RE­SET­TING US-IS­LAMIC RE­LA­TIONS TO BE­FORE 9/11

Best chance of get­ting rid of ex­trem­ism is through win-win mu­tual trade and in­vest­ment

New Straits Times - - Opinion - The writer is an in­de­pen­dent Lon­don-based econ­o­mist and writer

WHO­EVER came up with the idea of the first-ever United States-Arab Is­lamic Sum­mit, Riyadh, which started on Satur­day, should be com­mended, not for his per­spi­cac­ity, but for the sheer sym­bol­ism of the oc­ca­sion.

That sym­bol­ism, alas, could be a dou­ble-edged sword. Whether the tim­ing is a mere co­in­ci­dence — two days af­ter the Ira­nian pres­i­den­tial elec­tion and a week be­fore the ad­vent of Ra­madan — is a moot point.

A no­table ab­sen­tee was Iran, whose re­form-minded Has­san Rouhani, fresh from a thump­ing man­date af­ter win­ning a land­slide 57 per cent vote in Fri­day’s pres­i­den­tial elec­tion over his hard-line ri­val, Ebrahim Raisi, could have been the sur­prise pack­age at the sum­mit.

Alas, the art of the deal in this in­stance seems to have been lost in op­por­tu­nity.

Per­cep­tion is as im­por­tant as sym­bol­ism. For the layper­son in the 56 Or­gan­i­sa­tion of Is­lamic Co­op­er­a­tion (OIC) coun­tries, the spec­tre of Mus­lim “unity” bro­kered by a pres­i­dent, who only months ago seemed to revel in ram­pant Is­lam­o­pho­bia, may seem sur­real.

Geopol­i­tics, for­eign pol­icy and de­fence pri­or­i­ties fea­ture strongly in the agenda of Pres­i­dent Don­ald Trump’s gru­elling eight-day trip, which apart from Saudi Ara­bia, will also take in Is­rael, the Pales­tinian Ter­ri­to­ries, Brus­sels, the Vat­i­can and Si­cily.

Trade, in­vest­ment and fi­nan­cial ser­vices, I be­lieve, are the ar­eas where US-OIC ties have got a more re­al­is­tic chance of thriv­ing. The two economies need each other at a time when their eco­nomic for­tunes have been un­der­mined by the quadru­ple ef­fects of un­fet­tered glob­al­i­sa­tion, the 2008 global fi­nan­cial cri­sis, the eu­ro­zone de­ba­cle and the dra­matic fall in world com­mod­ity prices, in­clud­ing oil and gas.

A pre-con­di­tion is to re­set USIs­lamic re­la­tions to the pe­riod be­fore 9/11, and for Wash­ing­ton to bury its ghost once and for all. This does not mean for­get­ting the heinous as­sault on the US, those who fell and were maimed. On the con­trary, it would mean us­ing the mem­ory and lessons of 9/11 as a re­in­force­ment of the global fight against ex­trem­ism by not giv­ing its de­trac­tors the ex­cuse of fur­ther sow­ing di­vi­sion be­tween the US and Mus­lim world. Sev­eral OIC coun­tries are on the front line of ter­ror­ism, some on a daily ba­sis. The world ben­e­fits when US-Is­lamic re­la­tions thrive.

I can think of three ar­eas where progress could be achieved rel­a­tively quickly — Is­lamic fi­nance, in­fra­struc­ture fi­nanc­ing and de­fence co­op­er­a­tion, al­beit with the above caveats. Prior to 9/11, Wash­ing­ton took a lead­er­ship role in western en­gage­ment with the Is­lamic fi­nance in­dus­try, well be­fore the United King­dom and Lux­em­bourg.

The first ma­jor mile­stone for the pro­vi­sion of Is­lamic re­tail bank­ing ser­vices in the US came in 1997 when the Of­fice of the Comp­trol­ler of the Cur­rency ap­proved Is­lamic home fi­nance prod­ucts based on ijara (leasing) and murabaha (cost-plus fi­nanc­ing) pro­vided in New York by the United Bank of Kuwait and later by HSBC Amanah.

But, post-9/11 fol­low­ing the US’s re­treat from the mar­ket due to then pres­i­dent Ge­orge W. Bush’s so-called “fi­nan­cial war on ter­ror­ism” and the sub­se­quent in­tro­duc­tion of a spate of Pa­triot Act leg­is­la­tion which gave sweep­ing pow­ers to the De­part­ment of Home­land Se­cu­rity and the Fi­nan­cial Ac­tion Task Force of the US Trea­sury and fright­ened off banks and in­vestors from the Is­lamic world be­cause of fear that their as­sets might get frozen for even the most friv­o­lous rea­sons, the UK gov­ern­ments led by Tony Blair and David Cameron saw its main chance in en­gag­ing with the Is­lamic fi­nance in­dus­try.

To­day, that pol­icy trans­lates into a proac­tive UK Is­lamic bank­ing propo­si­tion with cross-party sup­port in the House of Com­mons, and which core am­bi­tion is to de­velop Lon­don into the in­ter­na­tional hub for Is­lamic trade, in­vest­ment and fi­nance.

Prior to 9/11, it was usual for US gov­ern­ment of­fi­cials to at­tend Is­lamic fi­nance con­fer­ences. I re­mem­ber John B. Tay­lor, then un­der sec­re­tary of the US Trea­sury, do­ing the rounds. Even in the af­ter­math of 9/11, Tay­lor con­tin­ued his en­gage­ment in an ef­fort to “de­mys­tify” Is­lamic bank­ing by tak­ing a “greater in­ter­est in Is­lamic fi­nance be­cause of its rapid

This does not mean for­get­ting the heinous as­sault on the US, those who fell and were maimed. On the con­trary, it would mean us­ing the mem­ory and lessons of 9/11 as a re­in­force­ment of the global fight against ex­trem­ism by not giv­ing its de­trac­tors the ex­cuse of fur­ther sow­ing di­vi­sion be­tween the US and Mus­lim world.

growth and sys­temic im­por­tance in sev­eral Mus­lim part­ner coun­tries of the US”.

In­fra­struc­ture and ur­ban re­gen­er­a­tion of­fers promis­ing syn­er­gies with Is­lamic fi­nance for the US, which as Trump stressed dur­ing his cam­paign needs in ex­cess of US$1 tril­lion to re­build its crum­bling in­fra­struc­ture. Some US Con­gress­men from New York have re­cently sought to ex­plore sukuk as a po­ten­tial in­fra­struc­ture fi­nanc­ing in­stru­ment — some­thing the G20 lead­ers have ex­horted mem­ber coun­tries to do.

While the UK and Lux­em­bourg re­main the only two western sov­er­eigns to is­sue sukuk in the in­ter­na­tional mar­ket, sev­eral US cor­po­rates have done so, in­clud­ing Gen­eral Elec­tric, East Cameron and Gold­man Sachs, while others have reg­u­larly ac­cessed the syn­di­cated murabaha mar­ket. US as­set man­agers, in­clud­ing Welling­ton Man­age­ment, Cit­i­group, JP Mor­gan, Mor­gan Stan­ley, Prin­ci­pal In­ter­na­tional and State Street, have a long his­tory as in­vest­ment ad­vis­ers to Is­lamic eq­uity funds. It was Fred­die Craw­ford at Welling­ton who struc­tured the first Is­lamic global eq­uity fund for Na­tional Com­mer­cial Bank in Saudi Ara­bia more than two decades ago.

On Satur­day, Riyadh signed de­fence agree­ments worth over US$100 bil­lion, in­clud­ing a US$6 bil­lion or­der to as­sem­ble 150 Lock­heed Black­hawk he­li­copters in the king­dom. Na­tional oil gi­ant Saudi Aramco signed US$50 bil­lion of deals with US com­pa­nies aimed at di­ver­si­fy­ing the king­dom’s econ­omy away from oil.

Riyadh in the past has signed ef­fec­tive de­fence-re­lated off­set deals with Bri­tish Aero­space, Rolls Royce, Lock­heed and Boe­ing, where Bri­tish and US com­pa­nies agreed to in­vest in other sec­tors to help di­ver­sify the econ­omy. Tate & Lyle, for in­stance, built a sugar mill in Saudi Ara­bia as part of the deal with Rolls Royce.

Turco-US de­fence co­op­er­a­tion went fur­ther. Turkey man­u­fac­tures F24 jet fighters un­der li­cence com­plete with job cre­ation, sup­ply chain tech­nol­ogy and main­te­nance spin-offs.

It is through win-win mu­tual trade and in­vest­ment co­op­er­a­tion that the US and Is­lamic world stand the best chance of break­ing down bar­ri­ers and sus­pi­cions, and ul­ti­mately elim­i­nat­ing the evil that is ex­trem­ism.

AFP PIC

United States Pres­i­dent Don­ald Trump and Saudi Ara­bia’s King Sal­man Ab­du­laziz al-Saud ar­riv­ing for a re­cep­tion ahead of a ban­quet at Murabba Palace in Riyadh on Satur­day. Geopol­i­tics, for­eign pol­icy and de­fence pri­or­i­ties fea­ture strongly in the agenda of Trump’s first for­eign trip.

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