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Comment on "China's foreign aid at a transitional stage"
No full textUnderstandably, Naohiro Kitano's work experience at the Japan International Cooperation Agency (JICA) has given him a comparative advantage in writing a paper on China's foreign aid. China's foray into international economic cooperation as a donor is admirably documented in his paper (Kitano, 2014). The paper provides valuable insights into the network of Chinese aid programs. It is amazing that China, a major recipient of external aid in the past (largely from Soviet sources), could emerge as a major donor in its own right with visible signs, but it is unclear if that experience has influenced its own aid programs. It is amazing that China, a major recipient of external aid in the past (largely from Soviet sources), could emerge as a major donor in its own right with visible signs, but it is unclear if that experience has influenced its own aid programs. Amazing as it indeed is, it is unsurprising, as the Chinese economy has grown so big that it could replace Japan as the second largest economy in the world, saddled with the largest external reserves in the world
House prices and bank credits in Malaysia: an aggregate and disaggregate analysis
No full textThe paper investigates the long run behavior of house prices and their dynamic interactions with bank credits, real output and interest rate for the case of Malaysia. Apart from the aggregate house prices, the analysis also covers various house price sub-indices, namely, the terraced house price index, the semi-detached house price index, the detached house price index and the high-rise price index. From the aggregate perspective, we note the presence of a long run relation among the variables. Moreover, the findings suggest the long run causality that runs from the included variables to both the aggregate house prices and bank credits. Dynamic interactions between house prices and bank credits are further reflected by the generated impulse-response functions. The disaggregate analysis indicates that only the terraced house price index forms a long run relation with bank credits, real output and interest rate with their dynamic interactions to mimic well the aggregate systems. Still, a further analysis reveals that shocks to the terraced house price tend to diffuse to other segments of housing markets. Among the housing types, the detached house price is relatively segmented and affected only indirectly through the diffusion/ripple effect. These findings bear important implications for macroeconomic stability, monetary policy and investment decisions
The recent turmoil and monetary policy in a dual financial system with Islamic perspective
No full textThe financial turmoil that the 2007 subprime debacle of the US set into motion has raised a welter of puzzling questions for the policy makers across the world. The position seems all the more confusing in the Muslim world where the fast expanding Islamic finance operates in competition with the conventional in a dual setting. The turmoil has led many to blaming the private lure for the colossal failure of financial institutions. In contrast, others counter argue to put public policy in the dock under the exalted banner of ‘regime uncertainty’. They blames the aggravation of the trouble on the uncalled for government intervention in financial markets. Interestingly, few draw attention to moral crimes committed on either side of the fence among the causative factors. This paper seeks to investigate if the monetary policies the Central Banks follow - now including the Basel capital adequacy norms as well - would suit or suffice Islamic banking institutions competing with the conventional in a dual financial framework? In this context, it questions the claim that risk-sharing is or can alone be the basis for Islamic finance
Long term causes of decline of the Ottoman/Islamic economies
No full textIn this article I will attempt to explain long term causes of decline of the Islamic world with specific reference to the Ottoman empire. The emphasis on the Ottoman empire is due to the enormous territories this empire controlled until the twentieth century as well as the survival of the rich Turkish archives. These archives contain some 400 million documents and are unique in the Islamic world. During the period 1453 to 1606, from the conquest of Constantinople to the treaty of Sitva-Torek (Zitvatorok), the Ottoman Empire emerged as a world power. As a world power it was capable of directly challenging Spain in the Western Mediterranean and supporting its enemies, the newly emerging Protestant nations of England, the Netherlands and Catholic France as well as projecting its power in the Indian Ocean all the way to Sumatra, to aid the Muslims of the region against the Portuguese
Islamic interbank money market products: the Malaysian experience of developing new financing instruments
No full textIn managing liquidity, conventional banks resort to investing in treasury bills, overdrafts, placements with the central bank or with other conventional banks in order to gain interest, even if the placement is only overnight. However, it is not possible for Islamic banks to use the same instruments because of the numerous Shari'ah violations in them. Furthermore, Islamic banks have alternative financial products that are derived from Islamic jurisprudence. They can use various contracts such as qard hasan (benevolent loan), mudarabah (profit sharing between a capital provider and an entrepreneur who contributes only his labor and expertise), murabahah (mark-up sale), or other Shari'ah-compliant contracts. In their capacity as financial intermediaries, Islamic banks need instruments that will allow them to utilize their surplus liquidity in a temporary form and for short periods or to receive help from other financial institutions using their available liquidity to cover their own short-term liquidity needs. Thus, they are in need of contracts that will help them to manage liquidity in surplus as well as deficit situations
Whither Islamic banking?
No full textIslamic banking is visibly on the rise across the globe, supported by a growing clientele, both Muslim and non-Muslim, although it has yet to demonstrate that it is a viable alternative to conventional banking. Islamic banking is still under the shadow of conventional banking, not only with products that are strikingly similar to those offered by conventional banks, but also with conventional banks having a strong presence as stakeholders in the Islamic banking industry. Islamic banking is still in the early phase of a presumably long evolutionary process, apparently stuck in the initial phase of product differentiation. Islamic banks are competing with conventional banks rather than among themselves, which does not augur well for innovations and creativity, as it tends to keep them preoccupied with modifications of conventional products with Shari'ah compliance. Islamic banks have arrived at a new crossroads. They could either continue on the same path of what may be termed as ‘head-on competition’ with conventional banks or change their direction in favour of a ‘niche market’ strategy
Figure massaging practices in Malaysian firms: are they fraudulent?
No full textThis empirical paper was aimed at exploring and analyzing the earnings management practices which is often refers to as “Figure Massaging”. The aim of this study is to gather further evidences as to whether these practices constituted an act of misconduct or fraud while taking into consideration the modern business environment's challenges. The analysis provided us with an appropriate evidence that on average, the listed alleged fraud firms in Malaysia had aggressively managed their reported earnings prior to the alleged fraud year and continue to smoothen their earnings subsequent to alleged fraud year through both accruals and real earnings management
Islamic banking and financial crisis: reputation, stability and risks
No full textThis title examines the resilience of Islamic banking during the global financial crisis and the subsequent recession. Do Islamic financial institutions perform better during periods of financial stress? How do Islamic financial institutions manage risk, given their unique characteristics and the need for Shari'ah compliance? This volume looks at the challenges for Islamic financial institutions in an international post-Basel II system where banks are required to have more capital and liquidity. It also examines the influence of governance on client and investor perceptions and their implications for institutional stability and sustainability
Risk sharing, public policy and the contribution of Islamic finance
No full textA major reason for the recurrent episodes of financial instability is the predominance of interest-based debt and leveraging. Financial stability is achievable through risk sharing finance instead of risk shifting that characterizes contemporary finance. A risk sharing system serves the true function of finance as facilitator of real sector activities and avoids the emergence of a “paper economy” where there is gradual decoupling of finance from the real sector. Islamic finance was initially proposed as a profit-loss sharing system, but its core principle is risk sharing. In prohibiting interest-based debt instruments, Islam grounds finance on a strong risk sharing footing. Although still a young industry that has come a long way, it has not managed to develop truly risk-sharing instruments that would allow individuals, households, and firms as well as whole economies to mitigate systematic and un-systematic risks. It is suggested that governments should intervene and issue macro-market instruments to provide their treasuries with a significant source of non-interest rate based financing while promoting risk sharing. Moreover, given that evidence across the world suggests that monetary policy’s transmission mechanism may be impaired, it is suggested that these government issued securities could also impart added potency to monetary policy
An overview of the Malaysian economy: past, present and future
No full textMalaysia has a long history of internationally valued exports, being known from the early centuries A.D. as a source of gold, tin and exotics such as birds’ feathers, edible birds’ nests, aromatic woods, tree resins etc. The commercial importance of the area was enhanced by its strategic position athwart the seaborne trade routes from the Indian Ocean to East Asia