Wednesday, March 31, 2010

Potential for Islamic finance in Canada is huge



Conference highlights opportunities and challenges in serving Muslim market

Tuesday, March 30, 2010

By Megan Harman

As the Muslim community in Canada continues to grow, there are vast opportunities for financial institutions to offer Islamic financial products, services and advice, speakers at a Toronto conference said on Tuesday.

UFANA, the Usury-Free Association of North America -- a new non-profit organization committed to helping people sustain themselves on a usury-free lifestyle -- launched its first annual conference on Tuesday.

Speakers at the conference emphasized the potential for growth in Islamic finance in North America. The Muslim population in Canada is roughly 1 million in size, representing 3% of the country’s population; and doubles every 10 years, noted Omar Kalair, president and CEO of UM Financial -- an Islamic financial institution offering financing, investment planning and advice and Shariah-compliant products, among other services.

Islamic financial products are unique in the sense that they must be designed to be compliant with Shariah law, which requires that all products are traded interest-free, among other limitations.

“Demand from the community has kept increasing,” said Kalair. “Our business model has always been that we’ve partnered with financial institutions to try to meet the demands of the Muslim community.”

Few firms in Canada offer Shariah-compliant products and services to retail clients. The Big Banks have so far avoided the market, which is niche and limited in size, and lacks a regulatory framework, the speakers said.

As a result, the market remains underserved, according to Saad Rehman, a wealth advisor at Scotia McLeod in Saskatchewan.

“The reality is there is still a huge portion of investors in Canada that nobody seems to really focus on,” he said.

Access to Shariah-compliant products and financing is critical for Muslims, noted Sheikh Nizam Yaqoobi, a Shariah scholar based in Bahrain. He said many Muslims would otherwise be unable to take out mortgages and loans, which in many cases would prevent them from owning homes and cars, from starting businesses, and from affording post-secondary education.

“A big proportion of them are not willing to compromise their beliefs,” he explained, adding that a lack of access to appropriate financing for these individuals would lead to a “big burden on the community.”

Aznan Hassan, a Shariah scholar from Malaysia, agreed that the potential for Islamic finance in Canada is huge.

“I believe it’s very timely for the Canadian society, Canadian government, and also the financial institutions in Canada to try to explore this opportunity to offer this to their clients,” said Hassan. He added that in countries such as Malaysia, Shariah-compliant investment products have proven to appeal to non-Muslims, as well.

“These products are not only for Muslims,” he said. “Islamic financial products are for everybody to use.”

But serving the Muslim community involves challenges, the speakers admitted. Representatives from U.S.-based companies that offer Islamic financial products said it took up to 10 years to become profitable in the market, since the Muslim community is limited and the domain is relatively new.

Successfully developing Islamic financial products and services for the North American Muslim community demands “tremendous patient capital, patience, perseverance,” said Stephen Ranzini, president and chairman of University Bank, who launched its Islamic financial subsidiary.

Another challenge is the lack of education around Shariah-compliant financial products and services, Rehman said.

He noted that even Muslim clients are often unfamiliar with how the products work, and how they’re different from conventional products. In fact, he said many Muslim clients have millions of dollars of assets that they do not invest, since they’re unfamiliar with the Shariah-compliant options available to them. Educating these clients could create an opportunity for Canada’s financial services community to serve them.

“There’s not enough knowledge out there,” he said.

Abu Dhabi's oil reserves to last another 150 years

Emirate is blessed with 95 per cent of the UAE’s oil reserves and 92 per cent of gas.

Capital contributes 60 per cent to the UAE's GDP. (REUTERS)

Oil-rich Abu Dhabi is on a strong growth trajectory and the emirate will remain in a strong economic position in the future, too, after having weathered the economic downturn considerably well.

The figures quoted in a new report by Isthmus Partners 'Abu Dhabi Investment Environment', shows that with 33 per cent of the country's population, the emirate contributes around 60 per cent to the UAE's GDP and has a GDP per capita of 1.8 times the national average.

"Abu Dhabi has one of the highest GDP per capita in the world. Even on a standalone basis, Abu Dhabi would be the second-largest economy in the GCC after Saudi Arabia," said the authors of the report stressing the economic clout of the capital city.

The emirate is blessed with 95 per cent of the UAE's proven oil reserves and 92 per cent of UAE's gas reserves. Based on current utilisation rates and no additional discoveries, Abu Dhabi's oil reserves will last for 150 years, said the report.

According to the IMF estimates, the UAE produced 2.62 million barrels of crude oil per day on average in H1 2008, 97 per cent of which was produced in Abu Dhabi.

As a result, oil exports generate significant income for the emirate.

In 2008, export revenue from oil and gas was Dh376.9 billion, but in 2009 this figure was reduced to Dh208.5bn due to the drop in the price of oil and the global economic recession.

With good revenues coming from the hydrocarbons, Abu Dhabi is also trying to diversify its economy.

"The government has intensified the diversification efforts in recent years capitalising on the 2000s oil boom and the increased inflows of foreign investment," said the report, adding that the "emirate's strategy is to capitalise on the strong hydrocarbon sector and grow into other industrial sectors as well as tourism and aviation".

The emirate is also home to one of the world's leading sovereign wealth funds, Abu Dhabi Investment Authority, which is a strategic international investor.

The report said: "Although official figures on assets under management are not forthcoming, it is considered that the Abu Dhabi Investment Authority (Adia) and Abu Dhabi Investment Council (Adic) hold hundreds of billions of dollars of investments. According to the IMF, the UAE held an international investment position (IIP) with net assets of $305 billion (Dh1.1 trillion) of international assets in 2009 and the great majority of them are owned by Abu Dhabi entities.

The ratio of IIP net assets over UAE's GDP is 132 per cent, compared to 105 per cent for Singapore and 52 per cent for Norway."

Abu Dhabi has traditionally invested a considerable amount of its oil revenues abroad and such international investments provide a significant source of income to the Abu Dhabi Government and reduce the volatility of the emirate's GDP and dependence on oil prices, said the authors of the report.

Exports of oil and gas brought $102.7bn to the UAE in 2008 and a projected $56.8bn and $71.8bn in 2009 and 2010 respectively, according to the IMF, as quoted in the report. The year 2008, which was probably one of the best in terms of economic growth, saw the UAE's consolidated fiscal surplus reach a record high of Dh127bn due to strong oil and non-oil revenue, even though consolidated government expenditure increased to a record of Dh198bn, as per the data in the report.

"The UAE reported fiscal surpluses for four consecutive years from 2005-2008 (while previously it had several years of fiscal deficits due to low oil prices and a steady growth in public spending and infrastructure).

"A small fiscal deficit of 0.3 per cent of GDP is predicted for 2009 due to lower oil prices and an expansionary fiscal policy by Abu Dhabi to counteract the economic slowdown. The IMF forecasts that the UAE will report a surplus in 2010."

Given the economic growth, Abu Dhabi's population has increased rapidly in recent years, primarily through immigration of expatriates. "Resident population grew by a compounded average of 4.6 per cent annually between 2001 and 2006. Between 2005 and 2008, the emirate grew at a faster annual rate of six to seven per cent. Anecdotal evidence suggests that the population increased mildly in 2009 and 2010, as Abu Dhabi remains a net employer."

In recent developments, Abu Dhabi was also hit by the global credit crunch.

"The oil growth engine (centred in Abu Dhabi) and the non-oil growth engine (centred in Dubai) were hit at the same time driving the country into mild negative real GDP growth in 2009, forecast at –0.7 per cent by the IMF."

However, it was a softer landing. "Though at the beginning of the financial crisis many participants expected that Abu Dhabi could be immune to shocks, the reality is that the crisis has affected Abu Dhabi though to a smaller degree.

"In the real estate sector, Abu Dhabi has expanded more conservatively and has a better match of demand with supply. In many segments of the property market, Abu Dhabi is still undersupplied. Yet the UAE's capital experienced a reduction in real estate prices in 2009. Prices in prime residential properties have fallen 40 per cent between Q3 2008 and Q3 2009," said Colliers.

Rental levels have fallen by an average 18 per cent in the first three months of 2009, but had previously increased by 14 per cent in Q4 2008.

"Occupancy rates in Abu Dhabi are almost 100 per cent and supply of completed property (rather than off-plan) cannot satisfy demand. Yet rental prices have been dropping since Southern Dubai has emerged as a substitute to Abu Dhabi."

As far as the banking sector is concerned, the central government has moved proactively in easing the liquidity problem and restoring confidence in the system.

Other sectors of Abu Dhabi's economy are performing well. The return of oil prices to the $70-$80 a barrel level has boosted oil revenues. "Industrial demand and revenues have fallen due to the slowdown in global activity and local construction, but investments in this sector continue.

"Abu Dhabi will capitalise by increased industrial export revenues once the global economy resumes expansion. In the meanwhile, the emirate benefits from carrying out its infrastructure investments at reduced cost due to the drop in the price of construction materials and labour costs."

Abu Dhabi has also indicated that the government and the emirate will continue supporting troubled government-related entities given that they are sustainable businesses, the report points out.

With a GDP of Dh520bn in 2008, the emirate is a strong economy. Yet, Abu Dhabi is one of the most concentrated economies in the GCC, as the oil sector dominates economic output and any major fluctuations in oil price can impact it.

Thus, diversification is in a major way and the emirate has invested large amounts of capital in broadening the economic base.

"Abu Dhabi has intensified efforts embracing the two pillars of diversification and privatisation, introducing strategic measures and undertaking substantial new investments in industry, real estate, tourism, aviation and other sectors.

"Abu Dhabi targets an annual growth of 7.5 per cent. The emirate published in 2009 the 'Abu Dhabi Economic Vision 2030' outlining its economic priorities for the coming years and its policies over the next two decades to achieve its goals.

"The plan envisages a population of 3.1 million by 2030, an 80 per cent increase from an estimated 1.7 million people in 2009," it said.

"Abu Dhabi's aim is to stimulate non-oil sectors rather than to reduce activity in the oil sector. It is increasing its industrial base [petrochemicals, plastics, metals] capitalising on the availability of resources.

In addition, it is looking to boost tourism and aviation sectors amongst others.

Abu Dhabi aims to become industrial and manufacturing hub

On sector analysis of the Abu Dhabi economy, the Abu Dhabi Investment Environment report highlights that Abu Dhabi aims to become the Middle East hub for industrial and manufacturing companies seeking to capitalise on the numerous opportunities that the emerging economies of the region offer.

"The government envisages exploiting the emirate's competitive advantage in the energy sector and command a larger share of the hydrocarbons value chain.

"According to the Abu Dhabi Chamber of Commerce, investments in industrial projects reached Dh39.8 billion in 2008."

The construction sector is another important one to watch out for. It contributed Dh21bn to Abu Dhabi's GDP in 2008. Construction activity is still strong as there are massive infrastructure projects under development. Growth in real estate construction has slowed down but fundamentals are good, said the report.

"There are massive government or government-related investments in shipyard, seaport, airport expansions, healthcare, education, major road upgrades and transportation.

"Infrastructure investment makes up a significant and growing proportion of construction activity for Abu Dhabi and the GCC," it said.

Developments in transport are also commendable. Abu Dhabi's new port is under construction and will include one of the world's largest industrial zones.

The emirate has also undertaken a massive expansion project for its main airport.

Aerospace and defence are also important pillars for Abu Dhabi's diversification plans.

"In the third quarter of 2009, Mubadala announced that it had signed a long-term strategic aerospace agreement with Boeing to develop mutually beneficial initiatives in various areas including composite manufacturing, engineering, R&D, commercial maintenance, repair and overhaul, military maintenance and sustainment, and pilot training.

"In the first quarter of 2009, Mubadala had announced that it is in the initial stages of forming a joint venture with the United States company Sikorsky Aerospace Services in order to develop a military-aviation maintenance centre," the report said. Abu Dhabi is also investing considerably in the tourism sector as a means of diversification.

The city has been developing specialised economic zones in strategic locations to attract investments.

The emirate has launched huge projects to diversify its economy.

Tuesday, March 30, 2010

Dr. Ahmadinejad: How I stopped Worrying And Learned to Love The Bomb


By Amar Toor

There are significant parallels between Ahmadinejad and Kubrick’s most memorable character, Dr. Strangelove. Dr. Strangelove was an extremely trigger-happy, suspiciously double-talking character that so many in 1960s America feared—the same kind of characterization, in fact, that many in the Western media have now branded upon Ahmadinejad. But is there really a madman lurking far beneath the placid surface of Iran’s President?

Stanley Kubrick’s classic 1964 film Dr. Strangelove: Or How I Learned to Stop Worrying and Love the Bomb places some of the most morbid Cold War-era nuclear fears and attitudes under a searing satirical lens of stygian-black comedy. Released at the zenith of Cold War frigidity and paranoia, Strangelove tells the story of a rogue US general who, having apparently lost his mind, suddenly pulls the trigger on a fleet of nuclear warheads aimed at Communist Russia, threatening global extinction.

The nuclear hysteria upon which Kubrick based his satirical film has certainly died out, but many of the core nuclear fears at which Kubrick takes such deft jabs are still very much at the center of international discourse. Nowhere are they more pertinent than in Iran, where the Islamic Republic has, justifiably or not, stepped into the Soviet Union’s gargantuan shoes as the newest nuclear threat to mankind.

Strangelove in Iran

More than 40 years later, both the film and its message, are as resonant in today’s cavernous media amphitheatre as they were at the height of Cold War tensions. As global attention centers ever more intensely on Iran and its apparent push toward nuclear armament, the principle personages, as in any film or narrative structure, have gradually come into more refined relief.

And, as the line dividing media consumers from producers blurs to nearly indiscernible levels of turbidity, we all become atomized Truffauts, Kubricks, or, as the case may be, David Lynches. We read and construct media the same way any director, screenwriter, or novelist structures a narrative—namely, around easily identifiable characters and personalities.

Heads of state become leitmotif shorthand for countries, populations, and policies. Barack Obama is as synonymous with the US as Paul McCartney once was with The Beatles, as Charlton Heston was with Ben-Hur, as Rush Limbaugh will forever be with Oxycontin. We impose cinematic and literary archetypes on to political storyboards because character-driven tales are, quite simply, more exciting to read.

The Iranian political landscape may be complex and multifarious, but it’s not immune to our own storytelling devices.

Although the country’s political architecture is actually anchored by a triumvirate of theocratic, presidential and militaristic constituent regimes, the “face” of Iran, the singular personage that’s emerged as its representative actor, its foremost team captain, is, without question, President Ahmadinejad.

But what kind of character is he? Where does he fit in the current political drama that we as media consumers have constructed for ourselves? What role does he fulfill? Does he have the onscreen charisma and James Dean-like swagger to actually carry our nuclear film? Or is he more of a niche character, deigned to play a small, predictable role but do it to absolute perfection, à la Jerry Orbach?

Is he, perhaps, the Dr. Strangelove of the 21 century?

Though he makes only a handful of appearances onscreen, Kubrick’s most memorable character, by far, is the film’s namesake—the deranged (and ambiguously Nazi) scientist known only as Strangelove. In what may be the most economically brilliant performance in cinematic history, Peter Sellers brings to life a character so profoundly enigmatic, so anomalously German, and so inarguably deviant that one can’t help but be lulled into the hypnotic spider web that Sellers casts across the screen.

Granted, Strangelove is no head of state—no nation, no matter how desperate, would be that suicidal. And Sellers’ portrayal is unquestionably more demonstrative and exaggerated than anything we’ve seen from Ahmadinejad in the public sphere. But circumstantial differences aside, there remain several significant parallels.

Even though he’s technically working under the American regime, Strangelove is plainly cast as an extreme caricature of the same trigger-happy, suspiciously double-talking character that so many in 1960s America feared—the same kind of characterization, in fact, that many in the Western media have now branded upon Ahmadinejad.

But is there really a madman lurking far beneath the placid surface of Iran’s President? Has Ahmadinejad finally and inexorably stopped worrying, and learned to love the bomb?

Dr. Ahmadinejad

Everything about Ahmadinejad—the man and the fable—speaks to relative normalcy; relative, obviously, because compared to other leaders of either perceived or real nuclear threats, he comes across as, well…tame.

North Korean President Kim Jong-Il is, by most accounts, certifiably insane. Both his promethean ego and his diminutive embonpoint suggest dictatorial tendencies and inferiority complexes of the Napoleonic variety.

The man known domestically as “Dear Leader” has manicured such an absurd myth about his messianic origins that the official North Korean records describe his momentous birth on Mount Paektu as a near biblical event peppered with "flashes of light and thunder,” upon which “the iceberg in the pond of Mount Paektu emitted a mysterious sound as it broke, and bright double rainbows rose up."

When Kim Jong-Il boasts of his nuclear warhead collection, there’s indeed a measured and understandable ripple effect of concern that radiates throughout the international community. But no one’s really that surprised. After all, Dear Leader simultaneously claims, in all seriousness, to have drilled 11 holes-in-one the first time he ever picked up a golf club.

There don’t seem to be any traces of similarly inflated egomaniacal nucleotides in Ahmadinejad’s DNA. There doesn’t even appear to be much of the showmanship that has become the global calling cards of both Venezuelan president Hugo Chavez and Libya’s Muammar al-Qadaffi. Ahmadinejad’s stage presence, by comparison, is borderline soporific.

While his plaintive eyebrows and densely compact eyes render him low hanging fruit for political cartoonists, Ahmedinejad’s actual behavior, at first glance, seems downright vanilla. This is a man, after all, who ascended to high political office on the wings of plebeianism. His entire campaign was built upon the premise that he was just “one of the guys,” a man with the same blue-collar origins of the working class Iranians to whom he so openly pandered during his 2005 presidential election.

He further strengthened his populist credo and symbolically reinforced his commitment to the conservative working class by famously removing the opulent furniture in the presidential palace and replacing it with more acceptably modest pieces. His wife still packs him lunch every day. Calling his suits “modest” is like calling Rembrandt “talented.” Cut out of a martinet’s cloth, the staunchly conservative Ahmadinejad represented an orthogonal right turn from the socially moderate regimes that preceded him.

On occasion, however, Ahmadinejad has displayed curiously contradictory behavior, and has given us brief, puzzling glimpses into a more complex individual.

The same man who ushered in a new era of social conservatism is also the man who, last summer, so tirelessly stood by his initial choice for First Vice President, Esfandiar Rahim Mashaei. The move upset not only the Supreme Leader, who immediately ordered his resignation, but also irked many in his conservative base who weren’t so keen on a high elected official who’d previously been videotaped enjoying a wholly inappropriate dance performance put on by Turkish women.

Ahmadinejad, the “man of the people,” also happens to be the same man who infamously claimed that a halo-like light hovered over his head during a 2005 speech at the UN. He maintains, furthermore, that every world leader present for the speech did not blink for the entire 27-minute duration. These are hardly words you’d expect from a supposedly austere, religious conservative, or, for that matter, from a man of science with a PhD in engineering—both of which Ahmadinejad claims to be.

Despite these wrinkles, though, he continues, in speech and in public, to hold to his self-perpetuated image of normalcy. More importantly, when compared to many of the same men with whom he’s often mentioned in the same breath, he still comes across as the only relatively coherent member of the group.

For all his quirks, he’s still nowhere near as volatile (or senile?) as Kim Jong-Il. And you definitely won’t see him dressed like the veritable Austin Powers extra that Qadaffi has become.

So why is the international community so incensed over someone so relatively normal? Could it be because of this normalcy? Is the West warier of Ahmadinejad’s more calculated game of double talk and duality than they are of North Korea’s impulsive Dear Leader?

It’s a reasonable explanation; a cagey, mysterious adversary, after all, is always worthy of attention, in any forum. And a cagey, mysterious adversary with nuclear capabilities is worthy of extra attention.

But does it necessarily make him another Strangelove? Do nuclear capabilities have the transformative power to turn an otherwise sibylline world leader into a spastic, charlatan of an antagonist?

The answer, of course, depends on the fiction we construct around Ahmadinejad’s nuclear ambitions, the editing and splicing we use to piece together the story, and the creative license with which we allow ourselves to do so.

However unique each iteration may be, each auteur remains restricted to the same material, the same constituent bits of reality with which to assemble the Ahmadinejad mosaic. And only in examining each individual piece of radioactive mini-narrative can we even hope to remove the veil, and unearth the true Strangelove or Regular Joe buried underneath below.

How He Learned to Stop Worrying…and Love the Bomb?

At some point over the course of his presidency, Ahmadinejad, like the blundering characters in Strangelove, simply stopped worrying. While he hasn’t done anything as drastic as pulling the trigger on a nuclear warhead, his nuclear rhetoric has certainly become more emboldened and, at times, brazenly confrontational.

Ahmadinejad is certainly not responsible for planting the seeds of uranium enrichment in Iran, but during his time as president, they’ve blossomed like never before. After a group of exiles revealed that Iran had resumed uranium enrichment activities that had laid dormant ever since the 1979 Revolution, then-President Mohammed Khatami confirmed in 2003 that the country had been secretly working since 1985 to develop a nuclear fuel cycle, thus setting in motion the international cat and mouse game of inspections and sanctions that’s still in full swing today.

While Iran was embarrassingly forced to import gasoline in 2007 due to insufficient infrastructure to refine its abundant supply of oil, Ahmadinejad pushed full steam ahead with his nuclear program, while disclosing the details of the endeavor on a piecemeal basis to the rest of the world.

After deciding to hold a guided and highly publicized tour of the new Natanz uranium enrichment facility in April of 2008, even in the face of mounting sanctions handed down from the UN Security Council, Ahmadinejad appeared to be more contumacious than ever.

Just last month, at a ceremony celebrating the 31 anniversary of the Islamic Revolution, Ahmadinejad not only proudly declared Iran a “nuclear state,” but had some carefully articulated words for concerned Western powers, as well.

As some demonstrators in attendance shouted chants of “Death to the dictator!”, the President, from atop a flower-adorned platform, asked the West to “please pay attention and understand that the people of Iran are brave enough that if it wants to build a bomb it will clearly announce it and build it and not be afraid of you.” He went on to assert, “When we say we won’t build it that means we won’t.”

Iran has claimed, on numerous occasions, that they’ve cooperated with all of the UN inspections requirements and documentation. Inspectors, on the other hand, say they haven’t had any news from Iran since mid-2008.

According to a recently publicized February 14 report from the IAEA, Iran has now decided to move its entire stockpile of enriched nuclear fuel to an above-ground location—just a few months after claiming that they had no choice but to build an underground nuclear facility near Qum, because of the ever present threat of attack.

The anomalous move struck many as bizarre, and led to speculations that the Islamic Republic might be baiting Israel into striking the facility, as a means of unifying its suddenly divided electorate. Others, meanwhile, have hypothesized that the move was intended as yet another bold confrontation with the West, in an attempt to gain leverage in future diplomatic negotiations.

As he’s done all along, whenever the currency of clarity and forthrightness are at an all-time high, Ahmadinejad continues to sit idly by, and let the speculation foment.

Dr. Strangelove? Or Dr. Strange?

So, is Ahmadinejad today’s Strangelove? Not exactly. Does he aspire, in some way, to step into Sellers’ role of mad nuclear scientist? Not quite.

But is he as enigmatic and curiously placed as Kubrick’s zany creation? Absolutely. Then again, though, so is all of Iran.

In many ways, Ahmadinejad and his life stand as a microcosm of the current state of Iran. His persona, like Iran’s nuclear and foreign policies, is one shrouded in a miasma of mystery.

His statements are often schizophrenic and contradictory, reflective of a state caught in the vortex between the pull of religious conservatism and the ongoing push toward Western ideals of modernity.

Like Strangelove on screen, Ahmedinejad occupies a strange and peculiarly precarious space in the international political fiction we've engineered around Iran. We’re never sure how much sway Strangelove has over the US administration, and we’ll never know the extent of Ahmadinejad’s influence in Iran, either. He’s neither an absolute authority, nor a Wizard of Oz, relegated to rote, behind-the-curtain duties.

And, as with Strangelove, he’s a nearly impossible character to decode. Much as the true extent of Iran’s nuclear progress remains encased in an obscure box of arcanum, so too does the “true” character of Ahmadinejad remain blurred. As with every major politician, it’s become virtually impossible to separate the three-dimensional human from the two-dimensional image.

Even if we tried to derive a “pure” idea of Ahmadinejad’s actual intentions, we would have to disentangle the complex web of power relations that govern the Iranian presidency, the Supreme Leader, and the Supreme National Security Council. Even the most advanced econometric evidence would be hard pressed to isolate a pure “Ahmadinejad factor” in the three-headed consensus-based process that dictates Iran’s foreign policy.

As in any film, though, we, as viewers, must sacrifice some basic level of objectivity. The only clay with which we can mold a character is the raw material before us—what we see on-screen, or read across headlines. While we can certainly deduce much from Ahmadinejad’s actions, circumstantial context remains paramount. The rhetoric may be fiery, and his speeches may be hawkish, but it’s critical to place Ahmadinejad’s recent actions within the recently transformed mise-en-scene against which he’s placed.

Ahmadinejad as Wallflower

Last July, for the first time in decades, Iranian discontent coagulated and manifested itself as palpable action. Now, barely seven months removed from this rupture, Ahmadinejad’s back is pressed squarely against the wall. The Iranian regime last summer perhaps heard the ominous drone of what Roger Cohen described as “the death knell of an ossified post-revolutionary order.”

In response, the Iranian leadership has turned to the haven of uranium enrichment. In ramping up the program, and, more importantly, ramping up his promotion of the program, Ahmadinejad and his brass have made their intentions blatantly clear.

A “nuclear state,” in their eyes, is a world player. By their ratiocination, a state that “goes nuclear” against the wishes of nearly every other government is even more fiercely autonomous. Iran, like a gambler watching his chips dwindle, has now put everything on the table, and has begun chanting an interminable chorus of “Hit me!”—even as the Obamas, Sarkozys and Merkels perched around the blackjack table shake their heads.

Whether or not Iran actually plans on using enriched uranium for militaristic purposes remains unknown—perhaps even to Iran’s own leadership. By Ahmadinejad’s quasi-Buddhist philosophy, the journey seems to outweigh the destination. It seems that, for him, simply attaining, or even attempting to attain nuclear capacities might be enough of a roborant to restore a state that’s recently shown signs of frangibility.

The worry, however, is that simply building capacity won’t be enough, and that only international confrontation, induced either passively or actively, will placate an administration intent upon regaining control over its country.

Defusing the Doctor?

We probably shouldn’t spend too much time constructing doomsday endings for our Iranian film script just yet. If anything, we should take solace in the fact that we’re not dealing with a Strangelove, but simply with a man and a country that, at the moment, are at a uniquely transitory inflection point in their respective evolutionary arcs—a prolonged mid-life crisis, if you will.

Does this mean we should treat the threat of a nuclear Iran as nonchalantly as Kubrick does? No. We should, however, always keep ourselves firmly grounded in the truth serum of context, and realize that Ahmadinejad and Iran, while certainly playing up the role of defiant adolescent to the West’s solicitous parent, are not de facto dangers.

Nor should we expect to see a transparent Ahmadinejad anytime soon. Opaque intentions shielded behind a poker-faced President only raise Iran’s bargaining value at the card table of international diplomacy. Much like Peter Sellers, Iran’s president is perfectly capable of playing numerous archetypes, and of sliding seamlessly between his blue-collar “man of the people” and his authoritarian “man of The Man” roles.

At the end of Strangelove, the wheelchair bound doctor suddenly finds the will to walk, and famously exclaims, “Mein Fuhrer! I can walk!” just as the warheads zero in on Russia.

Don’t expect a similar 180 from the Iranian President.

Ahmadinejad may raise eyebrows. He’s unquestionably controversial, and eternally enigmatic. At the end of the day, though, he’s no Dr. Strangelove. He’s just another strange doctor, caught in a strange period of upheaval. When we eventually debunk the myth of “Ahmadinejad as Madman,” we’ll all be able to stop worrying, and, perhaps, begin reconsidering the “bomb” at the epicenter of our Iranian screenplay.

Amar Toor – Paris-based freelance writer and consultant at the OECD. The views expressed in this article are those of the author, and do not reflect the policy or views of the OECD.

Monday, March 29, 2010

Arab Investing Food in Foreign Land

From Al Majalla

Investing in Foreign Land

A food-security calculus or sound commercial logic

The food crisis of 2007 has raised awareness of the potential consequences that a more potent sequel might have. However, instead of waiting for governments to break promises regarding investment in food supplies, developing countries stand to profit much more from opening to private investment. FDI transfers not only bring money to the receiving country but also technology and knowledge, and productivity improvements often spill over to local production. Investment in food supplies should therefore be handled like other investments by independent companies looking at economic fundamentals and not by state-owned funds and companies driven by a strategic food-security calculus.

Suddenly, the world food markets spilled out of control. Within a year, prices for wheat doubled, those for soybean and sugar even tripled. The drivers behind this surge were stock decreases during the preceding years, a disappointing harvest due to bad weather in several countries and growing demand for feedstuff. Once prices soared, governments of exporting nations curbed the outflow of food, thus exacerbating the crisis. Merely two years later, prices had come down roughly to previous levels—the affliction had ended.

This is not the account of the infamous 2007/2008 price spikes; it is the half-forgotten story of the early 70s. At least for developed countries, this earlier crisis was worse than the recent one. Real food prices—corrected for inflation—climbed higher, and food expenditures absorbed a much greater share of households’ income, so that any increase was felt more harshly. This episode nonetheless takes a backseat in our collective memory because OPEC limited oil production soon after the food prices had started to rise. Higher oil prices proved to be the more lasting and pernicious impediment to global growth.

So there is a historical precedent of a food price surge that did not destabilize the world economy. Instead, it was eventually followed by a quarter of a century of low food prices beginning in 1980. But the 2007/08 episode was not perceived from this bird’s-eye perspective. Even in emerging and industrialized countries, much less affected than the poorer nations, the crisis has changed the thinking of the powerful. The fear was born that the next food crisis may be waiting for us, one that will dwarf anything the world has seen before. The world might cast off its multilateral, liberal veil in the merciless scramble for food.

Under this lens, the purchase or long-term lease of fertile farmland abroad appears to be a hard-nosed move of Realpolitik without humanitarian disguise. Non-governmental organizations attack the neo-colonial land grab of Arab and Chinese investors that uproots local communities and undermines the self-sufficiency of poor nations. It’s smart but contemptible, so the common judgment goes—which may be wrong on both counts.

The receiving countries may actually win. Investment in developing countries’ agriculture is direly needed: the Food and Agriculture Organization (FAO) estimates that an annual US $ 30 billion of additional funds will be required over the next 10 years. This is hardly a sum governments will muster. Often the significant pledges made by donor countries during the crisis are just that, pledges. Making a promise is not the same thing as signing a check. Private investment is necessary to fill the gap.

Foreign direct investment (FDI) has long been considered as the most desirable form of capital inflow. It transfers not only money but also technology and knowledge to the receiving country, and productivity improvements often spill over to local production. Furthermore, FDI involves heavy transaction costs for the investor—in this case, selecting suitable land, negotiating agreements, setting up production and organizing transportation. Direct investment is therefore much more stable than the billions of speculative money that may trigger a bonanza today and dry up tomorrow. The very idea of farm land contracts for food security is long-term reliability.

What about the food security gains of the investing country? What happened if world food prices skyrocketed? Pressures in many producing countries would be tremendous to scale back or stop exports. Certainly, investments are generally protected by investment treaties that guarantee the right to export and prohibit expropriation without compensation (which would be difficult for developing countries to pay, especially with high food prices that increase the value of the investment). Cynics say treaties are made to be broken, and they are likely to be right when it comes to food security. If it is either do or die, one government will inevitably cede to popular demands, others will find it convenient to follow suit and the entire system will unravel.

Arab and Asian governments that pour billions of dollars into farmland FDI—whether through Sovereign Wealth Funds of state-owned enterprises—must be aware of the fragility of these contracts. The market outlook may nevertheless justify these investments on commercial grounds. The world population will continue to rise during the next decades and income growth per capita in developing countries will further add to the demand for food. Also, non-food uses of agricultural produce are expected to expand, especially for bio-energy.

The supply equation is more complicated. Since the end of the Second World War, world food supply has grown even more rapidly than the population—which underwent a growth spurt unseen in human history. Increasing investments into agricultural research and development suggest further productivity increases down the road.

More important than new high-tech solutions are the gains to be had from ending the disastrous inefficiency rampant in many developing countries. The first challenge here is to improve the input, credit, land, and output markets on which farmers rely. It is plain to see that a farmer who lacks clearly established and enforced property rights will undertake only minimal effort to maintain or improve soil fertility and irrigation systems. The other challenge is to enhance farmers’ knowledge of production techniques. Quite tellingly, the application of organic farming often raises farm output in developing countries even in the short run, though this technique is by no means geared at quickly maximizing yields. Still, it performs better than the outdated piecemeal approaches currently found in many places of Africa, Asia and Latin America. Taken together, inefficient markets and lacking knowledge go a long way to explain why Africa produces only 7% of world cereal supplies on 22% of the world’s agricultural area. A tremendous potential thus lies untapped.

Food production will also benefit from further trade liberalization as agriculture is the most protected sector of the world economy. While the Doha negotiations of the World Trade Organization are deadlocked and its ambition is watered down, more and more countries unilaterally lower tariffs and remove their heavily distorting subsidies. This facilitates greater specialization of production: less sugar from the EU and more from Brazil.

Climate change is the wildcard in this market forecast. The threats include heat stress and droughts, soil erosion and salinization, the spread of pests and diseases and more frequent extreme weather events. This will be partly offset by greater productivity of agriculture in colder climate zones and higher CO2 concentration in the air, spurring plant growth.

Most likely, we will see a reversal of the decade-long trend of lower food prices but no dramatic shortages in world food supplies. Buying farmland and ramping up production may simply be a good investment given this market outlook. In this case, it should be handled like any investment: by independent companies looking at economic fundamentals and not by state-owned funds and companies driven by a strategic food-security calculus.

Valentin Zahrnt - Research Associate at the European Centre for International Political Economy (ECIPE)

Sunday, March 28, 2010

Prince Alwaleed retains top spot in ARAB Power 100

Prince Alwaleed retains top spot in Power 100

1. Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud

2. Dahi Khalfan Tamim


3. Dalia Mogahed


4. Mohammed Alabbar


5. Dr. Samia Al Amoudi


6. Ahmad Al Shugairi


7. Hassan Shehata


8. Adel Ali


9. Fadi Ghandour


10. Abdo Khal


Power 100 list of 2010