By Rushdi Siddiqui, Head Of Islamic Finance At Thomson Reuters
The inflation adjusted billion dollar question has become, ‘what nationality should lead the International Monetary Fund (IMF)?’ It used to be the $64,000 question, and then became the million dollar question. This says something about the ‘naked’ dollar or US influence or both.
The tradition has been the Managing Director of the IMF was European. The traditional thinking has gotten us to where we are in today’s inter-connected, borderless, flat-wired world in real time, resulting in credit crisis induced systemic risks, corporate and government bailouts at the expense of hard working tax payers.
The established emerging markets like the BRICS countries, Brazil, Russia, India, China, and South Africa have raised valid points, and a recent FT article correctly mentioned, ‘… the IMF executive directors for Brazil, Russia, India, China and South Africa said the “obsolete unwritten convention” of appointing a European as managing director undermined “the legitimacy” of the fund and called for a “truly transparent, merit-based and competitive process”.
Now, what if the suggestion was a Muslim to head the IMF! Imagine the uproar, ‘Shariah creep Trojan horse’ at the IMF resulting in dejure financing of terrorism with international lending agency’s funds. Taken one step further, some may even say a benchmark sized, above investment grade ‘terrorist sukuk’ [with a Takaful put] offering led by syndicate of Islamic banks that is oversubscribed by family offices of narco-extremists and traded in the grey market in Afghanistan.
What if the new head of the IMF is a non-Muslim woman, like French Finance Minister, Christine Legarde, who has embarked on making her country an Islamic finance hub since 2008, how would the world react? The point is, a Muslim in a very high profile position will probably result in a knee-jerk, sustained reaction of ‘gloom and doom’ by a vocal segment of society.
Yet, a non-Muslim lobbying for Islamic finance, as part of financial inclusion, may not receive the same reaction and it will eventually die down as people will tire of Shariah takeover of capital markets, financial instruments, mass conversions of non-Muslims and non-Muslim countries.
Now, how the real world works: Obviously, the new Managing Director should be a moderate mind with thoughts of modernization of the institution to play catch up in today’s contagion connected turbo-charged capital markets. The person would be someone who is a globally recognized brand by the western capital markets and media based upon merit and history of insights.
It would be someone who manages and speaks in hundreds of billions of dollars and tactical allocations in his nine to five job. Someone that can talk off the cuff about technical capital issues in the G-20 countries, which includes three Muslim countries, and switch gears to talk about geo-political issues in rapidly developing economies (RDEs). Someone who knows the difference between CDS (credit default swap) and CDs (certificate of deposits), between bonds and Sukuk, between leading and lagging indicators, between thinking outside the box and being boxed inside.
Someone who would easily be a keynote speaker at the prestigious and star studded Davos forum, but also empathetically connect with the financially disenfranchised.
I have a recommendation for the next head of the IMF. His name is Dr Mohamed A El Erian. He bears double nationality, French and Egyptian and according to Wikipedia, i.e., European citizen issues addressed, and previously worked for the IMF as an economist and was on the Committee of Eminent Persons. Presently, Dr. El Erian is the CEO and co-CIO of Newport Beach, California, based PIMCO (Pacific Investment Management Company), which manages about $1.2 Trillion. Putting that number into context; it’s much bigger than Islamic finance, larger than almost all Sovereign Wealth Funds, and about 10% of the US economy.
People like Dr El Erian can move markets with comments via op-ed, books, media interviews, etc., hence, he commands the attention of markets, investors, regulators, policy makers and asset managers. He has written about the European debt crisis, hence, has a good grasp of the crisis unfolding in real time.
Together with PIMCO’s co-founder, Mr Bill Gross, he coined the phrase the “New Normal” in the post casino capital market crisis. The ‘New Normal’ is a reset of the different landscape in the post crisis world economy, and the ensuing of new opportunities for institutions and their clients.
Therefore, there needs to be a ‘new normal’ thinking for the new head of the IMF. Dr El Erian’s candidacy hits a large number of important touch points in the ‘post crisis new order world’ (PCNOW), including an economist’s understanding of boom/bust cycles, strategist’s thinking of tactical asset class allocations, and trader’s mindset of quickly absorbing information, actively managing risks and transforming it all into knowledge for execution. This is essence of merit for such an important position.
Oh, by the way he happens to be a Muslim. But, does that really matter? Not really, but, unfortunately, it depends upon which camp one is speaking to!