The new Director-General of the OPEC Fund for International Development, Suleiman Jasir Al-Herbish, outlines his vision and the future thrust of the institution in an interview with OPEC Bulletin's Deputy Editor, Lizette Kilian and OPEC News Agency Editor, Umar Aminu.
Question: It has been five months since you assumed office as Director General of the OPEC Fund for International Development. How has it been adjusting from OPEC Governor and Chairman of several key establishments in your home country, Saudi Arabia, to being the Chief Executive Officer of the OPEC Fund?
Answer: As you know, I have served OPEC Member States in various capacities for over 30 years, and I see my position at the OPEC Fund simply as an extension of that mission. In that sense, the transition is more of a natural progression than a change of direction. So, the 'adjustment', if that's what you want to call it, has been quite straightforward. It is, of course, an enormous help knowing that I have the confidence and trust of our Member Countries. I have to say, too, that I have been impressed by the level of co-operation and professionalism shown by the Fund's management and staff. That said, however, it is clear that I am facing new challenges and goals and it goes without saying that I will do my best to fulfill them.
Q: As an economist and technocrat with a huge wealth of management experience, could you give us an insight into the direction, in terms of priority, of how you intend to move the Organization forward?
A: I believe one of the principal challenges will be to continue carrying out the Fund's mandate while, at the same time, safeguarding the institution's long-term sustainability. Let me just quote some figures here: To date, the Fund has committed close to $6.9 billion in development assistance. That is an impressive sum for what is, after all, a modest-sized institution. In line with our mandate, the bulk of this (around 79 per cent) has gone in the form of highly concessional public sector lending, primarily to the poorest countries in the world. On top of that, a substantial amount has been given in outright grants for technical assistance, research and emergency aid, or in contributions to the resources of other development institutions. In terms of income that can be recycled and used to finance more operations, the returns on our commitments are therefore very small.
Clearly, it would be imprudent to believe that we could continue indefinitely in this vein. And this is one of the reasons, among others of importance, why the Fund's Private Sector Facility was set up five years ago. Here, although still containing elements of concessionality, our financing is market-oriented and generates a higher rate of return. Of course, the challenge now is to strike the right balance, and I firmly believe that prudent management of the Fund's resources will be essential if the institution is to maintain both its level of assistance and viability.
Q: The OPEC Fund was created as a response to the OPEC Member Countries' yearning and aspirations to support and share the concerns of the less privileged, poorer countries of the world. Do you feel it has fulfilled its efforts in this direction?
A: I believe the Fund's record speaks for itself. We shouldn't forget that it was originally conceived as a temporary institution with a lifespan of just a few years. That it is still flourishing almost three decades later is a powerful testament to its success. This success is due in no small part to the unique relationship the Fund enjoys with its beneficiary - I prefer to call them partner - countries. As an organization of developing countries ourselves, we have a special understanding of the problems associated with poverty and have built alliances with our partners based on foundations of equality, solidarity and respect. This makes for a very healthy working environment on both sides.
The feedback from our partner countries also shows how much they appreciate the Fund's flexibility and its readiness to respond to the shifting demands of the development arena.
An overriding priority of the Fund over the years has been to remain relevant. As needs change in the developing world, so we must adapt to meet them. Indeed, the scope and nature of the Fund's activities has always been needs-based. In the early years, the demand was for fast-disbursing balance of payments support, then we moved into large-scale infrastructure projects. Over the past decade, the focus has shifted to smaller-scale, community-based projects that address basic needs. More recently, the call has been for greater investment in private enterprise - hence, our Private Sector Facility. Nor should we forget our special grant accounts for HIV/AIDS, Palestine and Food Aid. So, one can see, all along, that we have tried to anticipate the circumstances at any given point in time and prepare ourselves to tackle them.
Q: One of the areas that the Fund has scored impressive success in, besides its public sector operations, loans and grants, is the private sector loan initiative to support low-income entrepreneurship development. What is your assessment of the institution's private sector window? Ultimately, how big might a shift in the Fund's focus from the public sector to the private be, in terms of the relative percentages of each?
A: When the Private Sector Facility was officially launched five years ago, it was a major departure for the Fund. However, it was a decision based, in part at least, on an increasing number of requests from our recipient countries, so it was one we felt we had to make. Although the large majority of developing countries have entrusted the management of their economy to the private sector, they lack access to the necessary capital to foster its growth. The role of the Fund is to provide this capital.
As one can imagine, the logistics of setting up a new window like this are quite staggering. So, initially it was a fairly slow process while we got a policy framework in place and took care of all the necessary institution building requirements. In the beginning, we concentrated on the financing of small- and medium-scale enterprises through financial intermediaries, including micro-finance institutions, regional and national development banks, leasing companies and commercial banks. Now that the Facility is on a sounder footing, we have diversified into a much broader range of operations in sectors as varied as pharmaceuticals, telecommunications, textiles, tourism, manufacturing and industry. We are also expanding the range of financing products we offer. Total commitments to date stand at $238 million, an amount I believe to be satisfactory. But, perhaps an even greater measure of the Facility's success is the fact that our Ministerial Council approved a replenishment of its resources in June last year (2003) - an additional $250m.
Regarding the suggestion that we may witness a shift from public to private sector financing, I should stress that this is not the case. The Private Sector Facility is an additional window drawing on additional, dedicated resources. The two windows deal with different demands and apply to different circumstances. They are complementary and are called upon to work together where public-private partnership is deemed appropriate. Their growth is envisaged separately and not competitively.
Q: The Food Aid Programme and the HIV/ AIDS global support initiative are two of the Fund's initiatives that have endeared it to the international community and thereby portrayed OPEC Member Countries as caring and sharing. Do you intend to extend such humanitarian causes to other equally important areas such as other health problems and education?
A: The Fund's special accounts for food aid and HIV/AIDS were set up specifically to address serious emergency situations. Nor is it the first time we have responded in this way and on such a scale. However, one has to be careful to make a distinction between emergency, humanitarian aid and our regular grant operations. When the need arises, as in the case of any human or natural disaster, we stand ready to do what we can to support the international relief effort. But, when it comes to ongoing assistance to areas of basic need, this is covered by our technical assistance grant programme. And, indeed many of our activities in this field are in the very areas you mention, ie, education and health, as well as in other vital sectors such as water supply, sanitation and rural development.
For example, we have helped finance mass immunization programmes; we have been instrumental in battling the African scourge onchocerciasis - or 'river blindness' as it is more commonly known; and we have supported numerous literacy and vocational training programmes in poor communities all over the world. So, while ready to provide emergency, humanitarian assistance on an ad hoc basis, the Fund's main focus is on supporting projects with long-term impact. Indeed, this is a view shared by almost all developing countries. By and large, they will tell you that they yearn to be self-sufficient and to be responsible for their own destinies. This can only be achieved through assistance that promotes sustainable development.
Q: Are you satisfied with the achievements so far of the Special Grant Account for HIV/ AIDS Operations? And how do you see the future of the Account?
A: Yes, we are more than satisfied with the achievements of the Account. We are currently providing direct benefits to 32 countries, and another 22 countries are receiving assistance through regional components. Additional projects, programmes and initiates in the pipeline will increase our reach to some 75 countries worldwide. So, from an operational perspective, the Account is certainly achieving what it set out to do. We are working in partnership with established international networks, such as WHO, UNFPA, IFRC and UNECA.
HIV/AIDS is an insidious disease out to jeopardize the accomplishments of the past several decades in development. I do no think it is in anybody's interest to allow this or any other epidemic whatsoever to dictate the human agenda. The OPEC Fund is committed to supporting the ongoing global campaign against the disease; and this remains a priority.
Q: The Fund has traditionally been a strong supporter of developing countries less fortunate than the OPEC Members, but you have spoken of expanding its sphere of influence. What kind of projects do you envisage expanding your support for in the economies in transition and elsewhere (for example, the FSU, China, India, South Africa and so on)?
A: In keeping with its mandate, the Fund has been a strong supporter of all developing countries, with the exception, of course, of its own Member States. Today we have a presence in 111 countries around the world, including many of the transition economies of the Commonwealth of Independent States and some of the less developed countries in Europe. With some of our traditional partners 'graduating' out of our concessional window, efforts are being made to continue working with them in the private sector. As far as the nature of the projects is concerned, our policy has always been to respond to the needs of the recipients. This could range from modernizing the railway system in Uzbekistan to upgrading Albania's Durres port to supporting the development of economic infrastructure in the Maldives.
Q: Continuing on the theme of expanding the Fund's sphere of activity, could you envisage supporting/financing projects in the developed nations, while avoiding a possible clash with the Fund's mandate?
A: There is no plan to support projects in developed countries. There may be an issue as to where one draws the line between developing and developed countries, as all indicators are relative. However, our mandate is clear on this matter and we have no intention of moving outside it.
Q: Barely a few days after your assumption of office as CEO of the Fund, you were keen about strengthening the level of co-operation among Member Countries of the Fund, as well as beneficiary states. Can we share your vision on this?
A: It is the fundamental mission of the Fund to reinforce co-operation between its Member Countries and other developing countries. And I believe, in this respect, the OPEC Fund should consider working closer with its sister institution OPEC to help complete the circle that joins OPEC nations to the rest of the developing world. I am thinking, in particular, about the fact that a major share of future incremental oil demand will be assumed by developing countries.
This will create a certain interdependence between those countries (the oil consumers) on the one hand and OPEC Member States (the oil producers) on the other. When we bring the OPEC Fund into the equation, with its mandate to foster the social and economic advancement of the developing countries, there is a further convergence of interests. It seems clear to me, therefore, that there could be much to gain all round from strengthened cooperation.
Q: You have also stressed the need to promote greater awareness of the Fund's global development efforts. How do you envisage achieving this, especially with regard to gaining greater recognition from the private sector?
Q: One possible way of enhancing the Fund's profile could be through greater co-operation with other OPEC aid organizations. Do you think this is a viable option, or are you thinking of another approach, and if so, what might this be?
A: It is true that I am fully committed to doing all I can to give the Fund greater visibility. This is particularly vital within our Member Countries as we have to be seen to living up to our mandate and using their contributions wisely. With this in mind, we are looking at ways of creating greater awareness of our work through public relations exercises such as journalists' workshops. We also have to do more to raise our profile in beneficiary countries and clarify the widespread confusion between OPEC and the OPEC Fund. This is perhaps a task our two institutions could undertake jointly. However, a lot of brainstorming still needs to be done to identify exactly how such a 'partnership' could work, particularly as we face different challenges - for OPEC the problem is one of 'image', while for the OPEC Fund the issue is more one of 'visibility'. With regard to the private sector, our involvement here has led us, for the first time, into a 'competitive' arena, and we face having to develop more pro-active marketing strategies to secure a niche in the market.
Co-operation with other institutions is always a preferred option as we can share expertise and experience (as well as some of the risk in the private sector). We have a long history of collaboration with the regional development banks, with UN agencies, NGOs and, of course, with our sister institutions. Indeed, of the 26 public sector projects we approved in 2003, for example, 17 of them were co-financed with other development institutions. As far as visibility is concerned, there are certainly benefits through association to be gleaned from working closely with like-minded agencies.
Q: There have been suggestions in recent years that the Fund should consider assisting Member Countries in need of its support. Do you think that the mandate of the Fund should be expanded to include assistance to Member Countries?
A: The mandate of the Fund is very specific in this regard and with good reason. If I can take you back to the first OPEC Summit of Heads of State and Government which was held in Algiers back in 1975, the Solemn Declaration emanating from this meeting committed OPEC Member Countries to helping spur social and economic development in their sister developing countries as a means of narrowing the gap between rich and poor and protecting international stability. The OPEC Fund was conceived as their collective instrument (in addition to bilateral channels) for carrying out this commitment, a commitment I should add which was re-affirmed at the Second Summit in Caracas in 2000. The Fund's mandate states clearly that it may extend assistance to all developing countries, with the exclusion of Member Countries. The explicit intent was - and still is - to strengthen South-South solidarity. That said, however, the Fund does not ignore its Member States in times of dire need. In the past few years alone, for example, we have extended emergency aid to Algeria, Indonesia, IR Iran and Venezuela in the aftermath of natural disasters, and will do so again in similar situations should the need arise. In addition, many Member Countries have benefitted from regional programmes financed through our grant window.
Q: Over the years, the Fund has been a staunch supporter of the Common Fund for Commodities, although some say that the CFC's limited membership also limits its effectiveness. Do you believe that the CFC is deserving of the Fund's continued support, or could you envisage a more effective way of achieving the aims of the CFC? What alternatives might be considered to achieve these or similar aims?
A: Firstly, I would have to disagree on the comment about the CFC's membership. It currently has 104 member countries, in addition to the European Community, the African Union/African Economic Community and the Common Market for OPEC Bulletin Eastern and Southern Africa. Its membership could not therefore be described as limited, despite the absence of a few major countries.
As far as the OPEC Fund's support for the CFC is concerned, there is a clear community of purpose between the two institutions. The CFC seeks to strike a balance between the economic interests of its member countries, whether producers or consumers - an objective that is easy to marry with the OPEC Fund's global objective of reinforcing financial co-operation between the OPEC Members and other developing countries. Thus, in supporting the broad objectives of the CFC, the Fund is being true to its own mandate, as indeed it was when it helped establish the CFC. In total, we pledged support amounting to $83.56m. Some $37.16m of this was given to cover the subscriptions of 35 least developed countries to the CFC's First Account, and a further voluntary contribution of $46.3m was given towards the Second Account.
However, it has to be said, from the OPEC Fund's point of view, that it is disappointing that the objectives of the First Account have so far proved to be elusive. Its intended purpose was to contribute towards the financing of buffer stocks as well as internationally co-ordinated national stocks within the framework of International Commodity Agreements or Arrangements (ICAs). Regrettably, this has not happened. The explanation given for this is the subsequent market developments which no one had anticipated at the time the CFC was conceived in 1981 or, for that matter, by the time it eventually became operational in 1990. As a result, by the late eighties and early nineties, the issue of buffer stocking, as an economic imperative in the commodities arena, was already in serious decline. This inevitably led to the unraveling of the various ICAs which had been previously set up to modulate swinging fluctuations in commodity prices and assure price stabilization.
Regarding our continued support to the CFC, it should be reiterated that the OPEC Fund's mandate enjoins it to co-operate with international development agencies set up to benefit developing countries. In that respect, it should be noted that the CFC's Second Account operations cover activities that are very similar in nature to those carried out by the OPEC Fund. Turning to the question of alternatives that could help revitalize the objectives of the CFC, I believe that this is better left for the member countries of the CFC to decide upon.
Q: The Fund has signed numerous agreements for the protection and encouragement of investment with various countries. Can you elaborate on what the function of these agreements is, and whom do they benefit in concrete terms?
A: To date, 53 Agreements for the Encouragement and Protection of Investment (AEPI) have been entered into between the Fund and host countries. In essence, they exist to support and protect our engagement in the private sector by according the Fund the same privileges as would normally be given to international development institutions in which the host country holds membership. In practical terms, these privileges and immunities extend to preferred creditor status and special tax treatment of investments.
In the public sector, the required immunities and privileges are secured by the agreements signed for every project between the Fund and the sovereign borrower. However, in private sector operations, the Fund generally deals directly with private companies and other entities which have no legal power to confer any such privileges and immunities. The resulting gap is therefore filled by the governments of the host countries through the conclusion of individual protection treaties.
Q: On a slightly more personal level, how much autonomy does the Director General of the Fund have in his day-to-day work? In other words, what kind of decisions can you make on your own, and what requires the approval of the Fund's Governing Board before it can be implemented?
A: The main agreement of the Fund sets out very clearly the responsibilities of the Director-General as well as those of the Governing Board and Ministerial Council. We operate within these set boundaries. Fortunately, at the Fund, Management enjoys an extremely good relationship with its superior bodies.
Q: Finally, could you describe the OPEC Fund that you inherited? How daunting is the task? How easy or difficult has it been made by the structure you inherited? Should we expect any restructuring of the Fund?
A: The OPEC Fund is an institution that has been evolving continuously since its inception 28 years ago. The OPEC Fund you see today bears little resemblance to the institution of 20 years ago or even of 10 years ago. This has been partly by necessity - the development arena is constantly shifting - and partly by design - it is in the Fund's interest to accommodate change if it is to remain relevant. Personally, I believe that change is healthy and that a dynamic organization has the potential to be a successful organization. It is early days yet, but I will certainly be looking to see that management copes with challenges in a pro-active manner in order to achieve an even better performance for the institution.