He may not be as well known as Christine Lagarde, the managing director of the International Monetary Fund (IMF), or Dr Jim Yong Kim, president of the World Bank.
But get to know the name Dr Bandar Mohammed Hamzah Hajjar.
On Oct 1, the good doctor (he is actually an American/British educated economics don and the erstwhile Saudi minister of haj) takes control of the most important financial institution in the Muslim and emerging world — the Islamic Development Bank (IDB).
As the new president of the IDB Group, his task is to herald in a new dawn for the multilateral development bank of the ummah as it starts its fifth decade of operations.
Does he have his work cut out, especially at a time when the Muslim world is faced with one of its most turbulent periods in its 1,437 years of history, which today includes at least six failed states in Syria, Iraq, Yemen, Somalia, Libya and Afghanistan, out of 57 member countries of the Organisation of Islamic Cooperation (OIC)?
The IDB, since its establishment in 1975, has amazingly had only two presidents in its 41 years’ history, which is a sad indictment of its organisational and corporate governance culture and deficit.
Except for one year, when Dr Osama Faqeeh briefly took over the reins, one man — Tan Sri Dr Ahmad Muhammed Ali — has run the institution with an iron fist, micro-managing to the last banal detail for almost four decades. The Malaysian government saw fit to honour him for his services to the promotion of Islamic finance globally and the economic development of the Muslim countries.
On his watch, the IDB, whose motto is “Together we build a better future”, provided development finance to its member countries exceeding US$113 billion (RM465 billion), including US$12 billion in last year alone. For that, the Muslim ummah should be grateful.
The IDB has made a real impact on the lives of millions of people in member countries and has played a meaningful role towards achieving two of its core mandates of alleviating poverty and promoting Islamic finance. In its other two core mandates of promoting intra-Islamic trade and economic development, the report card would read: “Could do much better. Needs to focus and prioritise through delegation of responsibilities and improvement of governance structures.”
Intra-Islamic trade is about 18 per cent of the total trade of member countries, which is disappointing. A target of 30 per cent has been set for 2025. Access to basic infrastructure remains a major problem in OIC countries where 23.9 per cent of the population in 2015 did not have access to proper water resources, and 39.7 per cent did not have access to adequate sanitation. In addition, some 423 million people did not have access to electricity.
So, what should the priorities for the 61-year-old “new kid on the bloc”, Dr Hajjar, be for the next decade or so?
The IDB, like the World Bank/IMF and all multilaterals, is a hostage to its paymasters — its shareholders. This comes down to the equity subscription (and, therefore, voting rights) of member countries. In the case of the IDB, Saudi Arabia is by far the single largest equity subscriber with 23.52 per cent of the capital (and 24.01 per cent of the voting rights). This compared with Libya with 9.43 per cent equity stake and 9.53 per cent of the voting rights, Iran with 8.25 per cent and 8.43 per cent, Nigeria with 7.66 per cent and 7.28 per cent, United Arab Emirates with 7.51 per cent and 7.62 per cent, Qatar with 7.18 per cent and 7.26 per cent, and Egypt with 7.08 and 7.18 per cent of the voting rights respectively.
Malaysia has an equity stake of 1.63 per cent and voting rights of 1.66 per cent compared with Indonesia’s 2.25 per cent and 2.32 per cent, which is nothing to write home about.
It would be too much to ask or expect Dr Hajjar to preside over the reform of the IDB’s equity, voting and organisational structures. That remains the prerogative of the shareholders.
But, Dr Hajjar is a technocrat with a difference. He served as a member of the Shoura in Saudi Arabia for four sessions, and led Shoura Committees on the National Strategy for Integrity and Anti-Corruption, which resulted in the creation of the Anti-Corruption Commission, and the Civil Authority for Zakat. This augurs well for him to navigate the corridors of power especially in Riyadh and key Muslim capitals including Putrajaya — armed with the requisite economics and finance understanding, which was so bereft of his predecessor who was more into public administration, and hopefully the wherewithal of how to deal with the political powers-that-be.
Beyond equity subscription and voting rights, any further similarities between the IDB and peer institutions, especially the World Bank Group, would feign to flatter. True, the IDB with an authorised capital of US$75 billion is second only to the World Bank whose capital amounts to some US$120 billion.
One way of improving the internal governance of the IDB Group is to consider opening up the equity subscription to outsiders, of course with strict ceilings so as to pre-empt any attempt at controlling the institution. There is a precedent — the African Development Bank, which has the United States, the United Kingdom and European Union as equity subscribers.
It could enhance the IDB as an institution should Russia, China and India — all with substantial Muslim minority populations — together with the US, UK, EU and Japan become shareholders. Russia already has Observer Status with the OIC. Muslim minority countries can accede to membership of the OIC and its organ, the IDB. Mozambique, which has a small Muslim minority, is a full member of both organisations.
At a stroke, the IDB could improve its internal governance and widen its resource mobilisation base, which currently is confined to its capital and its US$25 billion sukuk issuance programme.
This out-of-the-box thinking might be anathema to some, but to take the IDB Group to its next level will require exactly the type of creative thinking to propel it out of its current comfort zone.
The magnitude of the challenge ahead for the IDB Group requires systemic improvement of its work to go beyond mere funding operations, technical assistance and grants, and to help member countries to migrate to knowledge-based economies by embracing information and digital technology.
This requires investment to improve educational systems, information and communication technology, innovation incentives, good governance, and capacity building.
A few days ago I saw a harrowing TV report on Yemen and how the conflict there is contributing to severe malnutrition especially among the hapless children. The images of children with their diaphragm virtually protruding through their chest, was reminiscent of those emanating from the Nazi concentration camps after the fall of Germany and those in Srebrenica during the Bosnian conflict.
The Muslim world is at war with itself — Sunni versus Sunni and Sunni versus Shia. The consequences are dire and desperate — the human cost of death, displacement and loss of dignity, and the destruction of infrastructure and resources totalling hundreds of billions of dollars. More than 15 million people in the Middle East and North Africa alone have been displaced over the last four years.
This has had a knock-on effect even on the economies of countries not directly affected by conflict, further exacerbated by low commodity prices which has further impacted on GDP growth and has led to burgeoning youth unemployment and alienation.
But as Malaysian Premier Datuk Seri Najib Razak alluded to at the World Islamic Economic Forum in the presence of outgoing IDB president Dr Ali in Jakarta in August, it is not all doom and gloom in the Muslim world.
The halal economy, for instance, is currently estimated to be worth US$2.3 trillion, of which halal food makes up US$700 billion. Muslim consumer spending is set to reach US$2.6 trillion in 2020. Today, there are some 1.6 billion Muslims comprise 23 per cent of the global population. But by 2030, this percentage is projected to rise to 26 per cent or 2.2 billion Muslims. Clearly, the opportunities for growth are enormous.
In 1995 I wrote a defining editorial headlined: ‘Tomorrow’s Job for Yesterday’s Man” alluding to the appointment of Dr Ali for a third consecutive six-year term as IDB president. Will Dr Hajjar’s appointment turn out to be “Yesterday’s Job for Tomorrow’s Man?” Only time will tell!
Mushtak Parker is an independent London-based economist and writer