Author: World Finance

Jordan’s success amid turmoil

Posted on by World Finance

Jordan’s banking sector has been able to transcend the geopolitical chaos that has hampered many neighbouring nations. Jordan Islamic Bank’s Musa Shihadeh explains how.

Jordan’s banking sector has been able to transcend the geopolitical chaos that has hampered many neighbouring nations. Here to tell us how, Musa Shihadeh. 

World Finance: We just talked about some of the tensions in your region. Tell me, how have you been able to continue to build on your country’s momentum despite all of this?

Musa Shihadeh: Jordan is secured and attractive for investors. The laws in the country are attractive for people coming to invest in the country. Regulations of the central bank enhance banks to make investments, and this gives the banking sector the success they have in this turmoil around our country.

World Finance: Of course you’ve been at the core of Jordan’s Islamic banking sector. Can you tell me what has been the key to your growth?

Musa Shihadeh: Jordan Islamic Bank is a pioneer in banking, established 35 years ago. We stick with Sharia rules and applications. We try always to have the technology and services to satisfy our customers in order to keep them and get other customers to come to the bank, and keep their loyalty for this business in order to continue successfully.

World Finance: As part of these long term plans you have of course incorporated corporate social responsibility. Tell me how.

Musa Shihadeh: Jordan Islamic Bank, as an Islamic Bank, should go to social responsibility so it is part of our mission in order to comply and apply these transactions for the bank. We have always put plans for social responsibility. We made a plan for five years in order to keep up with investing with SMEs for helping the people in education and financing them and medical systems.

We put a plan to have a solar energy system in order to save energy and keep things well, and always we apply these things in order to help the country and make sure that we are doing our business, applying to the social responsibility that banks should be part of a community.

World Finance: So as you continue with your high growth optimism, tell me how are you looking to expand your market share?

Musa Shihadeh: In our policy as a bank we make plans in order to keep our customers. They are our centre – in services and satisfaction of them – and we try always to get new customers in order to further our business.

World Finance: So who’s at the core of these growth plans, is it domestic clients or international?

Musa Shihadeh: Our domestic customers we rely on more, because we are a local bank, although we welcome international customers. Always we have a slogan that the customer is our partner in our business, and we welcome them.

World Finance: Musa, tell me, what’s next for your bank?

Musa Shihadeh: We plan to diversify and give more services for our customers to satisfy them. We hope to issue a tradable sukuk this year, because the government has issued a private loan for this. We hope that we will continue attracting our customers and satisfying their needs with more branches and ATMs, and improving our services.

World Finance: Musa, thank you so much for joining me today.

Musa Shihadeh: Thank you.

Growth of the Omani bond market

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The National Bank of Oman has become the second bank in the Sultanate to begin issuing bonds. Ahmed Al Musalmi and Wasfi Al Sayyid explain the ambitious infrastructure projects underway in Oman, and the excitement of the international investment community to sign up.

The National Bank of Oman has joined an illustrious club in the Sultanate, and across the Middle East and North Africa region. Here to tell us more – Ahmed Al Musalmi and Wasfi Al Sayyid.

World Finance: Now your bank is issuing bonds, only the second to do so in your country, why was it important to take part?

Ahmed Al Musalmi: First of all to diversify the funding profile of the bank, the funding base, traditionally what we’ve doing is through the inter-bank borrowings and the customer deposits. But is very important that we diversify with the funding base that’s a lot more sustainable and also helps a lot in mitigating the risks that are associated with concentration, whether it’s on deposits or whether it’s on the other side of the balance sheet.

So for us it has been a great success and this bond. Under the price we have actually closed the deal – it just shows us how much it is going to help us in reducing the overall cost of funds.

World Finance: Now having more access to bond markets of course increases your liquidity position. Can you tell me how this decision alone is going to help your bank in terms of building up investment capital?

Wasfi Al Sayyid: It’s a large issue – it’s very prominent. We’ve just closed a deal on the bond $500m, which is quite a large amount. We’ve had a lot of interest from all those countries that we talked about – particularly pleasing from European countries, in particularly from London. So we’ve managed to touch on a wide range of investors – some of the largest and most prominent investors in the world, and that will have a knock on effect.

Up to now Oman has been one of the best kept secrets I think in the Middle East and certainly in the Gulf, so this has given an opportunity for these investors to get to know Oman. And these people will be producing research reports – they will create a lot of buzz and a lot of noise around it, and be beneficial in the long term, in terms of our investment flows into the country.

And in terms of our tourism potential – tourism is one of the main diversifiers for the country and this is the vision 2020, where we expect tourism to form a good part of the GDP, and diversify away from oil and gas, and this is another way that we can help to achieve that for the country I think.

Ahmed Al Musalmi: And also I think from the banking sector perspective, when it comes to contributing to the overall economic diversification, which actually is under the government vision 2020, they key focus is to reduce dependence on oil and gas. What we have actually seen is that there is a tremendous amount of interest from all the markets that we have visited – Singapore, Hong Kong and London – a tremendous amount of interest from investors to actually invest in Oman, and Oman has been a very good story.

We have showcased this story of Oman. The government is investing a lot into infrastructure development in the country. There are mega projects that have been announced and these projects obviously need a lot of financing. And this will give a chance to the banks, once they get access to the global funding base, will give the chance to the local banks to participate in a lot more substantial ways going forward.

World Finance: Ahmed, can you tell me what sort of infrastructure projects are foreign investors looking to get involved with in Oman?

Ahmed Al Musalmi: We have quite a number of those. Under every sector of the economy, starting for example with the ports, we have got the new port in the central part of the country called ‘Duqm’. It is a mega project in infrastructure development; again it’s part of the overall vision of the government to diversify the economy.

And there is tourism, again a lot of interest we have seen in terms of hotels for example. We see quite a lot of interest from different investors who are interesting in investing in the tourism industry – it is very very attractive.

World Finance: Though there are many opportunities for investment, some people might be turned away frankly, because of the region you’re based in. How does that affect peoples’ confidence? 

Wasfi Al Sayyid: If you’d asked that question 15 to 20 years ago then yes, there would have been an impact. I mean people didn’t know much about the region at all; a lot of what was coming out was quite scary. Today people are a lot more sophisticated. So we don’t get our news from just one source – we have access to the Internet, blogs; there is a lot of dialogue. So the truth tends to come out a lot more quickly than before.

And I think that, you know, people are able today to differentiate between the Gulf region, which is really relatively peaceful, and some if the wider MENA region where most of the geo-political issues are occurring. So I think when it comes to the GCC we are not really impacted when it comes to investment, people are looking to invest in all of the GCC countries. Oman is particularly attractive – it is a very stable economy. It’s a beautiful destination – sun, sea, sand, 1,800km of coastline. People want to participate in that story and the more they know about it – the more they’ll want to do that.

And I think that’s the same with all of our neighbours. At the same time, you know Oman is very strategically located. It’s located in the centre of Persia and Africa and you know god willing, when peace starts to become a reality in the wider region, Oman will be well placed to form the centre peace of a hub, a logistics hub, a commercial hub that stretches all the way from Persia into Africa, and I think that’s very exciting for all of us.

Why is the US so threatened by the rise of the AIIB?

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Christian Whiton tells World Finance the recent US diplomatic uproar over the UK’s endorsement of the Bank makes Americans look weak.

World Finance: The China-led Asian Infrastructure Investment Bank has received the ultimate seal of approval from international monetary fund chief Christine Lagarde, saying her organisation would be delighted to co-operate in the AIIB’s activities. 

The UK, Germany and France are on board; but there is one vocal opponent: and that’s the Americans. Christian Whiton, former Bush State Department senior advisor joins me with his thoughts.

So tell me, why are American so threatened by this bank?

Christian Whiton: The US government has been of two minds on China, really for a long time. Since the end of the Cold War, certainly since Tiananmen Square; where there is a component that is very concerned about China, the rise of China. China’s military.

And sort of, the Wall Street side, the business side, would very much like to engage China. And you’re seeing this in the Obama administration, which has good relations with Beijing, but also talks about pivoting military force. And this is the case where they have decided to draw a line. The Obama administration is a big fan of the international order as they see it.

World Finance: That world order, very much western-backed: is that the real issue here? That perhaps we are seeing the cementing of eastern influence in the world.

Christian Whiton: I think we have to wait and see what really materialises with the AIIB, because so far, you have had a great deal of European interest; and interest in spite of US concern. But the question is where… what’s really there so far?

You have been able to sign up as European government have, without actually pledging money! To my knowledge, at least. Without anything really specific, without any funding that’s actually appropriated and ready to go .

So far the Chinese have put up money but it’s just sort of a question of what this will actually lead to. And if it really does compete with the World Bank and IMF. And if anyone really cares if it does. 

World Finance: I take the argument that there is still a lot to be determined. But let’s look at Asian infrastructure investments as a whole question, right? So let’s talk about the prospect of having these investments done by the World Bank. The World Bank has not always been at the forefront of these developments, so who else is going to fund them? The Chinese.

Christian Whiton: That’s right. The question is of course whether this really will enable them to do much. The Chinese have tended not to be magnanimous in economic development. The extent that they involve themselves, and they actually give money or guarantee loans or other sorts of economic assistance is often for a political quid pro quo.  They will happily build the soccer stadium in Africa for a country that is willing to switch diplomatic relations from Taiwan to China.

Infrastructure in Asia? Of course, looking 25 or 50 years down the road, it’s tremendous growth. But there are real red flags in China in particular. And questions! Is this really going to drive, for example, infrastructure in Indonesia and the Philippines? Or is this, at the end of the day, just for China’s benefit?

World Finance: But we can read into China’s ambitions all we want, but we have to accept the reality that we are in and that’s that China – very much – has the money to drive this growth. So why shouldn’t China be at the helm, why shouldn’t Europe take advantage and support some of these infrastructure projects?

Christian Whiton: My view, is that absolutely: if it’s really there, then why not? I mean after all the World Bank, the IMF, those are taxpayer dollars on the line either for development or for bail-outs, and you know, monetary reserves.

So if China wants to compete with that and actually put up the money? It certainly does have resources, but it has a lot of problems – economic and political – on its hands. So, I am fine with that as taxpayer and as someone who’s been skeptical of that sort of post-Bretton leftovers that haven’t performed terribly well.

World Finance: OK, well, of course you have been in advisory roles at the senior level. If you could advise the incumbent government, or the next one coming into power in the US, would you advise them to also jump on the bandwagon?

Christian Whiton: I would say we should just be blasé. Basically see were it goes, see if it’s really about more than just a prestige project for China, see if it is actually helping other governments in the region; or if it’s coercing other governments in the region.

The US has been a very strong power in Asia. And virtually every government in Asia welcomes that except for China and Russia. So, you know, we want that to continue but I don’t see this as an imminent threat. So I say just let it ride: don’t really raise objections because that just makes you look weak.

World Finance: Political nexus-wise, are you concerned about what we’re going to be seeing rise? Or already seeing rise, as a result of the Europeans backing this bank.

Christian Whiton: I think what you see is that if Washington doesn’t have its act together and doesn’t clearly explain why something Beijing wants or does is wrong; then we shouldn’t expect European governments to be any firmer against China or take a position that’s hostile to China. 

If however we can make the argument – for example there was a discussion some years back about lifting the European arms embargo on sales to China, that has been in place since the Tiananmen Square massacre – then, you know… Frankly we have had great success in bringing Europe along on those things.  So I think it comes back to how strong of an argument you can make.

World Finance: You are going to have an audience here that could potentially want to take advantage of some of these infrastructure projects moving forward through this bank. What stops do you think should be put in place to make sure that the interests of all parties involved are protected?

Christian Whiton: I think the key part is a strong role for the private sector and private capital. And I suspect that Europe would want that as well, not just contributing actual government funds to be spent at the direction of another government, but if you are building a new express way in Indonesia, or in China, or a new dam, or a new airport. The involvement of private capital, I think, is the best insurance that these are just monuments that politicians build for themselves.

Is positive discrimination the way ahead for women?

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The chair of a female executive’s organization speaks to World Finance about how positive discrimination allows women to move beyond the bottom rungs of a company ladder to make it to the C-Suite level.

Germany has joined a growing number of eurozone countries that are legally requiring corporations to meet female board member quotas. Now, is positive discrimination the way ahead? Rowena Ironside, Chair of Women on Boards UK, joins me with her thoughts. 

World Finance: Rowena, right off the bat, do you think we’re heading in a positive direction?

Rowena Ironside: I certainly think that if you look at what’s happening in the top companies in the UK, FTSE 100, we’ve had real progress in the boardroom in the last four years. We had the Lord Davies report in 2011, and there’s been a lot of media interest, and a lot of pressure from the government to try and meet those targets, those 25 percent by 2015. So we’ve double the number of women in the FTSE 100 boards in those four years, so real progress here yes.

World Finance: So you seem to be an advocate of the idea of upping the numerical order, so you want to see that quota increase. But what sort of qualitative difference do you think that achieves at the board level?

Rowena Ironside: So I think leadership of organisations of society needs to be representative if you like of society. There’s no excuse nowadays with women graduating at the same rate as men, if not better, from universities. We ought to be seeing more women at the top than we are. That’s why we are getting now, involved in putting some pressure on organisations to have a look at what they are doing with their talent and work out why there are still so few women at the top.

I think there can’t be any doubt now that there are plenty of qualified women, and there is no doubt in my mind that organisations, politics, society, need to be run by people who are well qualified. It is about why aren’t some of those people who clearly are ready and eager to take on the roles making it through?

World Finance: Sometimes when I see marketing around increasing the participation of women, the focus is on the unique traits that women have, perhaps in being able to juggle multiple tasks, that sort of thing. Do you think in some ways focussing on these spurious debates in any way insults the gender as a whole?

Rowena Ironside: I think it comes down to the fact that men and women are different, and they do bring different qualities, different perspectives and different priorities to the boardroom, they will hear different things sometimes, and it is that mix of the two I think that really strengthens organisations and society.

World Finance: Rowena you have decades of executive level experience. Do you see a fundamental difference in the way women are perceived at the top tier?

Rowena Ironside: I think women who’ve made it to the top normally are taken at face value. I’ve worked in a lot of tech organisations which actually had female executives, and personally I didn’t notice when I was the only woman. There was enough going on and enough other women around.

I don’t think once you’ve got through to the top level, you have a problem. It is getting through some of those final hurdles that seems to be where women are getting stuck, and institutional injustice if you like, mostly unmeant and unseen, is actually making it more difficult for them than it is for men.

World Finance: What else would you like to see happen in terms of leadership and getting women to that top tier level in the boardroom?

Rowena Ironside: I think probably the single most important element is disclosing data. One of the problems at the moment is people assume. So boards assume the reason that women aren’t moving up is because they make other choices, and if you get a firm to actually look at its workforce gender composition, and how that shifts from entry level through to senior management, that data will start to pinpoint where things are going wrong.

It may be a person problem, it may be a process problem, but without that data people will carry on assuming and so encouragement, whether it’s about equal pay or whether it’s about gender workforce composition, encouragement for firms to actually at least know it themselves and possibly make it public so other people can hold their feet to the fire where there are problems, I think is the most important thing.

World Finance: OK, well let’s see how those changes come into play in the near future. Rowena Ironside, thank you so much for joining me today.

Rowena Ironside: Thank you.