SPEECH: Keynote Speech by Prime Minister of the Republic of Mauritius at the 11th IFSB Summit
Date posted: 21 May 2014
Date: 21 May 2014
Event / Venue: 11th IFSB Summit - Keynote Speech
Speaker: Dr. The Honorable Navinchandra Ramgoolam, Prime Minister of the Republic of Mauritius
I am delighted that you have chosen Mauritius for your 11th Annual Global Summit.
As you will no doubt be aware, Mauritius is often referred to as Africa’s growth success story.
A former slave colony with high levels of ethnic diversity and a monocrop economy, Mauritius has succeeded in becoming an upper middle income country with a thriving Financial Services Sector.
We therefore have two dimensions that make us an ideal location for your summit.
The first is a thriving internationally oriented offshore financial market that is increasingly serving the needs of global investors.
The second is a deeply ingrained institutional necessity of building institutions and business that are economically successful but also sensitive to the cultural and ethnic needs of different groups.
Exactly the sort of perspective that is required to build successfully an Islamic finance industry.
We see our role at this Summit as providing a gateway to new ideas, new services and new partnerships in finance as you open up to new markets and extend the frontiers of Islamic finance, which is the theme of this summit.
When I talk to our students at school and university, these days many of them are studying finance and economics, in preparation for a career in financial services, business and banking.
This is in stark contrast from my time as a student, when the focus was on medicine and law.
This shift is in tune with the profound structural change in our economy as it has steadfastly moved away from traditional agriculture and manufacturing to becoming a strategic service hub for the South Western Indian Ocean countries and a gateway to the fast emerging economies of continental Africa.
Our economy has now ventured into new pillars of development and growth.
Our Financial Services Sector is in full bloom and is one of the linchpins of our transformation agenda.
Islamic finance is a relatively new venture for us, but we must recognize that Islamic finance has grown substantially over the past decade and is expected to grow further in the decades to come.
Ladies and Gentlemen,
Banking has been rather in the doldrums in the past few years. Some bankers abroad have been shamefacedly hiding their professional calling at diplomatic parties; some have faced gigantic fines for past misdeeds, while others are kicking their heels in jail.
Reform, and a fresh face for finance and banking, are high on the agenda here, as in many countries. I welcome you all to share with us your experience, advice and professional views on the future role of Islamic finance. I trust we will learn from this Summit how Islamic finance has been serving the world in this changing environment. More and more, people want to see how non-conventional modes of banking and finance can become a greater dynamic force in promoting economic growth and social development.
The global financial crisis has led in many places to financial collapse in the real economy. The high risk innovations in the banking sector in the west, with scant regard to regulation and prudential norms, have created a huge economic burden for future generations in many countries. Happily here, with more conservative and rigorous regulatory systems, which our bankers regularly complain about, we have escaped the worst of the primary impact and we are sufficiently resilient to cope with the secondary impact of the problems afflicting our main trading partners in Europe.
We know from the Global Financial crisis that regulators need to look carefully at fast growing markets.
As Islamic finance grows, so too will the number of regulatory issues which must be addressed.
The Global Financial crisis has clearly revealed that the risk sharing that is at the heart of Islamic financing is a better principle than the risk transference which led to so many financial bankruptcies.
Islamic finance with its focus on risk sharing offers genuine advantages to a financial system deeply scarred by the crisis. As Islamic finance grows rapidly, the danger is that the growth comes from conventionalizing Islamic finance and introducing weaknesses that became so apparent after the collapse of Lehman.
What is really needed is rather to islamicise conventional banking with its focus on the provision of real economic services and risk sharing and effective regulations. We need to stay ahead of the curve and learn the painful lessons of the global financial crisis which had its origins in conventional banking without a proper functioning regulatory framework – or institutions which adopted a cosy relationship with bankers and those in high finance and failing in their duty to protect customers. For the resilience and capacity of an economy to face a crisis depend as much on what has been done throughout the years to strengthen the economic fundamentals and the financial system, as it does on the ability to wriggle out of the crisis when it hits. I am proud to say that we have had very able monetary and fiscal leadership during these difficult times, and we are still very much afloat, with the economic engine purring along nicely. Only a few days ago, the IMF has given us very good marks on this count.
My Government has put in place the pre-requisites for us to become an attractive, safe and business-friendly jurisdiction. Capitalising on our sound economic base, a stable political environment and our strategic geographical location, we have been at the forefront in adopting international best practice. Through constant review of our legislative framework, our country has embraced bold reforms that have made it among the most open, competitive and low tax economies in the world.
What we have on offer is a safe and effective business environment, with a young, dynamic, talented, multi-skilled and multi-lingual workforce – in English, French and Asian languages – including business and banking in a busy commercial community here. We offer first class, world qualifications, skills and experience. As you see, we presently offer a pool of professionals in the field of accounting, law and finance such that we are capable to develop a competitive edge in the delivery of world-class conventional and Islamic financial services.
On my initiative we have been able to put in place an International Arbitration Centre with a representative of the Hague based here permanently. We went to great lengths to achieve this and now some are trying to hijack it – those who did nothing for over 2 decades now see the lucrative side of it and want to take over international arbitration.
Like the communists credo: you create wealth and we take it. No Sir, I won’t allow this. They can do local arbitration but not international arbitration. We need to ensure that we become an international arbitration centre of repute.
My vision is to see Mauritius emerge as an International Financial Centre of repute. Indeed, I am confident that Mauritius stands poised to sustain and further develop a buoyant Islamic financial services’ industry on our shores. So, Ladies and Gentlemen, you are at an opportune time in the right place today. Our country is a new market, a new frontier for Islamic finance.
Over the last few years, we have been busy creating the appropriate environment to welcome Islamic finance. Our aim is not to compete with well-established Islamic finance jurisdictions in the Gulf and elsewhere. We have made it our mission to be the bridge to Africa and become the staging post, as in the past, for trade and investment.
Islamic banking assets have expanded at an impressive pace in recent years and are estimated at USD 3 trillion this year. Yet, ladies and gentlemen, you may not believe it. Only around 1 per cent has been channeled to the African continent. New opportunities are rising in Africa. Massive investments are required in public infrastructure, production of energy, health and education to enable the continent to take advantage of the evolving economic conditions. Africa needs finance to accompany it in its development. The World Bank estimates that nearly USD 93 billion is required annually as investment in Africa, while only two-thirds are funded. Islamic finance can bridge that gap of USD 35 billion.
I invite you to reflect on the new market and frontiers which the African continent represents. And I reiterate that you are in the right place. For Mauritius has currently over a dozen Double Taxation Avoidance Agreements with African States. We have very close relationships with many African States through our memberships in several regional blocks. So we are well prepared to participate most actively in this Summit and to offer our services as a bridge for the future of Islamic finance.
Allow me, Ladies and Gentlemen, to go back to the lessons drawn from the global financial crisis. There is a growing interest in ethical and socially responsible investment taking place in the conventional banking world today. It is notable that the roots of socially responsible investment in the conventional world have a religious influence. The Quakers, Methodists and others have been pioneers in defining the ethical products in the stock markets for example, excluding investment that touches on alcohol, tobacco, gambling and armaments. Islamic banking and finance with its own basis in inherent ethical principles contributes towards this global movement for socially responsible investment.
Mauritius has also been actively creating the right environment for the emergence of Islamic finance. As far back as 2007, the Bank of Mauritius – your host today – became a member of the Islamic Financial Services Board (IFSB). Currently, the Governor occupies the Vice-Chair of the Governing Board of the International Islamic Liquidity Management Corporation, a sister-institution of IFSB. Today, we have one full-fledged Islamic bank, and Islamic windows. We also have promoters in the Gulf region with keen interest to set up shop in Mauritius. We are also working towards developing Sharia-compliant liquidity-management instruments.
When the Governor invited me to address you this morning, I thought it important for me to be here and reiterate my Government’s commitment to the development of Islamic finance in Mauritius. I am delighted to see so many of you here. It is a sign that we are talking the same language and sharing the same vision.
These are exciting times for Islamic finance and I wish you much success during your deliberations.
I now have much pleasure to declare open this 11th Islamic Financial Services Board Summit.
I thank you for your attention.
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