuclear inspectors

As nuclear peace talks are cancelled, overwhelming vote by general assembly calls for Israel to join nonproliferation treaty

The UN general assembly has overwhelmingly approved a resolution calling on Israel to open its nuclear programme for inspection.

The resolution, approved by a vote of 174 to six with six abstentions, calls on Israel to join the Nuclear Nonproliferation Treaty (NPT) “without further delay” and open its nuclear facilities to inspection by the International Atomic Energy Agency. Those voting against were Israel, the US, Canada, Marshall Islands, Micronesia and Palau.

Resolutions adopted by the 193-member general assembly are not legally binding but they do reflect world opinion and carry moral and political weight. And the resolution adds to pressure on Israel as it facescriticism over plans to increase settlement in the West Bank, a move seen as retaliation for the assembly recognising Palestinian statehood.

Israel refuses to confirm or deny possessing nuclear bombs though it is widely believed to have them. It has refused to join the non-proliferation treaty along with three nuclear weapon states: India, Pakistan and North Korea.

Israel insists there must first be a Middle East peace agreement before the establishment of a proposed regional zone free of weapons of mass destruction. Its rivals in the region argue that Israel’s undeclared nuclear arsenal presents the greatest threat to peace in the region.

While the US voted against the resolution, it voted in favour of two paragraphs in it that were put to separate votes. Both support universal adherence to the NPT and call on those countries that aren’t parties to ratify it “at the earliest date”. The only no votes on those paragraphs were Israel and India.

The vote came as a sequel to the cancellation of a high-level conference aimed at banning nuclear weapons from the Middle East. All the Arab nations and Iran had planned to attend the summit in mid-December in Helsinki, Finland, but the US announced on 23 November that it would not take place, citing political turmoil in the region and Iran’s defiant stance on non-proliferation. Iran and some Arab nations countered that the real reason for the cancellation was Israel’s refusal to attend.

Just before Monday’s vote, the Iranian diplomat Khodadad Seifi told the assembly “the truth is that the Israeli regime is the only party which rejected to conditions for a conference”. He called for “strong pressure on that regime to participate in the conference without any preconditions”.

Israeli diplomat Isi Yanouka told the general assembly his country had continuously pointed to the danger of nuclear proliferation in the Middle East, singling out Iran and Syria by name. “All these cases challenge Israel’s security and cast a dark shadow at the prospect of embarking on a meaningful regional security process,” he said.

“The fact that the sponsors include in this anti-Israeli resolution language referring to the 2012 conference proves above all the ill intent of the Arab states with regard to this conference.”

The Syrian diplomat Abdullah Hallak told the assembly his government was angry the conference was not going to take place because of “the whim of just one party, a party with nuclear warheads”.

“We call on the international community to put pressure on Israel to accept the NPT, get rid of its arsenal and delivery systems, in order to allow for peace and stability in our region,” he said.

The conference’s main sponsors are the US, Russia and Britain. The British foreign office minister Alistair Burt has said it is being postponed, not cancelled.

Source: Guardian News

Why Palestine Won Big at the UN

An instructive week after Palestinian militants in the Gaza Strip tested Israel on the battlefield, the pacifist politicians who govern the West Bank  notched a significant diplomatic win without much of a fight at all.  Just before 5 p.m. New York time, the  United Nations General Assembly voted 138 to 9 (with 41 abstentions) to bring Palestine aboard as a “non-member state.”  Another 41 nations abstained. Assured of passage by a whopping majority, Israel and the United States noted their objections mildly and mostly for the record, their effort to limit the fallout for the Jewish state itself limited in the wake of Gaza.

The status of “non-member state” — emphasis on the “state” —  puts Palestine the same level of diplomatic recognition as the Vatican, which is technically a sovereign entity. The Holy See has its own ambassadors but, for a few, may be better known for its busy post office off St. Peter’s Square, where tourists queue for what quiet thrills are afforded by a Vatican stamp cancelled with the Pope’s postmark.

Palestine already has post offices. The particular marker of sovereignty it sought from the U.N. is even more bureaucratic: Access to international organizations, especially the International Criminal Court at The Hague.  Experts on international law say that, armed with the mass diplomatic recognition of the 150 or so nations it counts as supporters, Palestine will be in a position to bring cases against Israel, which has occupied the land defined as Palestine – the West Bank and the Gaza Strip – since 1967.

The ICC, as it’s known, is on record as inclined to regard Israel’s more than 100 residential settlements on the West Bank as a crime of war.  (The Jewish state pulled its settlers and soldiers out of Gaza in 2005, and argues that it no longer qualifies as its “occupier” under international law. Critics argue otherwise.)  The physical presence of the settlements in other words would give Palestine a ready-made case to drag Israel before the court — or to threaten dragging it before the court.  In the dynamics of the Israel-Palestine conflict, the real power lay in the threat.  But in his last UN address, in September, Abbas began to lay the foundation for charges based not on the settlements but on the violent behavior of some individual settlers, who attack Palestinian neighbors and vandalize property and mosques.  Settler attacks have skyrocketed in the last two years, according to UN monitors, and now account for the majority of the political violence on the West Bank, despite the lingering popular impression of Palestinian terrorism dating back decades.  On the West Bank, at least, the reality has changed.

“If you were in my place, what would you do?” Palestinian Authority President Mahmoud Abbas asked TIME in a recent interview. “We will not use force against the settlers. I can use the court, but it’s better for the Israelis not to push us to go to the court.  They should put an end to these acts committed by the settlers.”  His address to the General Assembly in advance of the vote Thursday made the stakes plain enough: Abbas blasted Israel for “the perpetration of war crimes” and “its contention that it is above international law.”

Abbas’ effort actually got an unlikely boost from Israel’s eight-day offensive in Gaza.  Operation Pillar of Defense focused on attacking Hamas, the militant Islamist group that has governed Gaza since 2007.  Hamas, and more radical groups also operating in Gaza, lost scores of fighters and rocket launchers to Israeli airstrikes. But by standing up to overwhelming Israeli military power for more than a week – and sending missiles toward major cities previously left untouched – the militants stirred a defiant pride and solidarity across the Palestinian community.

“The armed resistance of Hamas in Gaza gave the people hope and the impressions that this is the only way to fight against the ongoing occupation,” Majed Ladadwah, 46,  told TIME 0n a Ramallah street, in the West Bank.. “I can’t say they won,” said Ladadwah, who works at a bank  “but they surely gained a lot of points for Hamas in the streets of Palestine.”

That logic was pointed out to Israeli prime minister Benjamin Netanyahu by Secretary of State Hillary Clinton when she visited Jerusalem to coax him toward a cease-fire.  In the days that followed, Netanyahu’s government stopped threatening to punish Abbas for going to the UN, a move Israel has called a threat to the peace process, which has been stalled for at least four years.

At the same time,  European nations rallied around Abbas, intent on shoring up a leader who is secular, moderate – and already at political risk for cooperating with Israel to suppress armed resistance even before Gaza seized the world’s attention.  Many of the “marquee” countries of Western Europe that Netanyahu had hoped to vote against Palestine statehood, such as France, instead lined up behind Abbas.  Others, including Britain, abstained, after seeking assurances that Palestine will not to go the ICC, or that negotiations with Israel will resume. Abbas has already promised the latter.  Thursday morning brought news that Israel had lost Germany, a stalwart ally in the wake of the Holocaust, to the abstention column.  “If there is a poor turnout, a poor vote, the radicals gain,” India’s U.N. Ambassador Hardeep Singh Puri told reporters.

For their part, Palestinians overwhelmingly back the measure, despite an assortment of disappointments with Abbas –  for wasting a year trying to get full UN membership in 2011, and for not visiting Gaza during the fighting, as foreign diplomats did.  “We are for the UN bid because we anticipate this will help us legally to pursue our struggles and gain our rights,” says Ladadwah, the bank employee who spoke admiringly of Hamas’ stand in Gaza. Hamas itself said it backs the diplomatic effort, as do other factions.

“This is called resistance, whether armed resistance or peaceful resistance,”   said Mahmoud Khames, 34, an unemployed West Bank resident, in advance of the vote. “It’s not a soccer match that someone has to win.  Resistance is a matter of freeing one’s self and his people from the Israeli occupation.”
Source: Time World