Business, Markets & Economic | Financial news

Haj slowdown hits saudi businesses


´╗┐Saudi businesses catering to haj visitor have taken a hit this year as far fewer pilgrims arrive and those who come have less cash to spend. Saudi authorities say only about 1.86 million pilgrims, including around 1.3 million coming from outside the country, are attending this year's haj, down from peak figures that approached 3 million a few years ago. The number of visitors from abroad has fallen by around 20 percent and the number from within Saudi Arabia has fallen by half, said Marwan Abbas Shaaban, head of the kingdom's National Committee for Haj and Umrah. Overall, haj-related business was down by half, he said. Every Muslim who is able and has the means is expected to travel to Mecca in Saudi Arabia during the annual haj month at least once in a lifetime. Muslims also visit the holy city at other times of the year for pilgrimages known as umrah. Those who are still coming have less to spend, said Ali al-Hirabi, who hawks gleaming gold necklaces and rings from a shop in the holy city. "They come, but their situation isn't like it was when there was peace in the world," he said. "It's the Arab countries that are the problem."Saudi Arabia itself and many of its Arab neighbors are suffering from the fall in global oil prices that has cut state budgets, lowered wages and reduced lavish domestic spending. War across the Middle East has also hit the haj. Officials give a variety of reasons for the declining visitor numbers. One of the most obvious is a boycott by Iran, which barred its citizens from attending this year's haj after diplomatic relations with Saudi Arabia collapsed following the Saudi execution of a Shi'ite cleric. Efforts to find a way for Iranians to come faltered over Tehran's accusations that Riyadh was to blame for poor safety at last year's haj, when at least 2,070 people died in a crush. Saudi Arabia says safety has improved over the years and accuses Iran of politicizing the rite with its criticism. Shabaan said Iranians typically made up 7 percent of foreign haj visitors, and their absence did not account for the bulk of the fall-off in numbers.

He said another factor was the construction under way in Mecca itself, which is designed to increase its capacity to accept haj pilgrims in future, but means there is less room while the building is still under way."Over the last three years there has been a reduction in the number of pilgrims because of the expansion of the Two Holy Mosques and the massive infrastructure improvements," he said, also citing "political conditions in some countries and economic conditions."Wars in Syria, Iraq, Yemen and Libya, which have brought down numbers in past years as well, have worsened this year. Most Syrians and Yemenis now live in territory controlled by warring sides opposed by Saudi Arabia, making it difficult to get visas.

RENOVATIONS Mecca's mayor Osama bin Fadl Al-Bar played down the lull."There is certainly an effect on economic sectors, but the private sector is always looking toward the light at the end of the tunnel and the investment opportunities that are present."He said the renovations to expand Mecca's Grand Mosque and nearby hotels, which have turned the area into a tangle of cranes, would drive future business and let the city accommodate 3.7 million haj pilgrims in 2020 and 6.7 million by 2042. As part of a reform plan to wean Saudi Arabia off its dependency on oil, the government aims to encourage even more visits to Mecca outside of haj season, raising annual pilgrim numbers to 30 million by 2030 from 8 million at present.

Some architectural and cultural critics have lamented the changes to Mecca's landscape from the development projects, which include highrises and a 76-story clocktower. Meanwhile, despite the smaller crowds, merchants in Mecca do not seem to be lowering their prices. The high cost of basic goods, especially near the Grand Mosque, is a perennial complaint for pilgrims. Senior Saudi cleric Sheikh Abdullah Bin Sulaiman al-Manea told Okaz newspaper businesses should not gouge customers, and criticized the spread of billboards in the city: "The duty of haj should not become a venue for trade, profit and gain."Fatima al-Murabit, a Moroccan who together with her husband was visiting for the second year in a row, said prices had gone up since last year."Even dates are expensive, and bad manners are a general feature of traders and workers in the markets," she lamented. "There is exploitation of the ignorant. I hope that gets changed in the future. People come for the Prophet's Mosque and the Kaaba, but there's some exploitation and a lack of oversight."

Islamic finance struggles toward mainstream in azerbaijan


´╗┐When a businessman in Muslim-majority Azerbaijan wanted a bank loan that complied with Islamic principles, until a few years ago he had to negotiate it under the table. The government's fear of political Islam forced banks to conduct "guerrilla Islamic finance" in which sharia-compliant deals were hidden under the appearance of conventional banking, says Fuad Aliyev, a scholar at Johns Hopkins University's Central Asia-Caucasus Institute in Washington DC. Now several banks in Azerbaijan openly offer a limited range of services based on Islamic principles including bans on interest and pure monetary speculation. The country's largest bank, majority-owned by the state, has opened an "Islamic window" providing finance to small companies. Yet the government of the former Soviet state has remained reluctant to take a key step: creating a law to regulate the industry, which could allow commercial banks to expand their operations and issue sukuk or Islamic bonds. Islamic finance was born in its modern form in the 1970s, catering mainly to Muslims in the Gulf and southeast Asia. Over the past decade its growth has accelerated as economies in those regions have boomed. Its slow, incomplete growth in Azerbaijan, where an estimated 93 percent of the 9 million people are Muslim, reflects fear that Islamic finance could encourage Islamist politics, bankers and analysts say. But the government of President Ilham Aliyev cannot ignore the opportunity to cater for Gulf investors to the south."If a regulatory framework is developed and if Islamic finance is included into curricula (of local universities), there will be huge development of the industry in Azerbaijan," said Mahir Humbatov, an expert in Islamic banking at the Centre for Strategic Studies in Baku. AMBIVALENT After Azerbaijan emerged from the wreckage of the Soviet Union two decades ago, it quickly joined the Islamic Development Bank (IDB), a Jeddah-based institution with a membership of Muslim nations, and has received over $1.2 billion in funding from the bank, spending most of it on infrastructure projects.

But until the last couple of years, the government did not want a domestic Islamic banking industry, bankers say. Only one small Azeri bank, Kovsarbank, attempted to provide a full line of sharia-compliant services; the central bank of Azerbaijan revoked its license in January 2010, saying banking laws had been violated, and the bank was closed. By contrast, ex-Soviet Kazakhstan is bidding to become a centre for Islamic finance in the region. In July, the government-run Development Bank of Kazakhstan issued a $75 million sukuk, the region's first Islamic bond, and more sukuk from the country are in the works. With only about 10 percent of Azeris praying regularly, according to polls, and women in mini-skirts strolling the downtown area of the capital Baku, Azerbaijan will not become a conservative Islamic state any time soon. Even so, "Islamic finance is viewed not as a commercial activity, but as Islamic activism by most of the Central Asian and Azeri regimes, and therefore considered as part of the 'Islamic threat'," said Aliyev at the Central Asia-Caucasus Institute.

Azerbaijan's Islamist Party, banned in the mid-1990s on suspicion of spying for neighboring Iran, operates underground; last year seven members were sentenced to long jail terms for setting up military units and preparing terrorist attacks. The government, funded by rich reserves of oil and gas in the Caspian Sea, appears able to handle the security threat. But it also faces social pressure to permit more Islamic influence in daily life; last year hundreds of people protested to demand the right for girls to wear Muslim headscarves in schools. SLOW TURN Such tensions have hampered Azerbaijan's slow turn towards Islamic finance over the last couple of years. Several banks have begun offering the option of making Islamic deposits which, instead of paying interest, provide returns from investments in sharia-compliant business ventures.

Azerbaijan's largest lender, International Bank of Azerbaijan