How the Internet has snowballed in the Arab world

The internet in the Arab world has a snowball effect; now that the snowball is rolling, it can no longer be stopped. Getting bigger and stronger, it is bound to crush down all obstacles.
In addition, to the stress caused by the Arab bloggers, a new forum was opened for Aran activists; Facebook. Arab activists have been using Facebook in the utmost creative way to support the democracy movement in the region, a region that has one of the highest rates of repression in the world. Unlike other regions where oppressive countries (like China, Iran and Burma) represent the exception, oppression can be found everywhere in the Arab world.
The number of Arab internet users interested in political affairs does not exceed a few thousands, mainly represented by internet activists and bloggers, out of 58 million internet users in the Arab world. As few as they are, they have succeeded in shedding some light on the corruption and repression of the Arab governments and dictatorships.”

This is from the Arabic Network for Human Rights Information – released today. Read the whole report here: (Arabic and English)


A guide to terms for Arab reporters covering the Global economic crisis

Understanding the vocabulary of the global economic crisis

Here are some of the important words and concepts

Bank panic – When investors fear that their bank does not have enough money to pay them, they go to the bank and take their money out. When a large number of investors try to withdraw their money, this may cause the bank to collapse or to close permanently. In the current crisis there have been several times when worried investors rushed to their banks, and a number of banks have gone out business across the world.

In Iceland the collapse of the banking system led to loans by the International Monetary Fund, Denmark, Finland and Norway. The collapse of the banking system in the small country was a surprise for many.

But there were several factors in the collapse.

Credit was easily available. The economy had taken off and construction had helped the economy prosper. But most importantly, changes in regulations had allowed the banks to expand, to operate under new systems and to do business beyond Iceland.  As a result of the deregulation, the banks expanded to the U.K., the United States, Europe and elsewhere.

One lesson from the collapse in Iceland was that countries need to be able to supervise foreign firms that do business in their country.

Bear market – This is when stock markets are in trouble. The markets are declining and investors are worried about the future. Pessimism is common. A bear is an investor who sells stocks with the hope that they can be bought back at a less expensive price.

Bull market – The opposite. Here, the market is growing and investors are earning money. Confidence encourages investors and the stock market is flourishing. A bull takes advantage of the market’s boom and buys stocks, hoping that their value will go up.

Bonds – Large companies issue bonds. So do governments and institutions. The bonds pay interest. To measure the safety of investing in the bonds, they are rated by companies. But this crisis showed a problem with the system.

Continue reading A guide to terms for Arab reporters covering the Global economic crisis

Nakhana – an Iranian blog ناخــــــانا

When everyone and everything else is shut down from talking, when there is no way to tell others what’s happening, the Internet is a difficult door to close. Here, from the blog Nahkana, is a testament to the ability of bloggers to do the work of reporters.

And here is a youtube video, one of many:

Islamic Financing – some suggestions for reporters

Islamic Financing and the global economic crisis

Islamic financing is a unique development not only for Muslims but for global economics. It is a way of finance that marries Islamic faith with economics. The idea of linking finance to a moral, ethical or religious belief is not new. This is true for Islamic financing.

But the growth of Islamic financing as a part of global finance is a recent development. The first major Islamic financial organizations did not begin until the1960s’ and 1970s’.

And as they have developed, Islamic financial organizations have created new ways to adopt Islamic beliefs to modern day economic dealings.

The guiding rules for Islamic financing come from the core principles in Islam.

The role of Shariah in Islamic financing

Shariah or Islamic law prohibits interest. It bans uncertainty in contracts unless everyone involved in the business dealing clearly understand the conditions. It does not allow involvement in businesses that are prohibited by the religion. These would include businesses that deal in alcohol, pornography, gambling or pork-related products.

A mortgage or real estate dealing offers a good example of how Islamic financing differs. In most real estate agreements, the lender pays interest to the seller or the bank. But in Islamic financing, the banks own the property and the buyer pays rents until the cost of the property is covered.

Recent expansion

In the last few decades Islamic financing has grown markedly. It is estimated that this form of financing has increased by an average of 10 to 15 percent annually from the end of the 1990s’.

How large is Islamic financing?

Most estimates say that it represents between $700 and $800 billion in assets across the globe.

There are an estimated 300 Shariah-compliant organizations in 75 nations. A Shariah-compliant organization is one that uses the laws of Islams as its guiding principles.

The largest Islamic banks are located in Saudi Arabia, Kuwait, Dubai, Qatar, and Bahrain. The major organizations that issue Islamic bonds are located in the United Arab Emirates, Saudi Arabia and Kuwait.

But experts point out that the spread of Islamic financing is still quite limited. It is estimated that Islamic financing accounts for only 1 percent of the world’s financial assets.

Islamic financing exists mostly in the Gulf, Iran, and Southeast Asia.  Islamic financing has especially grown in Malaysia where, according to new reports, it accounts for 12 percent of the banking assets in the country.

There are also organizations based on Islamic financing in Europe, and United States.

Most of the money involved in Islamic financing is tied up in banking. A smaller share is committed to Islamic bonds, equity funds, and mutual funds.

How have Islamic financial organizations survived in the economic crisis?

To supporters of Islamic financing, the global economy crisis is proof that these organizations are an alternative to conventional financing. Why?

This is because they are barred from dealing in the kind of debt contracts that have led to the collapse of the world economy. It is also said that Islamic financial organizations are a safe haven for those frightened by the uncertainty of the conventional financial system.

But Islamic organizations are not immune from the collapse that began in depth in 2008. A study by Gulf One Investment Bank in 2008 said that Islamic financing has largely outperformed the traditional financial system in the last few years.

But it suffered a greater decline at the end of 2008 than conventional markets, the report said.

One of the problems of Islamic financing is that it heavily invests in real estate. This is a problem because it overly exposes the system and organizations to the weaknesses of the real estate market. Another concern is that the system is also heavily reliant on loans to consumers.

As a result of its reliance on real estate investments, Islamic financial organizations suffered marked loses as the economies of the Middle East began to weaken in 2008 and real estate values as well as construction suffered declines, according to news reports

Problems and Questions

Here are some of the criticisms and challenges facing Islamic financing:

Some of the newly created financial devices are too similar to those provided by conventional financing. This raises the question whether they are truly Islamic in nature.

Religious scholars have challenged some of the new financial instruments, forcing them to delay their work or to close down. Aand that has caused uncertainty for businesses and governments dependent on dealing with Islamic financial organizations.

There is a lack of Islamic scholars and experts versed in Islamic finance who can oversee a system that is growing very rapidly. This puts a strain on businesses trying to expand within the framework of Islamic financing.

Governments in some Muslim countries have not provided enough legal and financial support to make the system available to their citizens.

Scholars fear that Islamic financing can lose the it’s religious spirit and meaning by following the path of conventional financing.

Suggestions for reporters;

Can you identify the major Islamic financial organizations in your country?

What has been the impact of Islamic financing on your nation’s economy and ways of doing business? What have been the benefits? What have been the problems? How are these organizations regulated? Do they have the small level of openness of transparency to investors and regulators as in traditional financing?

Who are the major investors in Islamic financing and was the major borrowers?

What percent of all banking and loan applications in your country are controlled by Islamic financial groups?

Have Islamic financial organizations adopted new financial tools like Hedge funds in your country? Such tools would also involve stock derivatives, insurance and mutual funds.

Who are the leaders of these organizations, and who are their Islamic advisors? How do they guide their organizations differently from traditional ones?

Can you take examples of lenders or groups that rely on Islamic financing and show it has impacted their lives? Are loans easier to acquire? Is there a social benefit from the loans given out by the organization?

How much access do low-income borrowers and business and persons in rural areas have to Islamic financing?

Sovereign wealth funds صندوق ثروة سيادي

With the all of the problems suffered lately by sovereign wealth fund, here is a backgrounder written before the crisis in Dubai:

Sovereign Wealth Funds (SWF)

There is nothing new about a sovereign wealth funds. The first major fund was created in Kuwait in 1953. The goal was to invest for the country’s future, and to stabilize the economy as the price of oil changed dramatically.

But the shift in the world’s economic reality made these kinds of operations suddenly more powerful, more important and, in some countries, more feared.

What gave them such importance?

As a result of great growth in their economies, sovereign wealth funds in Russia, Asia and the Middle East grew and gained notice. They largely used their funds to invest in the U.S. and the West. They relied on hedge funds and investors to also use the largest forms of investment to reap higher profits.

Their arrival was unique for two reasons.

One: It marked the shift of wealth from the traditional global powers that had built their wealth on manufacturing and dominance of global trade to some newcomers. And the newcomers benefitted from either the growth in markets for oil or gas or because their sales of products and services to the Western and other countries had seen a dramatic expansion. China is one country that benefitted as it sold more of its products, and built great wealth.

Two: these funds represented economic concentrated in the hands of governments, not private companies or individuals. The fact that decision-making now rests with governments raised the fear that the funds would use their new powers for political and not economic reasons.

The lack of openness about the funds and their investment goals also raised concerns in the West. Though their investment decisions lack transparency, the fact that many funds have relied upon riskier investments raised concerns. The fear was that they would add to the forces that have created greater instability in the financial markets in the West.

“The majority of state-owned funds are highly secretive about their portfolio allocations and investment strategies, even as they control increasing amounts of the world’s largest traded assets.”

Sovereign wealth funds, according to one estimate in early 2009, managed as much as $2.9 trillion. The United Arab Emirates reportedly had the largest fund in 2009 with as much as $900 billion, the Abu Dhabi Investment Authority and Corp. There are over 30 sovereign wealth funds.

The other countries with large sovereign wealth funds, according to experts and news reports, are:

Norway, Singapore, Kuwait, Russia, China, Qatar, Australia, Algeria, United State, Brunei, Korea, Kazakhstan, Malayasia, Venezeula, Canada, Chile, New Zealand, Iran.

But the funds reportedly lost large amounts with the sudden collapse of stock markets across the globe. The funds that have relied upon gas and oil resources for their wealth have reportedly also avoided invested in these areas to protect themselves against the kind that began taking place in 2008.

How can they influence world markets?

If the sovereign wealth funds shift their investments from a market or a country’s investments that can led to a rapid decline in its stability because of their powerful presence.

For example, sovereign wealth funds from the Middle East are ranked among the top six buyers of the U.S. government bonds. These bonds are the how the U.S.  government pays for its debt. With the declining economy in the U.S., there were fears that the Middle Eastern sovereign funds would transfer their investments to other economies.

How has the crisis affected the major Arab funds

It was estimated that the major Sovereign Wealth Funds in the Gulf lost 27 percent of their assets in 2008. In most cases, the funds have reportedly used their finances to help their local stock markets. Some have also sought out less risky investments.

What is the future for Sovereign Wealth Funds?

Here is a suggestion from Rami Khouri, a commentator based in Beirut:

“This would seem to be the moment for Arab SWF managers and their political leaders to take advantage of the probably momentary leverage they enjoy globally and regionally, to help rewrite the prevailing rules of international financial investment flows. Three areas seem ripe for serious reappraisal.

First, the ultimate owners of these funds – the citizens of the energy-producing states – should be provided with more information on how the funds are accumulated and invested, rather than leaving this task to small groups of specialists. Second, inter-Arab investments in truly strategic industries like food production, water technologies, and solar energy should be considered much more seriously, now that basic infrastructure is in place in most Arab countries (which was not the case when the first oil boom hit in the early 1970s). Third, Arab investors should use this unique moment to negotiate better, more equitable, terms of global financial flows with the leading Western powers. This is a moment when some Arabs should be thinking more in terms of enhancing the wealth of their sovereignty, rather than bemoaning the erratic performance of their sovereign wealth.”