The Economist: Arming Up

This was a very interesting (if extremely short) article in The Economist about military spending per capita:

Israel spends most on defense relative to its population, shelling out over $2,300 a person, over $300 more than America. Small and rich countries, and notably Gulf states, feature prominently by this measure. Saudi Arabia ranks ninth in absolute spending, but sixth by population. China has increased spending by 10% to $85 billion to become the world's second largest spender. But it is still dwarfed by America, whose outlay of $607 billion is higher than that of the next 14 biggest spenders combined.

That Singapore comes in at #4 is a little surprising (I would have expected it to be a little lower down on the list), but I'm not surprised that it and some of the other small countries (Bahrain, Brunei, Kuwait, Oman, and Saudi Arabia) are there: all have valuable assets (mostly oil, and a very modern economy in Singapore) that would make nice war prizes for neighboring countries (witness Iraq's attempted grab of Kuwait back in 1990). Israel's there for the obvious reason (let's not forget that much of that military spending goes for the occupation and oppression of the West Bank and Gaza). The bigger surprise for me is the listing of some of the European countries: Denmark, Greece, Norway and the Netherlands. Is it because the cost of participating in NATO is that high or because owning the best military hardware is that expensive?

VoxEU: Quo Vadis Islamic Finance?

A good article on Islamic finance (if you're interested in the subject) at VoxEU, the European economics blog. The three authors, all of whom work for the International Monetary Fund (IMF), give a brief analysis of the state of the Islamic finance market, a listing of significant challenges facing the industry, and some concluding remarks. Below are some excerpts, primarily from the introduction and the conclusion; the section on challenges is significant and noteworthy, but I'll let my readers go to the original post to read it if they're interested.

BTW, in case you're unfamiliar with the Latin phrase, "Quo Vadis?", it means, "Where are you going?"

Since the summer of 2007, the global financial system has undergone a period of dramatic turbulence, which has caused a widespread reassessment of risk in both developed and emerging economies. The global financial turbulence appears to have had a limited impact on the Islamic finance industry, which has been in an expansionary phase in recent years (Economist, 2008; Financial Times, 2008). This rapid growth has been fueled not only by surging demand for Sharia’ah compliant products from Muslim financiers but also by investors around the world, rendering the expansion of Islamic finance a global phenomenon. In fact, there is currently over $800 billion worth of deposits and investments lodged in Islamic banks, mutual funds, insurance schemes (known as takaful), and Islamic branches of conventional banks.

...

...[P]erhaps the most striking has been the growth of sukuk, the most popular form of securitized credit finance within Islamic finance. sukuk commoditize capital gains from bilateral risk sharing between borrowers and lenders in shari’ah-compliant finance contracts into marketable securities without interest rate charges.

The sukuk market has held its own amid groundswell concern about the credit crunch and dysfunctional money markets. Although the current level of issuance remains a fraction of the global volumes of conventional bonds and ABS, the sukuk market had soared in response to growing demand for alternative investments before the first episode of severe market disruptions in 2007 showed first effects (Jobst et al, 2008). Gross issuance of sukuk has quadrupled over the past few years, rising from $7.2 billion in 2004 to close to $39 billion by the end of 2007, owing in large part to enabling capital market regulations, a favorable macroeconomic environment, and large infrastructure development plans in some Middle Eastern economies (see Figure 1).

By 2008, however, sukuk volumes dropped to $15.2 billion (about 50%) while the structured finance market dried up with just $387 billion issued (down by about 80%) during the same time. Factors contributing to this decline include the presentation of new rules on sukuk, the global financial crisis, and Gulf states’ currency risk. The slowdown in issuance was most pronounced in Malaysia, where fewer domestic transactions at smaller volume have balanced the market shares of Gulf Cooperation Council and Southeast Asian countries.

The rapid evolution of Islamic finance activities points to the available profit opportunities that beckon. This in turn has prompted a vetting process among a number of jurisdictions around the world to establish themselves as leading Islamic financial centres. In this regard, the case of London is perhaps the most remarkable insofar as it has managed to extend its leading position in world financial markets to become a center for Islamic finance. Similarly, Hong Kong, New York, and Singapore are also making important advances to accommodate Islamic finance within their jurisdictions and aspire to join the ranks of the more established Islamic centers such as Bahrain, Dubai, and Kuala Lumpur.

...

Islamic finance faces many challenges, including recent regulatory changes, illiquidity issues, liquidity risk management concerns, need for harmonized regulation, regulatory disparity amongst national supervisors, and a potentially unlevel playing field.

...

Despite the number of challenges outlined above, the long-term prospects look promising for Islamic finance. Financial institutions in countries such as Bahrain, the United Arab Emirates, and Malaysia have realized considerable demand for shari’ah-compliant assets and are gearing up for more shari’ah-compliant financial instruments and structured finance. In addition, financial innovation, driven by both domestic and foreign banks, will promote alternatives modes of intermediation and contribute to further development and refinement of shari’ah compliant derivative contracts.

As Islamic finance comes into its own, greater regulatory harmonization will be inevitable. Recent efforts have addressed legal uncertainty imposed by Islamic jurisprudence, discrepancies of national guidelines, and poorly developed uniformity of market practices. The Islamic Financial Services Board has moved ahead with its standardization efforts of the Islamic financial services industry that will foster the soundness and stability of the system. Globally accepted prudential standards have been adopted by the Islamic Financial Services Board that smoothly integrate Islamic finance with the conventional financial system.

Finally, despite the declining global sukuk issuance in 2008, emanating from both the Accounting and Auditing Organization of Islamic Financial Institutions decision and the impact of the financial crisis, the sukuk market will regain momentum, driven by demand from financial institutions, insurance companies, and pension funds across Islamic and non-Islamic countries. Many challenges still lie ahead, but the banks’ search for profitable opportunities and the ensuing financial innovation process in tandem with favorable regulatory developments at domestic and international levels will ensure that the Islamic finance industry will continue to develop at a steady pace in the long-run. The jury is still out how Islamic finance will be affected in the short-run by the repercussions of the global financial crisis.

HT: Economist's View

Stupid Sara

Sometimes non-Muslims are so blinded by their hatred for Islam that they blame Islam for things our religion has nothing to do with. Consider the post Islam's War on Women by one Sara Coslett. Sara had noticed some demographic statistics for certain Middle Eastern countries that show a sex ratio favoring men:

I wonder how is it [sic] that in the United Arab Emirates and Qatar the ratio of men to women is greater than 2/1, in Kuwait 1.5/1, Bahrain 1.34/1, Oman 1.26/1, and Saudi Arabia 1.22/1.

These particular ratios are for the population as a whole but, Sara, taking them at face value, doesn't dig deep enough. Instead, she comes up with two pathetic reasons for the skewed sex ratios:

Two possibilities come to mind. First, Muslim countries are notorious for practicing female infanticide.

Except, this isn't true. If Sara had said India or China are notorious for practicing female infanticide, I'd have quickly agreed with her. The problem is, the countries Sara highlighted don't have very high abortion rates to begin with. According to Johnston's Archive, which tracks historical abortion statistics, we find that the abortion percentage for all residents, in and out of the country, were extremely low for the six countries in question. While not all countries have a full listing for their statistics, the abortion percentage for Qatar was 1.3% in 2004, 0.05% for Kuwait in 2001, and 0.07% for Bahrain in 2004. The abortion ratio wasn't available for either the UAE or Saudi Arabia; however, the total number of abortions in 2006 for both countries among residents was 63 and 5, respectively. Note that all of those abortions were obtained overseas, meaning no abortions were performed among residents at all inside those countries. (No statistics are available for Oman.) With numbers so low, there's no reason to believe abortion is a cause for the skewed sex ratio.

In fact, it is not. If we next look at the CIA's World Factbook, we can look at the sex ratio at birth. Here, we find that for Bahrain, there were 1.03 boys born for every girl (2007 est.), 1.04 boys for every girl in Kuwait (2007 est.), and 1.05 boys for every girl in Oman, Qatar, Saudi Arabia and the UAE (2007 est.). Compare this to India (1.12 boys per girl; 2007 est.) and China (1.11 boys per girl, 2007 est.), and you see that Sara's argument with regard to female infanticide holds no water.

Sara's other argument is even more absurd:

The other possible reason for such a disparity between males and females is that census counters do not include females when polling the population. We know that Muslims regard women as property, so like a slave, they would not be considered a human and thus not counted.

Even if one were to accept Sara's argument at face value, the fact of the matter is that other sources, such as the World Factbook would provide fairly realistic estimates for the male-female population (see the "Age Structure" statistic).

Of course, there's one possibility that Sara hadn't considered, and that's immigration. Looking at NationMaster statistics, we see that immigrants make up the following percentages of the national population: Bahrain - 40.66%, Kuwait - 65.83%, Oman - 24.45%, Qatar - 78.34%, Saudi Arabia - 27.51%, and the UAE - 70.85%. And, as any expat will tell you, the vast majority of all expats are men. It's not surprising, then, that the sex ratio in the six Middle Eastern countries Sara highlighted should favor men: they're the ones who moved to these countries in search of work.

But Sara would rather blame Islam; that way she doesn't have to think too deeply about why things are the way they are:

It is obvious to me Islam has declared war on its female population.

Stupid Sara.

Update: Since writing this post last night, Sara has re-written her original post, plus written another. The problem is, while Sara realized that she made a mistake after reading my post, she compounded the original error by falling on another bogus claim:

Clearly something tragic is happening to females after age 15. Therefore, instead of two possibilities I realized there was a third - honor killings.

Most of the remainder of the re-written first post is merely a rehash of her original post. The second post, Erratum: Islam's War on Women is a strange mish-mash of retractions, corrections, and old allegations. On the one hand, she admits to forgetting about the impact of immigrants into the six countries she originally highlighted. She also admits that she was wrong "...in my assumptions that the Muslim practice of honor killings and a disregard for women as people..." However, she also makes some odd statements, such as:

Surprisingly I noticed Mr. JDsg did not refute or even mention anything about honor killings.

What Sara disregarded was the fact that she had not written anything about honor killings in her original post. What was there to refute or mention? Even so, honor killings is not going to be a high enough number to explain the skewed sex ratios. Honor killings do, of course, happen, but the number of killings committed is not going to be that high. This is merely Sara grasping at another straw.

Sara concluded her new post by writing:

While population data is a poor example for Islam’s War on Women, the war does continue.

That's it, Sara, keep beating your dead horse. You've been wrong in just about all your other "reasonings." Show us how more wrong you can be.

Update #2: Looked at Sara's blog once more, just to see if she had followed up on the comments I had made there the other day. No, she hasn't responded, and she's shut off her comments once again to only those who have "registered" (the usual cowardly BS tactic used by right-wing blogs who don't want to hear that the emperor wears no clothes.)