KARACHI: The Centre for Excellence in Islamic Finance (CEIF), IBA held an International Forum on ‘Unlocking Islamic Finance Potential in CPEC and Beyond’ at IBA City Campus. The China-Pakistan Economic Corridor (CPEC), often called a ‘game-changer’ in this region, primarily consists of $45 billion worth of domestic infrastructure projects planned by the government of Pakistan. IBA-CEIF, initiated in 2015 has done remarkable work; among all 3 centers in Pakistan, it is the most active.
Speaking on the occasion Irfan Siddiqui, President & CEO Meezan Bank said in order to answer the question that will the CPEC be a game changer, it is significant to understand what the CPEC is exactly. It is a project, which covers 60 countries – more than half of these are Islamic. It will also reduce the distance of Western China to Europe by 5000 km, a distance taking around 45 shipping days.Consequently, working capital requirements also reduce by one quarter. Mr. Irfan further said that China is the largest spender on tourism and if 1% of the tourism money – which the Chinese spend worldwide is invested in Pakistan than that amount will be greater than all the income earned by the tourism industry in Pakistan. It is important to understand that CPEC is not just a need of China but also Pakistan – creating a win-win situation. It is also significant for the young generation to learn Chinese since China is one of our friendliest neighbors, considering Pakistan’s hostile relations with India and Afghanistan, and sanctions on Iran, which have adversely affected its economy.
Saeed Ahmed, Deputy Governor, State Bank of Pakistan, then addressed the audience. He mentioned how policymakers all over the world are taking a keen interest in Islamic banking especially after the recession of 2007. The size of the global Islamic finance industry is also approximately Rs. 2 trillion now. The right way to finance projects under the CPEC– ports, roads, motorways – is not from commercial banks, but from specifically designed products by Islamic banks such as Ijarat. He also discussed the role of the SBP in encouraging Islamic banking, by allowing them to have a liquidity ratio of 14%. He also emphasized that it is also essential to sign a Memorandum of Understanding between Islamic Banks and Chinese representatives. This will bring forward new ideas and strategies, thereby stimulating the growth of the Islamic finance industry.
Dr. Nadeem Javaid, Chief Economist, Government of Pakistan, Ministry for Planning, Development and Reform said that there are four main components of CPEC: Energy, Infrastructure Development, Economic Incentives and Industrial Cooperation. He said that CPEC will greatly lower the per unit cost of energy, incentives such as exemption from local duties and materials, whereas suspension of trade union activities, will give opportunities to investors. Therefore, designing cost-effective, Shariah compliant finance options is the need of the hour. He predicted that the economic dividends of CPEC will be so high that even India might join this project eventually.
The second session was based on the theme ‘CPEC Opportunities for Islamic Finance Industry’, with some of the key topics being infrastructure development, trade finance and spillover opportunities in the cement, steel and energy sectors. The panelists were Maj. Gen. (Retd.) Dr. Zahir Shah, Mr. Irfan Siddiqui, Dr. Nasir Afghan, IBA Faculty, and Mr. Li Xiaoxin (David), Deputy CEO of Industrial & Commercial Bank of China Limited.