Istanbul is hosting the International Forum on Financial Systems from September 11-12. The forum kicked off on Wednesday with on opening address by President Abdullah Gül, who called for a new global financial system.

Gül calls for a new global financial system

During the inauguration of the forum yesterday, President Gül drew on the recent turbulence in the global economy and emphasized the need to formulate a new global financial system. Highlighting the importance of holding this forum in terms of seeking alternative financial systems and methods to efficiently overcoming the crisis, President Gül said it was the discrepancies in the financial system that acts as the root cause of the turbulence in the global economy.

Reminding that since the 1980's the world has been on a fast track to globalization, Gül said that the crisis which emerged in the American mortgage sector in 2008 impacted Europe first and then the rest of the world. "Therefore, the states spending large amounts of funds to save the financial system in the beginning, in time themselves began to face crises in their own economies. As we assess the situation, we should be mindful of the fact that the crisis has not yet been overcome completely as global risks and uncertainties continue.

"International economy acts on balance of economic terror"

President Gül stated that, "the international economic system seems to almost be acting on a balance of economic terror. It is for this reason that the architecture of the modern financial system is increasingly being questioned. The most important reason of this discussion is that the means and ends have been confused," added Gül.

Highlighting that the fundamental principle of the financial system of raising the prosperity level of societies, has unfortunately been totally disregarded in the process which ended with the 2008 crisis, Gül said, "the structure of the financial system is based on expectations vis a vis the future, instead of real economic value. Financial instruments are not used for creating more employment, prosperity or income, but instead to satisfy the increasing greed on behalf of the financial actors in the system."

"Risk of social unrest is high"

Gül emphasized the human cost of the crisis and reminded that about one percent of the world population dominates 40 percent of the world's accumulated wealth, while about 70 percent of the world population owns only about three percent of global wealth.

"Almost one billion people face hunger and malnutrition. Unemployment continues to be an increasing problem especially amongst the youth. There has been a significant decrease in the disposable income that people have. As a result, life has become much more difficult for an ordinary person," said Gül. "Under these circumstances, the risk of social unrest is high. If such structural problems in the international system cannot be resolved, the impact of the crisis could have impacts on the fabric of societies."

Gül pointed out that all of these factors make it necessary to come up with new global mechanisms and instruments which would reorganize the financial structure and stated, "There is a need for a new regulation appealing to the interests of all actors, including developing countries."

Turkey among countries with greatest Islamic finance development

Gül noted that the new financial structure must also take into consideration the need of developing countries within the global economy and therefore the G-20 was a very important platform and said, "Turkey is an active member of the G-20 and will continue to contribute to these efforts. As the international financial architecture is restructured, it is also very important to support alternative approaches," he added.

Gül also said Turkey has taken important steps in the area of finance, such as with the Istanbul Financial Center Strategy in Action plan. "The plan which is being carried out for the Istanbul Financial Center is important not only for Turkey, but also for our region. With the Istanbul Financial Center, we also envision the emergence of new financial instruments for the global financial system, including Islamic financial instruments. Turkey is one of the countries with the greatest development in terms of Islamic finance."

Istanbul to be a global finance center

President of the Islamic Development Bank (IDB) Mohammed Ali Madani spoke to reporters following the opening session of the forum on Wednesday, during which he stated, "Developing Istanbul to be kind of a gateway for world banking and finance is very important."

Stating that Turkey's role was very significant for the economy of the Muslim world, Madani said "The idea of developing Istanbul to be a kind of a gateway for world banking and finance is especially very important". Reminding that IDB will be opening an office in Istanbul in the upcoming week, Madani said, "We expect more investors to come to Istanbul and benefit from the institutions to be established in the city."

The International Forum on Financial Systems was organized by the Independent Industrialists' and Businessmen's Association (MUSIAD), BORSA Istanbul, Statistical, Economic & Social Research and Training Centre for Islamic Countries (SESRIC), Participation Banks Association Banks of Turkey (TKBB) and Islamic Development Bank (IDB) under the theme, "Sustainable Finance for Sustainable Development."

SABAH and Agencies