Reflections on Emerging Markets in the Muslim World: Investment, Trade and International Development

 

By

Professor Muhammadou M.O. Kah
Vice President For Academic Affairs & Provost, American University of Nigeria

Firstly, it is important to acknowledge that markets, investments, and trade are anchored and central to Muslims way of life since the dawn of Islam.  Majority of emerging markets in Muslim countries have established institutions to drive access to finance and investments, facilitating trade based on Islamic principles, sharia with Islamic finance and financial products and services accessible both to Muslims and Non-Muslims.

Indeed, Trading and Investment guided by ethical principles, values, and a moral compass, is as old as Islam and is central to the lives of Muslims and their communities. In the majority of emerging markets in Muslim countries, their economies are sustained by vibrant micro enterprises with micro investments that are the fabric of economic activity and engine of growth and development. This brings quality of life and dignity. The challenge often is scalability, access to funding and markets with competitive prices for their goods and services.  

Emerging Markets in Muslim countries are rapidly growing Islamic Finance Development and this is embraced increasingly by Muslims and non-Muslims and its products continue to be mainstreamed as an option available in the market place in traditional financial institutions in  Emerging Muslim Countries (EMCs) and non-Emerging Muslim Countries (non-EMCs) facilitating investments and trade efficiently and effectively.

Challenges on physical as well as on regulatory infrastructure constitute an important barrier to the growth of this sector. Human capital shortages and lack of harmonized standards on principles and definitions on Islamic finance instruments can be considered as other major challenges which need to be addressed both at the national as well as at the Emerging Muslim Countries (EMCs’) levels.

The Emerging Markets in the Muslim World are at different stages of development in these sectors and the weakness and challenges they are confronted with are many. The inadequacy of access to capital and sustainable financial structures for financing and favorable and or Fair Trade systems and platforms are the challenges common in many of the emerging markets of the Muslim World.

These challenges along with increase in fragility, social unrest and conflicts, negative impact of climate change, weak leadership, inadequate freedom of expressions and civil liberties, weak institutions, rigidity of regulations, poor governance, degree of poverty and inequity with a very slowly rising middle class, lack of opportunities for women and the youthful population, further exacerbate the situation in emerging markets of Muslim countries.

These challenges are overwhelming. However, emerging markets of Muslim Countries are committed to overcoming these challenges and be on the path of accelerated and effective development and to attain the targets of the Sustainable Development Goals (SDGs). The emerging markets of Muslim Countries are diverse and endowed with huge and diverse natural resources and a vibrant market with a huge population-the majority youthful and increasingly enlightened, creative and more connected to the realities of the times.

I propose to this eminent body present here today that the key ambition should be to enhance the level of cooperation, integration as well as competitiveness as individual Muslim Countries, regional players, as a group and as members of OIC, IsDB, ISESCO, etc. and also at the global level. To drive its ambition of cooperation with their European Counterparts, it is important to understand the value proposition of this huge Emerging Market. Appropriately harnessing the highlighted strengths and uniqueness of the Emerging Markets of the Muslim World through investment and trade, will results in unprecedented economic growth and development for the MC’s, their European partners’ and a spillover benefitting the rest of the world and global markets and economies.

Through investments and trade, guided by ethical principles, fair play and fair process as dictated by the values of Muslim countries will facilitate the mitigation of huge risks that tend to derail or slow down the effectiveness, efficiencies of investments and benefits of trade.   The key sectors with huge potential for cooperation with European Countries for investments and trade are in the areas of Agriculture, Education, Energy, Finance, Health, Labor Force, Science and Technologies, Transport and Communication.

Cooperation in the form of investments, joint ventures, access to financing, markets and better alignments to fair and sustainable trade systems and practices, will be fundamental to sustainable development and realization of consolidating gains, and returns of investment and trade between the MC’s and their European counterparts.

  1. there is a need for public, private and philanthropic resources and innovative sources of financing instruments in financing infrastructure and development and leveraging through guarantees and improving policy and business enabling environment (and risk mitigation). Ex.  PPP in electricity and water for instance in most vulnerable areas and use of guarantees, raising bonds, going beyond the balance sheet, domestic resource mobilization (taxes, etc.) building on the discussions on Financing for development in Addis Ababa.

The continuing threat of the rise of China, and the aggressive interest of China in emerging markets, especially, Muslim countries channeling billions of dollars and access to their markets and accelerated rise of protectionism of markets and nationalism, the collapse of markets of advanced economies and the uncertain and unpredictable shifts in the World Order, the huge resource needs of the advanced world, the renewed interest in emerging markets in general, given its endowed natural resources and, the fact that the next economic frontier and battleground is these emerging markets in Muslim Countries (MC’s),  cooperating and establishing an equitable trading relationships with the MC’s and European countries, guided by fair play, fair process, trust and channeling investments in the highlighted key sectors of the MC’s will develop, open and scale up emerging markets of the MC’s and facilitate meeting the European market needs and requirements for sustainability of their economies. These Emerging Markets will also benefit through the forging of cooperation with their European counterparts as an expanded trading partner with ease of transactions and protection of their expanding markets and also to channel their investments in diverse sectors of the European Market.

The Emerging Markets of the  Muslim Countries (MC’s) are increasingly the next economic frontier with huge cost advantages and returns on investments. The growth rates that can be realized in the MC’s cannot be realized in the European and non-European markets.

The MC’s will benefit from a newer form of disrupted engagement and cooperation with their European counterparts and facilitate a scale up from trading and investments to broader cooperation with Europeans to facilitate resolving the challenges and weaknesses of their key sectors required for building and developing scaled up trade, market development for efficiency, quality, scale and competitiveness.

Disrupted cooperation for reengagement with MCs, will checkmate the aggressive investment and growing trade flows emerging from China and other non-European markets. Further, the cooperation in building smart trading platforms with services, harnessing technologies and channeling talented MC youths in revitalizing and rejuvenating these sectors through adequate support of entrepreneurship and SME’s to ease trade and access to capital and investment, will mitigate the socio-economic risks and challenges faced by both the Europeans and the MC’s.  

With adequate investments in highlighted sectors, access to market and ease of trade, access to investments and capital from and jointly with European counterpart, targeting the youths, women and SME’s, hope and dignity in the MC’s will be restored.   Sustainable investment and revitalization of trade that is connected to open and accessible markets will revitalize communities and economies of individual MC’s. This will begin to meaningfully tackle head-on youth unemployment and the threats of migration to European countries risking lives.

And, channeling investments to strengthen rural economies and creating trading platforms and clusters in these rural communities with the requisite infrastructure will improve the lives of rural communities. Rural economies will provide access to basic amenities the youth yearn for and the community requires. These disrupted approaches to investment and trade may begin to reverse the continuing trend of MC’s youths crossing the Mediterranean to Europe for greener pastures.

Our large population in Emerging Muslim Countries (EMCs’) is a market opportunity for advanced nations, but we can encourage entrepreneurs and producers to make some of the goods sold to the local EMC markets and properly package with quality standards to European Markets, so as to create jobs for our youths. We also need to make our economies attractive to both domestic and foreign investors so as to engender private-sector-led growth and development. What we need is cooperation, partnerships, joint ventures, access to sustainable financing, access to the market, fair play, and fair trade!

The Muslim world is a special category in world politics that is a contested arena for global powers such as the USA, Russia and the European Union. The EMCs’ maintain super-power alliance according to their special interest and inclination which sometimes sway or become unstable.  Especially, after the 9/11 incidents, relations between the Muslim World and the West has become shaky to the extent that the former is probably in search of an alternative to its existing Western allies. Does rising China aggressively channeling her investments, seemingly fairer trade practices and access to market provide an opportunity to EMCs’ shifting cooperation and engagement with China?

The rise of China is clearly visible in the international political economy. Undoubtedly, China has risen as an economic giant with immense potential to surpass even the mighty US economy and is unapologetic in looking towards the EMC’s with massive investments and growing trade and delivering much-needed infrastructure?  It is observed that there is a shifting balance of power in the EMC’s region, trust building and economic engagement with EMCs, especially the EMC’s in SSA.

China is becoming the largest single energy consuming country and much of its energy comes from EMCS’s. Not only gas and oil that are flowing to China from EMC’s but petrodollars from the oil-rich EMC’s are also finding China an attractive destination for investment. As western style democracy continues to be a challenge for some of the EMC’s, China is acquiring the trust of the EMCs’ for being non-interventionist in their domestic affairs.

Clearly, the Muslim world might increasingly find China as an alternative superpower patron and destination for Investments and Trade to counter the influence of the West and/or Europe. If the present trend continues and the continuing rise of Islamophobia, rise of protectionism and nationalism, Europe and the West may play catch up and EMC’s may not find their investments and Trade attractive? Thus, the urgency for Europe and the West to rethink their engagement, mindset about EMC’s and their Markets and engage in reform and reengineering their approach to cooperation, investments, and trade.

The European landscape and the structure of Emerging Markets and Muslim countries are changing rapidly due to continuous technological innovations, advancements and disruptions, geopolitical circumstances and growing protectionism. Emerging Markets and Muslim Countries are faced with systemic challenges ranging from slow economic growth, lack of infrastructure, inadequate technological development and a growing youth population with low development of human capital, weak education and learning infrastructure and high levels of unemployment. Thus, the urgency and ease of engagements and access to investments and favorable trade with limited barriers will be attractive.

There is a major cultural shift, global ambition, open-mindedness and gradual disruptions on the socio-political infrastructure of societies in these countries and the youths are increasingly interested, engaging and stepping up in politics, public discourses and entrepreneurship and embracing the advances provided by technologies and channeling their creativity and see the world as their stage.

Also, the rise of the platform economy and social media is embraced by the youths and is their playground and reshaping their engagements in society, economy and breaking the old rigidities and value systems and bringing more connectedness to global interactions and activities.   These technological disruptions and advancements are opening up these emerging markets of Muslim countries and building Trust and broadening perspectives, collaborations, and cooperation and democratizing information and enabling freedom of expressions and empowerment of the youths and Women.

Adequate investment and trade are needed more than ever to harness the opportunities that are yet to be exploited in the emerging markets of the Muslim countries. The highlighted challenges confronting these markets, the abundance of natural resources and the huge and youthful labor force that are mostly unemployed can only be resolved with the value created through cooperation and partnerships with non-Muslim countries, such as the European Union.

There is an urgent need for both the Emerging markets of the Muslim countries and their European counterparts to revisit and augment the existing cooperation’s and relationships forged over the years and disrupt radically the approach to investments and trade for development. These must include rebuilding of “Trust”, transform and put in place an innovative, disruptive and sustainable development-financing, investment and trade models and align them better with the changing needs and requirements of the cooperation within the context of a changing, dynamic, complex, unpredictable and competing world, to help strive for the attainment of the SDGs, Development and quality of life in these emerging markets.

The Emerging Markets of the Muslim World and their European counterparts must be adaptable, disruptive and innovative financiers, with diverse funding structures and mechanisms that will facilitate holistically reconstruction of post-conflict Muslim countries and address poverty,  through creative partnerships, substantive engagement with the private sector, civil society and to engage in greater development effectiveness by jointly channeling resources through investments and resilience trading systems and platforms that are equitable and guided by fair play and fair process.