35th 1430H - Islamic Development Bank

Message from the President, IDB GroupRecovery from one of the most severe economicand financial crisis has started. Broadlyspeaking, the year under review may beconsidered as a year of “resilience in the faceof economic turbulence” for member countries,Islamic financial services industry and IslamicDevelopment Bank (IDB) Group.Firstly, for member countries, there is no doubtthat 1430H (2009) was a very difficult year.Their economic growth sharply deceleratedto 1.2 percent which was almost one quarterof their previous year’s growth. Clearly, theysuffered from the sharp contraction in worldtrade in nearly three decades. In particular,unemployment reached unprecedented levelsin many countries and progress achieved inreducing poverty and other social developmentalgains are seriously threatened.Fortunately, member countries have taken stepsto maintain their macroeconomic stability whichcontributed in mitigating the second-roundeffects of the crisis. As a result, better economicprospects for 1431H (2010) are envisaged with aprojected growth rate of 4.2 percent for membercountries as a group.Secondly, the Islamic financial services industrycontinues to grow and show resilience. Thefinancial crisis has brought very clearly thefundamental strengths of this alternativefinancial and banking system. As expected,during the year under review, IDB Grouphas been approached by many countries andinternational institutions to provide assistancein the development of the industry. It has alsocontinued to support this development throughvarious means including remaining active inSukuk market and initiating with other strategicpartners the idea of establishing a Mega IslamicInvestment Bank.Finally, in 1430H, two important events tookplace in the history of IDB Group. The Boardof Governors in their last Annual Meeting inAshgabat, Turkmenistan, in June 2009, stronglysupported the scaling-up of Bank’s operations.The Bank responded by committing to doublingof its Ordinary Capital Resources (OCR)operations over a three-year period from 1430Hto 1432H to help member countries in theireconomic recovery. Within the context of Vision1440H, the Bank speeded-up implementation ofa major reform process. With a focus on ensuringdevelopment effectiveness, the Bank is furtherdeepening partnership with member countriesand widening institutional cooperation acrossthe world. These developments have helped theBank to increase its relevance to the needs ofmember countries which is manifested by thefact that Group financing increased by almost29 percent compared to its level in previousyear. In particular, the Bank nearly doubledits infrastructure financing to help its membercountries prepare themselves for economicrecovery in the post-crisis world.In sum, member countries in the post-crisis worldneed to carefully address how foreign directinvestment and trade flows have been alteredand its impact on their development strategy.While the process of global economic recoveryis underway, the decline in global demand islikely to persist in the medium-term. In orderto offset subdued global demand, membercountries need to vigorously pursue effectiveregionalism, both at Organization of IslamicConference (OIC) and sub-regional levels. Inaddition, member countries need to reexaminethe agenda for reform of their financial sectorwith a view to achieve a better alignment withthe financing needs of the real sector. This is alsothe fundamental insight of Islamic finance.Ahmad Mohamed AliPresidentIslamic Development Bank andChairman, Board of Executive DirectorsIDB ANNUAL REPORT 1430Hvii