Islamic finance in Tatarstan: unrealized opportunities

Reception at high level

Last week's visit of the delegation of Tatarstan headed by President of the Republic Rustam Minnikhanov to the Kingdom of Saudi Arabia pleasantly surprised by a high level of reception, as well as by the general format of the visit agenda — from the discussion of international issues and business issues to the visit by the Tatarstan delegation of the sacred for every Muslim Kaaba in Mecca.

Let us recall that in the course of the visit, Rustam Minnikhanov had meetings with Saudi Arabia's King Salman bin Abdulaziz Al Saud and Crown Prince Mohammad bin Salman Al Saud, Minister of Trade and Investment of the Kingdom Dr. Majed Al-Kassabi, and Secretary General of the Cooperation Council for the Arab States of the Persian Gulf Abdullatif bin Rashid Al Zayani, the head of the Organization of Islamic cooperation (OIC) Dr. Yousef bin Ahmad Al-Othaimeen, and president of the Islamic Development Bank (IsDB) Dr. Bandar Hajjar. That's not even counting the fact that at the airport of Riyadh Rustam Minnikhanov was met by senior officials at the level of the minister and members of the ruling family of the Saudi Kingdom along with the honour guard and that the head of Tatarstan was given a special honour on behalf of the Saudi King in the form of a visit of the Kaaba and, as a final step, all of our delegation participated in business forum ''Tatarstan — Saudi Arabia''.

I assume that both reasons – the already established traditional ties between Saudi Arabia and the Republic of Tatarstan based on Islamic solidarity and the status of Rustam Minnikhanov as the special envoy of the Russian President, Vladimir Putin, — promoted such a high acceptance. In the end, there is a reason why the president of our Republic has become the leader of the Group of strategic vision ''Russia — Islamic World''. In this case, Moscow took into account the active relationship of Tatarstan with the Muslim World on the lines of Islamic cooperation, as well as the annual holding of KazanSummit forum in the capital of Tatarstan, last year it gathered more than 1.500 representatives of international organizations, public authorities, financial institutions, embassies of 14 countries, investors and business leaders from 51 countries.

As a final step, Tatarstan delegation participated in business forum ''Tatarstan — Saudi Arabia''.

Investment drought

However, amid such blissful background of the Arab-Tatarstan relations, the official figures of foreign trade turnover of the Republic of Tatarstan with the Kingdom of Saudi Arabia look ridiculous. In 2015, they amounted to only 11 million dollars, of which nearly $ 7 million accounts for our exports and 4 million dollars on their imports. In 2016, for 9 months the turnover amounted to 10 million dollars. One cannot disagree that for Tatarstan with its almost 2-trillion GDP and for the Kingdom of the Saudis with the largest oil reserves in the world and 33 million population, it is no exaggeration to say that these figures are rather close to zero.

Given the fact that the visit to Saudi Arabia took place between the boards of the Tatarstan Investment Development Agency and the two main departments of the economic block — the Ministry of Economy and the Ministry of Industry and Trade, on which the refrain was the issue of attracting investments to the Republic, the absence of investments in Tatarstan's economy from that country, such a meager result is an unforgivable reproach. Let's not forget that Saudi Arabia, in addition to the super-rich private investors, also has the sovereign wealth fund, the fourth largest in the world, it invests tens of billions of dollars a year around the world, holds almost $ 900 billion in the US treasury obligations and plans to create the world's largest investment fund at $ 2 trillion in the future.

Why does this Arabian investment rain not fall a drop on Tatarstan? In the presented by the presidential press service about the visit the following words of the Minister of Trade and Investment of the Kingdom of Saudi Arabia Dr Majed Al-Kassabi draw attention: ''Unfortunately, we have little information about the regions of the Russian Federation, we know very little about Tatarstan, Bashkortostan, Chechnya, Ingushetia and others.'' This statement by the Saudi Minister indicates that the reason for the low investment activity of Arab businessmen, particularly Saudis, in our Republic is not only the notorious bad investment climate in the country but also a banal lack of information about the economic potential of our Republic. This is our fault, and we are in the field of Islamic finance in a situation of unrealized opportunities.

Dr. Majed Al-Kassabi: ''Today Saudi Arabia has a great interest in Russia at the state level. We are interested in agriculture and industry — both civil and military''

Nothing personal, it's just business

Naive belief in Islamic solidarity, which was expressed in active financial assistance of the Saudis and the Muslim Umma of Russia, and Tatarstan in particular, in the revival of Islam in our land, is playing a bad role here. This assistance went to the construction of mosques, training of imams, the printing of religious literature, the support of the poor.

However, for Arab businessmen, it was just a variation of their charitable activities, a kind of sadaqah, which, like Islamic solidarity, does not apply to business. Here for them, as for all investors, it is important, first and foremost, to get a good guaranteed return. Let's not forget that future Arab entrepreneurs go to Western universities and MBA schools to learn the basics of business. Therefore, Arab investors still prefer to invest their money in the same American bonds, real estates in the leading Western capitals, to buy European football clubs, where guaranteed profits are obvious. So our Tatarstan officials responsible for attracting investment should not rely on Islamic solidarity, do not try to pretend to be devout Muslims, but rather to try to convince the Saudi investors that to invest in Tatarstan is advantageous, to prepare for them well-researched investment projects, to persevere, to work with them constantly and systematically. Then finally there will be tangible results.

In such a situation, it becomes clear the importance of the visit of our delegation to Saudi Arabia as a serious attempt to move away from the almost zero level of economic relations, to negotiate more specifically with their officials and the business community on joint trade and investment projects, the participation of the Arabian businessmen in the upcoming KazanSummit forum. As the same Saudi Minister Dr Majed Al-Kassabi stated: ''Today in Saudi Arabia has a great interest in Russia at the state level. We are interested in agriculture and industry — both civil and military.'' It will be a great loss for responsible for foreign economic relations departments in the Republic not to take advantage of these opportunities. About the results of the visit we will learn later.