The UK Electronic Trade Documents Bill – a Gamechanger in Digitalized International Trade?

The UK Electronic Trade Documents Bill 2023 (ETDB 2023) completed its final Committee Stage in the House of Lords in February 2023 and is now with the House of Commons for final approval before going to King Charles III for Royal Assent, hopefully before the end of this year. Under the Bill, digital trade documents will be put on the same legal footing as their paper-based equivalents to give UK businesses more choice and flexibility in how they trade. Could ETDB 2023 evolve into a global governing model akin to the pre-eminent role English Law plays as the governing law for the documentation in the global bond and Sukuk market? What are the implications for Data Protection, Privacy, Credit and Investment Insurance and UK Trade Relations with OIC Member States? Mushtak Parker discusses the potential impacts of ETDB 2023 and prospects for global trade.

The imminent adoption of ETDB 2023 in the UK could not be timelier. One of the unintended consequences of the COVID-19 pandemic was the massive acceleration towards digitisation in almost all spheres of human activity, whether in e-Government, e-commerce, online banking and insurance, multimedia, data harvesting, healthcare, industry and so on.

Digitization has brought huge opportunities not only in reach, instant messaging, marketing, cost efficiencies and savings, and boosting trade and investment flows, but also for cybercriminals armed with a growing epidemic of scams, compounded by the apathy of the tech giants, who after all are the technological ‘facilitators’, albeit unintended, of online fraud and scams, and the shortcomings of regulators who are always a step or two behind the innovators and increasingly sophisticated cybercriminals.

In a world preoccupied by the sheer scale and pace of technological innovations in Artificial Intelligence, Metaverse and Blockchain, digitization and cybersecurity, especially in global trade and investment activity, must be a shared responsibility. But as Belgium-based SWIFT, the world’s leading provider of secure financial messaging services, “not all jurisdictions and regulators use the same terminology or have the same classifications when defining fraud and cybercrime. This can lead to fragmentation in an understanding of the data and statistics because they’re not always comparable.”

Technology, the World Trade Organisation (WTO) tells us, is a potentially empowering enabler of trade and investment, despite the tendency towards protectionism in times of geopolitical and economic uncertainty. As such, a defining moment will come when the UK’s Electronic Trade Documents Bill 2023 gets imminent Royal Assent and enacted in law. It will not only reduce the cost of trade transactions but also be good for the environment.

While this transformation to digital trade documents has taken some 131 years since the adoption of the Bills of Exchange Act in 1882, the UK government projects a major boost for the country’s international trade, already worth more than £1.4 trillion, and will reduce the estimated 28.5 billion paper trade documents printed and flown around the world daily. Business-to-business documents such as bills of lading – a contract between parties involved in shipping goods and bills of exchange used to help importers and exporters complete transactions currently have to be paper-based due to longstanding laws. According to the International Chamber of Commerce, digitalizing trade documents could generate £25 billion in new economic growth in the UK by 2024, and free up £224 billion in efficiency savings.

Policy Rationale
The rationale behind launching ETDB 2023 is simplicity itself. In their joint Impact Assessment (IA) of the Bill, the UK Departments for Digital, Culture, Media & Sports and for Science Innovation and Technology stress that “the operation of many documents important to international trade, including bills of lading and bills of exchange, is premised on their possession. The person in possession of the relevant document can claim performance of the obligation recorded in the document and can transfer the right to claim performance of that obligation by transferring (physical) possession of the document.”

However, in this fast-evolving digital age, there are deficiencies in the current legal position which prevent the move to electronic versions of the above documents. English law – like many other trade jurisdictions around the world – does not currently recognise intangible things as being amenable to possession. This means that electronic forms of trade documentation, which are considered to be intangible, cannot be possessed and cannot, therefore, be used in the same way as their paper equivalents. “This,” said the IA, “was not an issue when technology did not exist to make electronic documents with the same relevant properties. However, technology has now developed which can provide an electronic equivalent of a paper trade document. The legal system has not kept pace with this technological development. The proposed legislation will correct this problem, allowing electronic trade documents to have the same legal effects as their paper equivalents. Without (primary) legislative change, trade will continue to be paper-based and thus more costly, complex, and time-consuming than it otherwise could be.”

The IA assessed two options. Doing nothing, it concluded, would yield no additional benefits. Businesses would have to continue to deal with unnecessary costs, complexity and time delays (all of which have been exacerbated by the pandemic). Inaction could also diminish the primacy of English and Welsh Law as the governing law for international trade transactions, as traders may instead switch to using US or Singaporean laws to underpin their transactions. For many OIC countries with their historical, kith and kin, and diaspora relations with Britain, London as the global financial centre and the most proactive non-Muslim jurisdiction for Islamic financial transactions, including Murabaha and Sukuk, and the pre-eminence of English law as the governing law for the documentation of the above transactions in the international market, the implications could be important.

The chosen approach is to introduce primary legislation to recognise electronic trade documents on an equal legal footing to physical trade documents. “This allows for take-up according to the preference of firms and technology coordination across industries. Benefits include increased growth through improved trade efficiency.”

However, the adoption of the Bill will not necessarily see a rush to electronic trade documentation migration. Nor will it be a panacea to seamless trade documentation, as some have claimed. Only those businesses, says the UK government, that see benefits as outweighing the costs will switch to using electronic trade documents. It is expected that once larger businesses and organisations make the switch, then smaller firms will soon follow. ETDB 2023, says its promoters, “is an incredibly important piece of legislation, small, succinct, and simple with just one clear aim – to allow the digitization of trade documents.” Not surprisingly, there is no associated secondary legislation.

Monetised Benefits and Costs
These include:

i. The total costs saved by businesses that shift to electronic trade document systems, through saving on the costs and time associated with producing and handling these documents, or experience issues such as paper documents being lost or information being re-keyed incorrectly – which have until now been a significant cost to the business.

ii. The initial transition costs, for example, developing new internal processes, purchasing the required technological capabilities and training staff to use the new system.

iii. Familiarisation costs incurred by businesses, whether they ultimately adopt electronic systems or not.

iv. Ongoing costs associated with operating the electronic trade document systems, including continuous staff training and technology maintenance/upgrades.

Not surprisingly, there is no associated secondary legislation. The International Chamber of Commerce (ICC) is confident that the digitalisation of trade documentation is expected to lower transaction costs and promote greater efficiency, transparency and security in international trade. It stresses that there is a strong desire in industry to transition towards digitized ways of doing business.

Given the cross-jurisdictional nature of international trade, global legal reform is essential to facilitate the use of electronic trade documents. In recognition of this international coordination problem, the UN proposed a Model Law on Electronic Transferable Records (UNMLETR). However, whilst some smaller jurisdictions, such as Singapore and Bahrain, have enacted legislation consistent with the model law, no major economy is yet fully compliant. Given the extent to which international trade transactions (even those not involving the UK) are based on the Law of England and Wales, it is most likely that UK legal reform in line with UNMLETR would act as a model and significant catalyst towards global legal reform and the development of an electronic trade document ecosystem.

Under its 2021 G7 Presidency, the UK secured an agreement amongst G7 countries to work together to progress coordinated legal reforms in line with UNMLETR. The UK government commissioned the Law Commission of England and Wales to examine the provisions of UNMLETR and make recommendations on how to bring UK law into conformity, which has resulted in the current ETDB Bill. “This legislation is permissive and stipulates that business-to-business electronic trade documents which satisfy certain criteria should be treated as functional equivalents of their paper counterparts. The proposed reforms cannot be made in any other way than through primary legislation because there are no existing legislative powers which could be used to implement this measure to cover the range of trade documents covered by the Bill,” said the IA.

Data Protection Adequacy
There is one other important implication, including for OIC/ICIEC member states dealing with or through institutions in the UK. On 18 July 2023, the UK and Türkiye announced plans to begin talks on an updated free trade agreement (FTA). The deal would replace the existing UK- Türkiye FTA, which was rolled over when the UK left the European Union and doesn’t cover key areas of the UK economy like services, digital and data. The UK is the second biggest services exporter in the world – behind only the US, and the services sector contributes around 80% of the UK’s GDP.

“Türkiye is an important trading partner for the UK,” stresses British Business and Trade Secretary Kemi Badenoch, “and this deal is the latest example of how we are using our status as an independent trading nation post-Brexit to negotiate deals that are tailored to the UK’s economic strengths.”

Bilateral trade between Türkiye and the UK reached £23.5 billion in 2022 – up more than 30% from the previous year. “The new FTA is an opportunity to strike a 21st century deal that is better suited to the modern economies of both the UK and Türkiye, covering areas such as digital trade and services, and could also potentially lead to cheaper goods and more choice for UK and Turkish consumers,” she added.

Türkiye is a major supplier of goods such as vehicles, clothing and electrical machinery and goods to the UK, which is its 4th largest goods export market, in return for £6.4 billion of UK goods exports, including power generators and metals.

In terms of data privacy and transfer, Türkiye could be a beneficiary of London’s policy to grant prioritised countries data adequacy status so that UK-based organisations can transfer personal data to these countries without restrictions or safeguards, subject to them passing the impact assessment. South Korea is the latest country to be afforded this “Green Rated – Fit for Purpose” New International Data Transfers Adequacy status by the UK Department for Digital, Culture, Media (DDCM) and Sport after approval from the UK’s Regulatory Policy Committee. The Status is considered fit-for-purpose for various business sizes, including small and micro businesses.

According to the DDCM, the status proposal aims to reduce barriers and burdens to organisations transferring personal data to the Republic of Korea while providing trust and confidence that all citizens’ data rights are upheld. The proposal is expected to be net-beneficial to businesses as they would no longer be required to purchase International Data Transfer Agreements (IDTA) to send data to the above country.

Export, Insure and Thrive – KazakhExport Stresses the Integration of Islamic Finance into the National Agenda of Kazakhstan Can Lead to the Expansion of Credit Insurance

Of the six Central Asian Republics, Kazakhstan has enjoyed the most proactive partnership with the IsDB Group, having acceded to membership of the multilateral development bank in 1995 and of ICIEC in 2003. Since then, ICIEC has insured a total of US$7.2 billion for trade transactions in Kazakhstan. In addition, ICIEC, through its risk mitigation solutions – credit and investment insurance, guarantees and reinsurance – supports infrastructure development and projects in line with achieving the goals of the UN SDGs, the Paris climate agreement towards Net Zero and Kazakhstan’s Green Growth agenda. The Corporation enjoys an excellent relationship with KazakhExport, the national ECA of Kazakhstan. Kazakhstan, blessed with natural resources, is also seeking to diversify its economy away from reliance on hydrocarbons, and to boost exports, especially non-commodity products, both to neighbouring Central Asian markets and beyond. The signs are of much greater support from KazakhExport to local manufacturers and exporters and cooperation with ICIEC. Mr. Aslan Kaligazin, Chairman of the Management Board of KazakhExport, in an exclusive interview, discusses the importance of credit and investment insurance and cooperation with ICIEC as a driver of dynamic growth in the economy in an era of global trade tensions and economic uncertainties, and the supporting role of KazakhExport in accelerating the country’s export ambitions.

Aslan Kaligazin: The Export Insurance Company (KazakhExport) is a relative newcomer as an export credit agency established as a national company on 10th March 2017, whose sole shareholder is the National Managing Holding Company, Baiterek JSC. In the context of your Development Plan (2014-2023), what is the state of the credit and investment insurance culture in Kazakhstan, especially in a world in which new risks and uncertainties keep materializing?

We believe that in the face of the emergence of new risks and uncertainties, the culture of credit and investment insurance in Kazakhstan shows dynamic growth. I would like to note that within the framework of the National Development Plan (2014-2023) and with the forthcoming creation of an Export Credit Agency, KazakhExport made significant efforts to strengthen the credit and investment insurance culture and industry in the country.

In general, geopolitical and trade tensions around the world have affected many of the key markets for Kazakh exporters. However, such changes could also create opportunities for Kazakh businesses through economic diversification based on increased investment in the non-commodity sector. Therefore, it is important for exporting companies to improve the culture of trade insurance. This will ensure financial stability, protection against unforeseen losses and will promote the development of exports and investment.

In general, the growth of the culture of insurance and the level of risk management in companies, as well as the increase in the degree of confidence in development institutions on the part of exporters, have a positive effect on the development potential of KazakhExport, i.e. the potential involvement of Kazakh manufacturers in export activities will help increase the number of our company’s clients and the volume of government support measures provided.

According to your own figures, the volume of your support for Kazakh exporters increased by 27% to 259.1 billion tenge (US$580 million) in 2022 compared to 90.2 billion tenge (US$237 million) in 2018. This suggests a low starting base, but a huge potential for business opportunities across several market segments. What are your priorities for 2023 and beyond in the context of your own business strategy and objectives and Kazakhstan’s National Export Strategy and development agenda? What is the potential to increase the above figures substantially as the country accelerates its export strategy, its inward FDI requirements, especially to finance projects in key sectors, including mining, transport, agribusiness and infrastructure in general?

In 2023, KazakhExport will continue its main activities to support Kazakh exporters in the manufacturing sector, to implement sectoral measures for legislative improvement and present KazakhExport as a single operator for the promotion of non-commodity exports.

The main goal of the state policy in the field of exports is to diversify the export basket and ensure the growth of non-primary exports at a faster pace. As part of stimulating the export potential of Kazakhstan, as well as diversifying exports with a focus on high added value, a strategically important area of activity for KazakhExport will be strengthening of financial support for exporters.

As part of assistance in increasing the export potential, KazakhExport sets itself the goal of increasing the volume of supported noncommodity exports, which will be carried out through the implementation of such tasks as: expanding the range of services provided to support exporters and improving existing instruments of financial support for exports. To do this, we plan to constantly monitor the needs of the market, based on the needs of customers, taking into account the place and role of KazakhExport in supporting Kazakh exports. In general, in the implementation of the above goals, we see significant potential for a significant increase in the performance of our Company.

As part of assistance in increasing the export potential, KazakhExport sets itself the goal of increasing the volume of supported noncommodity exports, which will be carried out through the implementation of such tasks as: expanding the range of services provided to support exporters and improving existing instruments of financial support for exports. To do this, we plan to constantly monitor the needs of the market, based on the needs of customers, taking into account the place and role of KazakhExport in supporting Kazakh exports. In general, in the implementation of the above goals, we see significant potential for a significant increase in the performance of our Company.

The first Facultative Reinsurance Agreement (FRA) between ICIEC and KazakhExport was concluded back in 2015 under a financial leasing transaction for Azerbaijan Railways of mainline Mr. Aslan Kaligazin, Chairman, Management Board, KazakhExport Export, Insure and Thrive – KazakhExport Stresses the Integration of Islamic Finance into the National Agenda of Kazakhstan Can Lead to the Expansion of Credit Insurance APR-JUN. 2023-QUARTER 2 09 locomotives of the TE33A Evolution type for a period of 7 years. ICIEC accepted 70% of the total insurance limit in the amount of US$5.6 million for reinsurance from KazakhExport.

Furthermore, during 2020-2021, painstaking work was carried out on the possibility of accepting documentary letters of credit insured by KazakhExport for obligatory reinsurance, which resulted in the conclusion in October 2021 of an obligatory agreement covered by 16 banks in Russia, Uzbekistan and Tajikistan – the first in the history of Kazakhstan – with ICIEC and KazakhExport each underwriting 50% of the risks respectively.

In October 2022, this agreement was extended with the inclusion of 21 banks in Uzbekistan, Kyrgyzstan, Tajikistan and Mongolia. As a result, for obligatory reinsurance in the period 2021– FH 2023, US$14.957 million in liability was transferred to ICIEC. In 2022, facultative reinsurance agreements for a 50% share each under letters of credit issued by the largest Tajik Amonat Bank from the total insurance limit of US$7,161,263 were concluded.

What can ICIEC and KazakhExport do more as individual entities in terms of enhancing your cooperation, whether in terms of cost of premiums, cost of finance, risk perception, product profile, capacity building and technical support?

ICIEC and KazakhExport can take a number of measures to expand cooperation and improve interaction between them. For example, ICIEC and KazakhExport can actively exchange information on markets, forecasts, risks and trends in relation to investment insurance and export credit. This will allow both organizations to better understand each other’s needs and requirements and offer related products and services.

Another aspect is the guarantee of the best insurance premiums and financing – ICIEC may consider the provision of preferential conditions for insurance premiums for Kazakh exporters cooperating with KazakhExport. In addition, our organizations can work together to improve the risk assessment of investments and exports. It is also worth considering the development of new products and services that would meet the needs and requirements of Kazakh exporters and investors. This may include more flexible insurance terms, different types of financing, risk management tools and other innovative solutions.

In addition, we aim to expand cooperation in the field of reinsurance in export credit transactions with Arab countries. In general, the partnership between ICIEC and KazakhExport has the potential to improve insurance and financing conditions, reduce risks and provide more effective support for export development.

Private sector engagement is crucial. Embedding commercial opportunities and helping corporates and banks make a material difference to support positive outcomes in food security, climate change, energy transition and infrastructure building is something that risk mitigation tools can facilitate. Private sector engagement requires credit enhance-ment, which insurers such as ICIEC, KazakhExport are uniquely positioned to do so through their sustainability policies and accessibility to national and subnational bodies, which engage with climate action and food security agencies, projects and transactions. Do you concur and what are the priority areas which you are focusing on?

The trend towards sustainable development on a global scale is gaining momentum and creates new opportunities for exporters, new opportunities are opening in foreign markets. KazakhExport pays special attention to supporting sustainable development projects. Compliance with international standards in sustainable development applicable to ECAs is important both in terms of positioning KazakhExport on international platforms as a progressive ECA, and in terms of creating a positive image of Kazakh companies in foreign markets. For these purposes, KazakhExport will improve the environmental review and assessment of the environmental and social impacts of export projects, taking into account international standards enshrined in the OECD recommendations.

The development of its own expertise in the sustainable development agenda will allow the Company to expand international cooperation and participate in joint projects in the field of sustainable development with foreign ECAs and banks. Another important activity of KazakhExport will be the development of insurance support for responsible exporters, expressed in support of export projects related to reducing environmental impact and adaptation to climate change by providing more optimal conditions for insuring green projects, as well as expanding support for investments and export transactions of companies with a high level of ESG responsibility for the development of the “exports of the future”.

De-risking solutions are important to act as an absorber and mitigator for transactions and projects and countries’ sovereign risk or to address tenor mismatch with investors’ appetite. Credit and investment insurance are essential for developing increased trade, and FDI flows. The opportunities are huge in ICIEC member states because the insurance premium market penetration and starting base are very low. I understand that Kazakhstan is currently looking at ways to achieve greater integration of Islamic finance into its mainstream national development agenda. What are the potential implications for the credit and investment insurance business?

Undoubtedly, Islamic finance is a rapidly growing service segment. The distinguishing principles of this sector are the examples it sets for all financial institutions. The main goals of Islamic banking are not limited to simply making a profit by any available means but are aimed at establishing fair and mutually beneficial partnerships. In Kazakhstan, Islamic finance is at the stage of active development.

With proper regulation and governmental support, we can achieve high growth rates and effective implementation of Islamic financial instruments. Kazakhstan seeks to develop the Islamic finance industry to create alternative sources of finance. In this direction, the country is actively creating the necessary infrastructure and regulatory framework that meets the best international practices and standards.

In general, the integration of Islamic finance into the national agenda of Kazakhstan can lead to the expansion of the insurance market, the development of new products and the strengthening of ethical principles. It will also require training and adaptation in the credit and investment insurance industry in order to successfully implement Islamic financial instruments.

Looking ahead, how do you see the trajectory KazakhExport’s relationship with ICIEC, the IsDB Group and with the credit and investment insurance business?

We are convinced of the great potential of joint projects implementation. We look forward to expanding our mutually beneficial partnership with ICIEC in the long term. Strengthening cooperation with ICIEC allows us to increase the financial strength and expand the Company’s capabilities abroad, reducing the burden on the portfolio and increasing the coverage of supporting domestic exporters.

This provides Kazakh exporters and banks with high reliability of insurance coverage. We believe that it is necessary to focus on further growth in the volume of transfers to obligatory and facultative reinsurance as a part of KazakhExpor’s portfolio, on instruments that comply with the rules of Islamic financing and insurance (Takaful).

De-risking Business Opportunities along the Silk Road Using Credit and Investment Insurance to Boost Exports, Development Projects, Interconnectivity and Green Growth

Of the six Central Asian countries – Azerbaijan, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan – four have acceded to membership of ICIEC, with the remaining two, the Kyrgyz Republic and Tajikistan, expected to join imminently following active engagement between the Corporation and the respective governments. Central Asia is a region in transition. Since its extrication from the yoke of the Soviet Union, the republics have been navigating their pathways to economic and societal prosperity based on their respective development agendas. While this journey has at times been difficult at times both at home, in the region and amid global economic uncertainties, the region’s collaboration with the IsDB Group and ICIEC has shown huge potential in national advancement, regional interconnectivity and intra-OIC trade and investment. Oguz Aktuna explores the opportunities and challenges that lie ahead.

The first country I travelled to in Central Asia was Kazakhstan in 2011. It was on a mission to discuss and the subsequent implementation of the IsDB Group’s Member Country Partnership Strategy (MCPS) for Kazakhstan.

By then, Kazakhstan was the only ICIEC Member State in the region. In the last twelve years, we made numerous visits to the region, some of them with the CEO Mr. Oussama Kaissi to invite the central Asian countries to accede to membership of ICIEC. Often colleagues from the Underwriting and Legal Affairs departments accompanied us to deliver due diligence reports and documents of different transactions and sometimes to attend seminars and conferences.

Two common characteristics of ICIEC Member States in Central Asia are that they are former Soviet Union countries and are landlocked. At the same time, they are rich in hydrocarbon and mineral resources. Therefore, their economies are mainly built on the revenues of such resources. Not surprisingly, their governments have been aiming to diversify their economies. In this respect, they are keen to promote private sector development and exports.

In order to attract Foreign Direct Investment (FDI), they have passed new investment laws or improved the existing legal and regulatory frameworks and have established Investment Promotion Agencies (IPAs) such as AZPROMO, UZIPA, and KazakhInvest.
These Members States of ICIEC also follow their National Development Strategies to achieve a diversified economy. As such, they actively cooperate with MDBs such as the IsDB Group, the European bank for Reconstruction and Development (EBRD), Asian Development Bank (ADB), the World Bank (IBRD), the Asian International Infrastructure Bank (AIIB), and International Financial Institutions (IFI) to find innovative solutions and expand the sources of funding for projects in agriculture, infrastructure, energy, healthcare, education, transportation, climate change, food security, and so on.

As an alternative to funding projects from their national budgets, Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan developed their own Public Private Partnership (PPP) legislation frameworks to attract foreign direct investors and IFIs in government projects. Although the application stages of the PPP differ from country to country, all will have projects funded by this method soon. As a priority of the governments, Central Asian Member States have been heavily investing in education and human capital development, and consequently, they possess a growing cadre of young and well-qualified human resources.

Regional Connectivity

Regional cooperation is increasing among these countries, and joint funds and institutions/companies are being established for the common development of their economies. Cooperation also has a geographical perceptive and background. Central Asian countries are all neighbouring states, and they are on the historical Silk Road.

With the rise of East-West trade, due to the congestion of the seaports in the East and the progress of the Central Asia Regional Economic Cooperation Programme, Central Asian countries are becoming a centre of focus, and they cooperate in building new and upgrading the existing transport infrastructure and connectivity, including railways and ports on the Caspian Sea for an efficient and short route to European markets.

Being neighbours to Russia and/or having export-import relations established during the Soviet Union era, Central Asian states face difficulties due to the war in Ukraine and the resulting sanctions on Russia. Consequently, in several cases, they are forced to find new clients in foreign markets to export to. In line with their strategies to support non-mineral exports, some have established their own Export Credit Agencies (ECAs) with whom ICIEC has been cooperating in providing reinsurance services, such as KazakhExport and UzbekInvest. The volumes of exports insured by these entities are increasing as exports increase year-on-year.

At ICIEC, we are confident that as an exporter of agricultural commodities, livestock, and processed food, Central Asia can and will cater to the needs of the world in terms of food security. ICIEC has been closely following the Central Asian region’s needs in trade credit and investment insurance and guarantees to provide on-time and high-quality service to its Member States there as it does in all its 49 Member States. As the number and volume of transactions from the region are increasing, ICIEC has decided to have a physical presence on the ground and has recently appointed staff to its Regional Hub in Almaty, Kazakhstan.

ICIEC and Kazakhstan

Kazakhstan joined ICIEC as a Member in 2003 – its oldest Central Asian Member State. Since then, ICIEC has insured a total of US$7.2 billion for trade transactions in Kazakhstan. This total can be broken down into US$3.1 billion in cover for the import of strategic goods into Kazakhstan and US$4.2 billion in cover exports from Kazakhstan.

ICIEC’s portfolio includes transactions related to imports of excavators and dump trucks from Japan for the mining industry as well as other types of capital goods and strategic goods for other industries. On the export side, ICIEC is supporting the export of locomotives, electronic goods, and other manufactured goods. ICIEC’s involvement in trade transactions helps Kazakhstan’s manufacturing, mining, and other sectors in increasing production capacity and securing new jobs. Diversification of the economy is a major goal of the Government of Kazakhstan as the major source of revenue is from hydrocarbon exports.

In line with ICIEC’s priority to cooperate with the national ECAs of Member States and help them support their countries’ exports, ICIEC has maintained an excellent relationship with KazakhExport, signing an MoU for cooperation in 2014. The MoU promotes cooperation and expands the insurance capacity of both institutions. In 2015 and 2023, ICIEC extended US$25 million in reinsurance support to KazakhExport for the export of locomotives to Azerbaijan Railways. In 2021, ICIEC concluded a Facultative Reinsurance Agreement with KazakhExport for exports to Uzbekistan, Tajikistan, and other countries.

ICIEC is closely following the PPP projects in Kazakhstan and is in contact with foreign investors, the Kazakhstan PPP Centre, and international banks to support PPP projects in the country. ICIEC is also working with its IsDB Group peers IsDB, ITFC, and ICD to enhance the Group’s synergy and expand joint operations in Kazakhstan.

ICIEC and Turkmenistan

Turkmenistan became an ICIEC Member in 2019. In 2022, ICIEC provided US$40 million in insurance coverage to ING Bank for a financing facility in Turkmenistan for the purchase of Komatsu earthmoving machinery from Japan for the development of the country’s agriculture sector. The seven-year insurance cover mitigates non-payment risk and comes under ICIEC’s Non-Honouring of Sovereign Financial Obligation (NHSFO) Policy. The facility was extended to the Government of Turkmenistan through the State Bank for Foreign Economic Affairs (TFEB).

Agriculture is a significant economic sector in Turkmenistan. The imported machinery will be used to build and maintain irrigation canals in the agricultural regions. This will help the economy to diversify from dependence on the hydro-carbon sector. The development impact of the facility and insurance coverage is wide-ranging. It includes reducing Turkmenistan’s exposure to volatile commodity prices, diversifying the economy and exports, stabilizing import substitution and balance of payments, improving food self-sufficiency and the efficiency of the agriculture sector by providing the latest irrigation technology, thus increasing yields, and promoting the rational use of water resources and the provision of clean water.

The facility is in support of five U.N. SDGs, namely achieving Zero Hunger (SDG2) through food security, improved nutrition, and sustainable agriculture, provision of Clean Water and Sanitation (SDG6), promoting Responsible Consumption and Production (SDG12), contributing to Climate Action (SDG13) and forging Partnerships for Sustainable Development (SDG 17).

Similarly, in 2022, ICIEC provided US$20 million in insurance coverage to ING Bank (Tokyo Branch) for a financing facility to Turkmenistan to buy Toyota taxis, buses, and minibuses supplied by Sumitomo Corporation. The vehicles will be used for intra and intercity transportation in Ashgabat and throughout Turkmenistan and will help ease congestion.

The seven-year insurance cover mitigates non-payment risk and comes under ICIEC’s Non-Honouring of Sovereign Financial Obligation Policy. The financing facility was similarly extended to the Government of Turkmenistan through the State Bank for Foreign Economic Affairs (TFEB).

The transport infrastructure is an important part of the development of the economy. In 2020, transport contributed 4.5% to the country’s GDP. Roads are the predominant mode of transport in Turkmenistan, carrying roughly 86% of total freight volume and about 60% of total passengers. Throughout the country, existing roads are being upgraded, and new roads are being built. The vehicle fleet is also being upgraded with the purchase of new buses, trucks, and taxis.

The transport sector plays a vital role in Turkmenistan, which is becoming a key transit country in Central Asia under the Central Asia Regional Economic Cooperation Programme. The efforts to provide better links to and within Turkmenistan are expected to lead to more jobs, higher incomes, and less poverty throughout the country.

The facility is in support of three U.N. SDGs, namely achieving Decent Work and Economic Growth (SDG8) through promoting sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all, Industry Innovation and Infrastructure (SDG9) through building resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation, and Sustainable Cities and Communities (SDG11) by making cities and human settlements inclusive, safe, resilient, and sustainable.

Since Turkmenistan’s membership accession to ICIEC in 2019, the Corporation has contributed to promoting foreign direct investment and expanding the country’s export base. ICIEC stands ready to support Turkmenistan by mitigating political and commercial risk for trade and investment through the provision of its Shariah-compliant insurance solutions for banks, corporates, export credit agencies, and other insurers. ICIEC prioritizes support for projects that contribute to Turkmenistan’s strategic development goals.

ICIEC and Uzbekistan

Uzbekistan joined ICIEC as a Member in 2019. ICIEC has insured a total of US$758 million business activities in Uzbekistan to date, comprising US$495 million in trade and US$263 million investment-related transactions.

In the telecommunications sector, ICIEC provided a total cover of US$50 million for transactions between two of China’s largest telecom equipment manufacturers and Uzbekistan’s state-owned telecom operator. ICIEC’s support enabled Uzbekistan to facilitate growth in its telecom sector and aligned with the Government’s National Development Strategy for 2017-21.

In energy investments in Uzbekistan, ICIEC provided US$60 million in support for Uzbekistan’s energy generation and transmission investments in a transaction signed on 11 April 2022. In the five-year deal, ICIEC provided political risk insurance (PRI) coverage for Hidro Enerji to make an equity investment of US$40 million in Odas Enerji CA, Uzbekistan.

This is a special purpose vehicle (SPV) for the Engineering, Procurement, and Construction (EPC) of a 174-megawatt combustion engine combined cycle power plant in the Khorezm region of the country. The project is estimated to generate US$20 million of revenues under a Power Purchase Agreement (PPA) signed with the Government of Uzbekistan.

The equity investment insurance is against three risks (breach of contract, expropriation, and transfer restriction) and follows an investment agreement signed by Odaş Enerji and the Government of Uzbekistan (represented by the Ministry of Investment and Foreign Trade). The investment aims to improve energy infrastructure, increase energy efficiency, reduce power outages in the Khorezm region, support employment and economic growth, and contribute to the government’s industrialization and import substitution ambitions.

ICIEC has been active in supporting the mining and metals industry in Uzbekistan. ICIEC extended EUR30 million reinsurance support to EXIAR (the Russian ECA) for the construction of the Tashkent Metallurgical Factory, which will produce steel for the automotive industry and create over 600 jobs.

In 2022, ICIEC provided a US$75 million cover in support of Uzbekistan’s vital mining capital expenditures. The five-year deal provided cover to ICBC Standard Bank (UK), for non-payment risk in a syndicated financing facility for Navoi Mining and Metallurgical Company (NMMC) in Uzbekistan. NNMC will use the funds for capital expenditure purposes.

NNMC is specifically involved in the production of precious metals. Gold is Uzbekistan’s major export, and the mining industry provides a major source of growth to the economy, which was impacted by the pandemic. The project aims to help with the government’s industrialization and sustainable mining efforts. NMMC currently supports the economy as it contributes to increasing tax and dividends amounting to around 20% of GDP, helping to narrow the budget deficit.

ICIEC provided a non-payment cover to ICBC Standard Bank using its Non-Honouring of Financial Obligation by a State-Owned Enterprise (NHFO-SOE) policy. Through the creation of direct and indirect jobs and the modernization of mining equipment, the project is contributing to two of the UN Sustainable Development Goals (SDGs). These include SDG8 (improving sustained, inclusive economic growth and decent and productive employment), and SDG9 (improving industry, innovation, and infrastructure by building resilient infrastructure, fostering innovation, and promoting inclusive and sustainable industrialization).

ICIEC has also been active in financing the agriculture, SME, and banking sectors in Uzbekistan.  Since 2020, ICIEC provided insurance coverage to international financial institutions for their lending to banks in Uzbekistan, such as Sanoat Qurilish Bank (SQB), Agrobank, Mikrokreditbank, and Asakabank. The banks further on-lend to the agricultural sector, SMEs, and clients for trade financing purposes.

By facilitating investment in strategic sectors, ICIEC promotes FDIs as well as financings, thereby supporting Uzbekistan’s specific development goals. In August 2021, ICIEC, Uzbekinvest, the Export-Import Insurance Company of Uzbekistan, and Uzbekinvest International Insurance Company Ltd (UK) signed an MoU supporting cooperation in expanding the insurance capacity of the institutions. In June 2021, ICIEC signed another MoU with the Investment Promotion Agency (UZIPA) under the Ministry of Investments and Foreign Trade to cooperate in attracting FDI into the country.

Similarly, on 20^th July 2023, ICIEC and the State Asset Management Agency of the Republic of Uzbekistan (UzSAMA) signed an MoU, whereby the two entities will collaborate in exchanging experiences in the privatization process. Both parties have committed to advancing their cooperation to attract potential investors for privatized state assets in Uzbekistan. ICIEC is in contact with the PPP Development Agency and international banks to explore opportunities to support PPP projects in Uzbekistan’s energy and healthcare sectors. ICIEC is cooperating with international banks for their lines of financing to Uzbek banks and entities.

ICIEC and Azerbaijan

Azerbaijan acceded to ICIEC Membership in 2023. To date, ICIEC has insured a total of US$104.8 million in business activities, comprising US$59.5 million in trade and US$45.2 million in investment-related transactions in Azerbaijan.

ICIEC is working closely with the Government of Azerbaijan to support economic and social infrastructure projects in trade, agriculture, infrastructure, healthcare, education, renewable energy, water, sanitation, transportation, and urban development. ICIEC supports Azerbaijan’s 2030 National Priorities for Socio-Economic Development Plan by promoting sustainable economic growth and high social welfare through its financing and insurance in line with the Government’s priority of building a country of “Green Growth” and a clean environment.

ICIEC’s presence as a partner provides a measure of reassurance and encouragement to potential investors seeking opportunities in Azerbaijan. The investment projects provide employment, enhanced, modern and efficient infrastructure, and better quality of life for citizens.

A Landlocked Resource Rich Country with a Young Demography Unlocking the Development Potential of Vision “New Uzbekistan,” Islamic Finance and Credit and Investment Insurance

In many respects, the Republic of Uzbekistan has a lot going for itself. The country has a diverse economy that has witnessed wideranging markets and some political reforms to increase jobs, exports and prosperity in the past few years.

Uzbekistan benefits from abundant natural and mineral resources, a relatively low public debt, a growing workforce, and a strategic geographic position between China and Europe on the historical and now rejuvenated Silk Road. It is a landlocked country, blessed with a young demography of 36.05 million people – by far the largest and most densely populated in the region accounting for 45% of Central Asia’s total population.

The government of President Shavkat Mirziyoyev guided by its Vision “New Uzbekistan”, has invested heavily in education and human capital development over the last decade or so, which has resulted in a workforce ready and arguably most suited in the region to meet the country’s development challenges that lie ahead. The IMF projects Real GDP Growth to reach 5.3% in 2023, but if Uzbekistan’s economy outperforms in the next two years, the growth trajectory could hit between 6% to 8%, respectively.

Like in many countries, the country’s economic fortunes are beholden to the Ministry of Finance’s policy and ability in containing and fighting inflation (consumer prices), which is projected by the Fund at 11.8% in 2023. The good news is that the inflation rate has been flattening from 12.9% in 2020, with a downward trajectory reaching 10.8% in 2021, 11.4% in 2022, and projected to decrease to 6.5% in 2025.

Uzbekistan acceded to membership of the IsDB in 2003 but is a relative newcomer to the Shariah-compliant credit and investment insurance ecosystem, having become the 46th member of ICIEC only in 2019. Since 2003, the IsDB Group has approved a total of US$3.464 billion in development financing for Uzbekistan in different sectors, including transport, energy, water, sanitation, agriculture, education, finance, and health. Of this, over US$1 billion has been dedicated to the private sector and trade financing. As of 12 May 2023, the IsDB active portfolio comprises of 70 active operations for a total amount of US$1.931 billion.

To date, ICIEC has insured a total of US$758 million business activities in Uzbekistan, comprising US$495 million in trade and US$263 million investment-related transactions.

The above figures suggest that despite a huge proliferation of collaboration and financing in the last three years, the business activities and development cooperation between the IsDB Group and ICIEC with Uzbekistan, at best remains a “work in progress.” However, the bilateral and regional strategy ahead is encouraging and augurs well for near-tomedium cooperation, underpinned by close cooperation between Uzbek state agencies such as Uzbekinvest, (UZIPA), and (UzSAMA). Not surprisingly, the IsDB and ICIEC consider Uzbekistan a strategic partner that can play an essential development role in the region.

To date, ICIEC has insured a total of US$758 million business activities in Uzbekistan, comprising US$495 million in trade and US$263 million investment related transactions.

This includes Tashkent’s stated desire to put export credit and investment insurance and guarantees firmly on the credit enhancement and risk management solutions map. Equally important is the fact that President Mirziyoyev’s government has embarked on an ambitious policy to promote Islamic finance as part of its diversification of funding strategy. It has created a perfect storm for consolidating Shariahcompliant financing solutions as part of the overall financial services mix.

The future relations of the IsDB Group and ICIEC with Uzbekistan will be driven by the Group’s Member Country Partnership Strategy (MCPS) for Uzbekistan, which was launched in May 2023 on the sideline of the 2023 IsDB Group Annual Meetings in Jeddah. The MCPS for Uzbekistan is a five-year strategy document (2022-2026) which focuses on two main pillars with three cross-cutting areas:

Pillar 1 focuses on Supporting Economic Transformation:
The objective is to help Uzbekistan build a green, resilient and sustainable infrastructure that enables enhancing competitiveness, industrial and agricultural diversification of productive capabilities, supporting higher productivity, promoting exports, expanding formal-sector employment and strengthening the role of priority sectors that can generate high value added for the economy. In the implementation of this pillar, priority shall be given the supporting the private sector and promoting the business environment.

Pillar 2 focuses on Enhancing Human Capital and Enabling Environment:
The objective here is to support the economic transformation of the country by investing in human capital and improving welfare. The focusis also to improving access to healthcare and health outcomes, access to quality education in line with industry requirements, and mainstreaming the applications and use of ICT and digitalization across the board. The cross-cutting areas include i) integrating the perspectives of women and youth, ii) supporting climate change mitigation and adaptation, and iii) focusing on long-term capacity development.
Another potentially key driver is the development of a Regional Central Asia Connectivity Programme by the IsDB Group in partnership with the Asian International Infrastructure Bank (AIIB), focusing on improving intra-and inter-regional connectivity. The rationale behind the initiative is that given Uzbekistan’s landlocked geography, it is essential to boost regional integration and harmonize relevant legislation to enhance intraregional trade and investments. The aim is to leverage technological tools to help build a future promoting connectivity, competitiveness, and innovation in Uzbekistan with the region. ICIEC has repeatedly stressed the importance of investment in boosting GDP growth and enhancing development through increased productivity which are crucial for sustainable economic transformation. According to the World Bank, “investor confidence decreases when the direction of policymaking is unclear, uncertain or unpredictable.” The best indicator of investor confidence is the ease of doing business in an environment conducive to political and macroeconomic stability as well as a transparent system of corporate governance.

Since the accession of Uzbekistan in June 2019 till end June 2023, ICIEC has been steadily building its portfolio with Uzbekistan. The data is implicit.

i. Current Commitments in Uzbekistan reached US$36.81 million – 1.41% of total ICIEC Current Commitments.

ii. Exposure in Uzbekistan of US$350.161 million – 7.76% of total exposure.

iii. ICIEC Business Insured in Uzbekistan totalled US$719.36 million – 0.36% of total Business Insured, of which trade transactions accounted for US$456.21 million and investment insurance for US$263.14 million.

iv. New Commitments of ICIEC services for Uzbekistan totalled US$584.62 million – 0.5% of total New Commitments, of which trade transactions accounted for US$267.70 million and investment insurance for US$317.00 million.

v. The number of Uzbek entities that benefited from ICIEC’s services totalled 24 -0.11% of the total number of entities benefitting from ICIEC services, of which the number of Insurance Policies issued to Uzbek entities was 1 (one), and the number of Uzbek buyers and banks covered by ICIEC reached 23 respectively.

The future of Uzbekistan’s engagement with ICIEC could be greatly enhanced if it were to increase its current very low equity subscription of 0.08% to ICIEC’s capital, compared with Kazakhstan’s 2.28%and Turkmenistan’s 0.17%. One way Tashkent can do this is to commit and participate to the recent capital increase of ICIEC’s approved by its Board of Directors at the Corporation’s Annual Meeting during the 2023 IsDB Group Annual Meetings in Jeddah in May 2023.

One area ICIEC is destined to play a potentially important advisory and facilitating role is in Uzbekistan’s ambitious privatisation process. ICIEC, in this respect, has recently signed a Memorandum of Understanding (MoU) with the State Asset Management Agency of the Republic of Uzbekistan (UzSAMA), whereby the two entities will collaborate in exchanging experiences and expertise in the privatization process, including that of the banking sector.

Both parties have committed to advancing their cooperation to attract potential investors for privatized state assets in Uzbekistan. ICIEC is in contact with the PPP Development Agency and international banks to explore opportunities to support PPP projects in Uzbekistan’s energy and healthcare sectors. ICIEC is cooperating with international banks for their lines of financing to Uzbek banks and entities.

Enhancing De-risking and Credit Enhancement Business in ICIEC Member States

The importance of credit and investment insurance cannot be overstated. For an industry that has been around for over a century, the challenge ahead is not to pay endless lip service to its business case but to enhance awareness and market education among policymakers, regulators, multilateral, national and private sector insurers and Export Credit Agencies (ECAs), banking institutions, insurance providers, exporters, importers, investors and SMEs. This is particularly so in a global geopolitical and economic environment of persistent and evolving risks, precipitated in recent years by the onset and ongoing impacts of the COVID-19 pandemic, the supply chain disruptions and burgeoning fuel and food price rises caused by the Ukraine conflict, the ensuing global economic downturn and cost-of-living crisis which has slowdown the post-pandemic recovery towards pre-pandemic normalisation. The biggest challenge, however, is how to instil the culture of credit and investment insurance among the 57 Organisation of Islamic Cooperation (OIC) member states with its disparate back stories of economies, financial resources, trade and investment architecture, de-risking and payment systems and development agendas. Is there a two-tier approach to trade and investment risk mitigation already entrenched? Mr. Oussama Kaissi, CEO of ICIEC, considers the options for OIC countries as they seek to build on their trade and FDI potential and attractiveness.

Today, around 90% of all global trade relies on some form of credit, insurance or guarantees issued by a bank, insurer or specialist financial institution. As it has done for over a century, the credit insurance industry will continue to evolve and adapt to meet challenges – societal, environmental and economic – that lie ahead and support the real economy.

Credit and investment insurance typically acts as a catalyst that provides financing to the real economy through export and import flows and promotes foreign direct investment (FDI) movements across the globe. By protecting exporters and banks against the risk of non-payment, defaults and expropriation, credit insurance enables cross-border trade and investment.

As the latest data suggests from The Berne Union (International Union of Credit and Investment Insurers), the not-for-profit professional association representing the global credit and political risk insurance industry, the industry demonstrated great resilience and adaptability throughout the pandemic, the crisis in Eastern Europe and the global economic downturn. Over the year 2022, the credit and investment industry supported US$2.83 trillion of cross-border trade and investment (up 5% on 2021) with an additional US$68.6 billion in non-cross-border support for exporters. Berne Union Members, which include ICIEC, collectively provide payment risk capital worth US$2.5 trillion each year, insuring approximately 13% of the value of total global cross-border trade.

A recent survey conducted for The Berne Union Export Credit Business Confidence Trends Index shows that the industry remains confident and positive, despite the high-risk environment and the global economic and geopolitical uncertainties. “Strong global trade performance in 2022 provides cause for optimism, but high inflation, widespread geopolitical risk and the increasing frequency of insolvencies/rising pre-claims means underwriters remain cautious through Q1 2023,” were the sentiments of an overwhelming number of respondents.

The Index tracks perceived demand, risk appetite and claims in the export credit insurance industry, based on quarterly surveys of Berne Union Members. To capitalize on business growth opportunities and increase resilience within key sectors, the survey recommends an approach based on five core features: ‘Adapt and Innovate’, Greater flexibility and support for finance across all stages of the trade cycle, More partnerships between public and private sources of finance and risk capacity, Reduction of barriers, Aligning of incentives, and Increasing coordination across different spheres.

Industry is Well Positioned

Respondents maintained that their industry is well positioned to support economic stability and energy security while also playing a pivotal role in advancing energy transition, food security and resilience, and climate adaptability goals.

Most industrialised countries, and many emerging economies, provide official support to cross-border trade and investment through ECAs. A number of global insurance companies have also introduced credit insurance products representing the private market. There are also four multilateral agencies that provide credit and political risk insurance, focused mainly on specific geographic regions. The latter category includes ICIEC, uniquely the only Shariah-compliant multilateral insurer in the world and a member of the Islamic Development Bank (IsDB) Group. The reality is that many OIC countries are bereft of a national ECA, a gap often unofficially filled by ICIEC by virtue of its de facto engagement with counterparties (usually ministries, state agencies, banks and export trade associations) and adoption by these partners.

Another reality is that of the 57 OIC and 49 ICIEC member states, only 15 are acceded to some sort of membership of the Berne Union, with the latest being the Export-Import Bank of Malaysia Berhad (EXIM Bank) which joined as an Observer Member and participant in the Berne Union’s Prague Club Committee. The 15 members include the Kuwait-based pan-Arab Dhaman (The Arab Investment & Export Credit Guarantee Corporation) and two members from Indonesia – Indonesia Eximbank and PT. Asuransi Asei Indonesia (Asuransi Asei).

Membership in a prestigious international professional body is essential or a panacea to the trade and FDI ambitions and shortcomings of several ICIEC member states. But the lack of participation in industry bodies such as the Berne Union, the Aman Union (the professional forum of Commercial and Non-commercial Risk Insurers & Reinsurers in OIC Member States and members of Dhaman and ICIEC), inevitably deprives partners involved in trade and investment activities in and with member states of getting the necessary exposure to the latest regulatory, legal, market, financial innovation and technical developments, trends, and processes pertaining to the industry. It also deprives them of engaging with potential partners, learning from the experiences of peer best-in-the-industry entities, exchanging ideas and forging partnerships for the future.

As risk absorbers and mitigators, the current status quo represents the credit and investment insurance industry in the OIC countries with both challenges and opportunities. Especially as the global economy is in a rebuilding and reimagining mode in the wake of the pandemic, as well as in pursuit of net zero goals for decarbonisation, and mitigating the impact of the supply chain disruptions caused by the Ukraine conflict, especially in fuel and foodstuffs, which has raised renewed questions about food security and building resilience to future shocks.

State of the Industry in Aman Union Member States

ECAs in AMAN Union member states have generally witnessed rising growth in their operations – both conventional and Shariah-compliant – largely linked to government COVID-19 mitigation emergency packages, the reality is that the culture of credit and political risk insurance (PRI) in many markets remains underdeveloped.

All stakeholders have a role to play to foster increased awareness of credit and PRI, including policymakers, multilateral and private insurers, reinsurers, private sector, businesses, SMEs and industry bodies such as our Union. The benefits and opportunities are implicit, especially in mobilising additional private capital for development from local banks and institutional investors. PRI and credit enhancement have a track record of effectively de-risking and thus catalyzing private investment into emerging markets through capital-efficient instruments.

Channelling investment into sustainable projects presents a sizeable growth opportunity for insurers, especially in infrastructure and development projects. Insurers can design products to reduce risks in infrastructure projects and increase their attraction to investors.

Turk Eximbank’s incisive Technical Performance Analysis 2020-2021 presented to the 13^th Aman Union AGM in Dubai in May 2023 shows steady progress of the export credit and investment insurance ecosystem but from a relatively very low base.

The main findings are revealing:
i. Total capital base of Aman Union (AU) member entities was US$13.6 billion at end 2021 – up on the US$10 billion in 2020. Saudi EXIM accounted for 59 percent of the figure in 2021.

ii. Total number of policyholders in 2021 reached 8,493 – up 11 percent on 2020.

iii. Total number of buyers increased from 106,000 in 2020 to 116,000 in 2021, of which Turk Eximbank accounted for 51 percent.

iv. Total AU Business Insured in 2021 reached to US$49 billion – up 17 percent on 2020.

v. Top 5 members accounted for 83 percent of total AU Business Insured, led by Turk Eximbank at 48 percent and ICIEC at 20 percent.

vi. Total Short term Export business increased to US$35 billion in 2021 from US$28.6 billion in 2021.

vii. MT Business insured decreased sharply to US$200 million in 2021 from US$1.7 billion.

viii. Investment Business Insured increased from US$2.5 billion to US$3.1 billion in 2021 with ICIEC accounting for 71 percent.

ix. In 2021, total premium reached US$240 million, up 19 percent on the previous year.

The data reveals a very fragmented export credit and investment insurance ecosystem with a handful of players dominating, especially ICIEC, Turk Eximbank and Saudi EXIM, and the very low base for almost all the various indicators. It shows the huge gaps relative to the developed markets in the advanced economies and the work that needs to be done by member states and entities in almost all facets of the credit and investment insurance architecture, ranging from enabling legislation, regulatory and tax frameworks, risk mitigation strategies, product innovation, capitalisation, market depth, competition, awareness and market education.

In March 2023, ICIEC organized and hosted the 1st Capacity Building Program for the users of the OIC Business Intelligence Center (OBIC) in March 2023, stressing the Role of Credit Information Sharing, Business Intelligence, and Digital Transformation in supporting trade and investment decisions and how the OBIC platform can be used as an improved Credit Risk Management tool that will facilitate access to finance for trade and investment, as well as the mitigation of risks related to those activities.

Benefits and Challenges

The efficacy, benefits and challenges of credit insurance could not be better illustrated by ICIEC’s experience in Senegal. Over the past years, ICIEC has supported numerous landmark transactions and projects in Senegal with an investment totalling US$3.6 billion through risk mitigation, credit enhancement solutions and guarantees. Notable projects include Blaise Diagne International Airport (AIBD SA), Stade du Sénégal (Abdoulaye Wade Stadium), Dakar Expo Center, the Market of National Interest, Hann-Fann Wastewater Collector, and the Dakar Truck Station.

According to Madame Oulimata Sarr, Minister of Economy, Planning & Cooperation of Senegal, “The ICIEC guarantees (and de-risking tools) have enabled the realization of several infrastructure projects in Senegal. ICIEC’s credit and investment insurance products play a major role in project risk mitigation, as they make them more attractive to investors. In addition, these products make it possible to ensure projects are more bankable with foreign investors who have a high-risk perception when it comes to investing in Africa or in developing countries.”

However, several ICIEC developing member states are confronted with various dilemmas. Despite its vital importance in project financing, insurance, they point out, often contributes to the increase in the cost of a project, especially in Africa, which suffers from an unfavorable and biased credit rating. “As you well know, the pricing of insurance premiums is partly based on a country’s credit rating and as rating agencies overstate risk on the continent, African countries find themselves paying very high premiums,” noted Madame Sarr. As one of the most important development banks in the world, the IsDB Group, including ICIEC, could play a key role with rating agencies to change this perception of overvalued risk on the African continent. ICIEC, like other insurers, operate in the real world accountable to shareholders, market conditions, various risk metrics and its mandate.

Senegal’s call to insurers for a reduction in insurance premiums because “lower insurance premiums would help reduce project costs on the continent and make the market more accessible to African private sectors” merits consideration. But this is subject to collaboration, negotiation and demonstrable progress in enhancing the credit insurance culture and ecosystem in member states – an ambition to which ICIEC is committed to.

The benefits for ICIEC member states are potentially game-changing – increased intra-OIC trade and investment, better socio-economic outcomes, greater capacity building, and resilience in meeting climate, food security and other challenges, ensuring that no one, whether businesses, SMEs, or individuals, is left behind. A much greater level of partnerships is needed to close gaps in resources, and capital, which would allow the underwriting of much greater volumes of business and investment insured, reinsurance treaties and guarantees, capacity building, better risk management, and reliable credit history and data collection.

Could underwater farming be a major contributor to a sustainable ‘blue economy’? If so, how will ICIEC help enhance the prospects and unlock the potentials for this new dimension in sustainable agriculture? By Tala Alsaati, Strategic Planning and Communications, ICIEC.

According to the United Nations (UN), using just 2% of oceans for sustainable farming could solve our global food shortage. Farming underwater is a revolutionary concept, but one that could provide a real alternative that will help improve global food security. The possibilities are exciting but not without consequences. In this article, we look into the current state of play, the economics, the opportunity, and the extent to which ICIEC could support aquaculture and underwater farming initiatives. One potential approach would be for ICIEC to offer coverage for equipment and resources used in these projects, as well as to facilitate and incentivize trade and investment in the goods produced.

Eliminating hunger on a global level will require adopting and implementing sustainable farming practices that produce a cycle of harvesting, while preserving our environment for future generations. With the global population projected to reach about 9.7 billion by 2050, the UN estimates that food production needs to increase by 60% to meet this demand. Underwater farming offers a promising solution to this challenge by providing fresh produce, increasing food production and supply, reducing the impact of climate change, and promoting sustainable farming method. Through underwater farming, marine life can be protected, CO2 removed from the atmosphere, and freshwater usage cut by 70%; while growing crop that can offer millions of people access to nutritious food, thereby ending food shortages. Ocean farming is a promising way to achieve the Sustainable Development Goals; a feasible path towards achieving Zero Hunger, Life Below Water, No Poverty, Good Health and Well-Being, Clean Water and Sanitation, and Affordable and Clean Energy.

Various initiatives are underway to develop underwater farming, including researching the cultivation of seaweed species, growing vegetables and fruits sustainably, and monitoring pests and diseases. The model requires less area and fewer inputs and can be more productive per unit of land. Additionally, underwater farming can reduce the risk of soil erosion, water contamination, and other environmental impacts associated with traditional agriculture. Underwater farming can reduce reliance on organic farming and biofuels to address food security, keeping prices lower and producing more for economic growth.

The future of financing vegetables and fruits farming underwater is an exciting and vital topic in the global economy, though initial costs may be higher than traditional methods, the marine environment’s abundant resources will boost profitability and economic growth, while helping to protect marine ecosystems. Exploring these options and developing financing mechanisms to support the development of the blue economy; The blue economy, centered around sustainable development and utilization of natural resources, including initiatives like aquatic farming, aquaculture, and other ocean-based activities.

The economic benefits of underwater farming to the blue economy are numerous, as it can provide food, jobs, and revenue to communities. To finance such initiatives, it is important to understand the economics of underwater farming and the potential for profit and return on investment. By making strategic investments, aquatic agriculture can transform global food security, reduce poverty, and promote economic growth.

Underwater farming is a key industry in the blue economy, with the potential to reduce poverty and finally eliminate hunger permanently. Financing new underwater farms is necessary, as the world population continues to grow. The expansion of private enterprises in underwater farming could reduce the financial burden for millions, reducing poverty and food insecurity in low-income areas. Government support for underwater farming is key to the long-term success of the blue economy. It is essential to find potential financing solutions that can help to offset the costs and reduce the risks associated with the project.

Governments, businesses, and international financial institutions should consider financing solutions to offset the high costs of setting up and maintaining aquatic farms. Government investment in underwater farming initiatives can offset the costs of setting up the project and incentivize businesses to invest in the technology. Private funding from investors is also an essential factor in financing underwater farming projects. International financial institutions can support such initiatives by providing resources, expertise, and financing. However, there are challenges in aquatic farming funding, such as the high cost of setting up the project, the risk of failure, and the need for more knowledge and expertise in the field.

Exploring ICIEC’s potential role in underwater farming

The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) could play a role in risk mitigation and insurance coverage for underwater farming projects. ICIEC could potentially provide coverage for equipment and resources used in underwater farming, facilitate trade and investment in underwater farming projects, and encourage the use of Islamic financing methods in line with Shariah principles, bringing together investors and project developers to exchange knowledge and best practices, supporting project development, and promoting the growth of underwater farming. ICIEC is committed to supporting initiatives that promote sustainable agriculture practices in a Shariah-compliant manner.

Since inception, ICIEC has had a significant development impact over 29 years, ICIEC has insured US$95 billion in trade and investment and provided US$1.5 billion in agriculture support. Underwater farming offers significant economic benefits to the blue economy, including providing nutrition and employment. To support the development and growth of the blue economy, ICIEC could also work with investors and state institutions to assess the feasibility and sustainability of these projects and provide risk mitigation services. Ultimately, the success of underwater farming depends on a variety of factors, such as water quality, temperature, market demand, and regulatory frameworks. However, with careful planning, innovative solutions, and the support of institutions like ICIEC, underwater farming could potentially be a viable and sustainable solution to global food security and the achievement of SDGs.

New partnerships and investments in this exciting field are needed, so that these potentials can become a reality. With a proper commitment to the blue economy and environmentalism, we can achieve food security and reach all the sustainable development goals. To meet current demands of food shortage and to cover future demand, this would require a 42% increase in land, 120% more water usage. Underwater farms will reduce our reliance on traditional farming that harms the soil and air that could produce 77% more greenhouse gas emissions. Not only does underwater farming provide access to fresh produce, but it also has the potential to significantly increase food production, while reducing the impact of climate change.

Lotfi Zairi, Lead of Operations for Sovereign Risks in the Underwriting Operations Department, ICIEC, addresses the questions about how ICIEC is working to enhance food security across OIC member states.

How does the ICIEC operations department fit and work with the wider IsDB family to promote food security across OIC member states?

In line with its mandate as a Multilateral Developmental Organisation, ICIEC endeavors to support its member states through impactful interventions on their respective economies, population, and environment. Due to the unprecedented crisis driven by the Russian – Ukraine war, ICIEC is extending its top priority to meet the emergency needs and strategic objectives of its member states regarding food security.

ICIEC has been actively engaged in the IsDB Group Food Security Response Program (FSRP), which was approved by an Extraordinary Special Meeting of the Boards of Directors of IsDB, ICIEC, and the Islamic Solidarity Fund (ISFD) on July 28, 2022.

This was initiated sometime earlier by the IsDB/ICIEC Board of Governors during the 47th IsDB Annual Meetings held in Sharm-El Sheikh, Egypt (1-4 June 2022) in the wake of the food crisis amid a record 56.3% increase in cereal prices.

What specific roles does ICIEC take in promoting food security across OIC member states?

Under FSRP, ICIEC focuses on the Least Developed Member Countries (LDMCs) by providing necessary support to active market players, including exporters, contractors, investors, and financial institutions. On an emergency and immediate response basis, ICIEC provides credit and political risk insurance (CPRI) solutions to facilitate the international trade transactions of food, seeds, fertilizers, and agricultural equipment.

On a strategic level, ICIEC plays the role of catalyst for the execution of foreign investments in the agriculture sector that contribute to food resilience through improving supply value chains, increasing food commodity production, and enhancing storage capacity.

Over and above the payment risk mitigation for the broad spectrum of economic players in the food and agricultural fields, ICIEC also mobilizes external financial resources for the benefit of member states via reinsurance arrangements to optimize the benefits of its member states.

This reinsurance support is possible via short-term, medium, and long-term portfolio-based treaties, as well as through ad-hoc facultative arrangements that ICIEC enjoys with international reinsurance institutions worldwide.

How much support has ICIEC provided to OIC member states under the FSRP program?

As of the end of March 2023, since the FSRP’s inception in July 2022, ICIEC approvals related to food security have reached US$301 million. This is already reaching 60% of the total amount of US$500 million pledged by ICIEC for the entire period until December 31, 2025.

This ICIEC contribution to food security support is distributed through all geographic zones of its Member States. So far, the beneficiaries are originating from Sub-Saharan Africa (Senegal and Uganda), MENA (Egypt), and Asia (Bangladesh, Indonesia, and Uzbekistan).

ICIEC’s contribution in this regard is mainly facilitating banking transactions in its member states, enabling the import of agricultural equipment, fertilizers, sugar, wheat and other grains, soya beans, canola, etc. This is in addition to enabling foreign investments for the modernization of the agricultural sector, which will reinforce the Member States’ resilience against food crises in the future.

Is support also primarily based on cooperation and framework agreements?

Aiming at maximizing its support to member countries in overcoming food security challenges, ICIEC has also initiated partnerships with several financial institutions and organizations. In this context, ICIEC signed MoUs with investment and banking institutions to cooperate in facilitating food trade and agricultural investments by blending financing facilities with risk mitigation services in the member states.

In the same context, ICIEC has initiated a business partnership with the Islamic Organization for Food Security (IOFS), a member of the Organisation of Islamic Cooperation (OIC), to promote food security, sustainable agriculture, and rural development in member states. Furthermore, ICIEC is part of the arrangements made with the International Islamic Food Processing Association (IFPA), a subsidiary of IOFS, for facilitating intra-OIC Agrifood and Halal trade.

What other new initiatives can ICIEC roll out to further support food security across member states?

An additional partnership is being discussed with the ISFD to replicate the ICIEC ISFD COVID-19 Emergency Response Initiative (ICERI) program for the FSRP, building on its successful synergy-based experience under the Strategic Preparedness and Response Program (SPRP), a holistic structure that IsDB Group developed to support member countries combatting the COVID-19 pandemic impact, restore interventions and restart growth.

Indeed, under that strategic preparedness and response program, by the end of 2022, ICIEC’s contribution reached US$1.4 billion in approvals for COVID-related transactions and projects. ICIEC was able to offer its risk mitigation solutions and capabilities in resource mobilization from the international market to benefit 15 member countries.

The food sector benefited to the tune of $169 million in those member countries. Also, US$655 million went to the energy sector, US$528 million to health, and $62 million to the SME sector. In addition, ICIEC’s approvals consisted of US$492 million under the Emergency Respond Track (R1), $490 million under the Restore Track (R2), and US$432 million under the Restart Track (R3).

Discussions are also underway to look at revising the ICERI model to offer broader coverage and better terms in coordination with ISFD. The ICERI program was efficiently used to register a total insurance approval of US$271 million. The spirit of its structure already offers a wide headroom for enhancement to support larger ticket sizes, longer tenors, and a more significant number of transactions.

ICIEC and the IsDB Group are well placed to promote food security in Côte d’Ivoire – mainly via financial packages and credit and political risk insurance (CPRI) solutions to bolster international trade for food, seeds, and fertilizers.

Côte d’Ivoire is far from an economic minnow. As the world’s top exporter of cocoa and raw cashew nuts, a net exporter of oil, and with a significant manufacturing sector, the country is the largest economy in the West African Economic and Monetary Union. And despite the COVID-19 pandemic and war in Ukraine, which has amplified food and energy prices and security, Côte d’Ivoire is experiencing one of the fastest sustained economic growth rates in Sub- Saharan Africa in over a decade.

With real GDP growth averaging 8.2% between 2012 and 2019 amid political stability, Côte d’Ivoire successfully contained the pandemic and maintained a growth rate in 2020 (2%). In 2022, growth was driven by private consumption, supported by public investment and wage increases in the civil service. Inflation averaged 5.2% in 2022, its highest level in a decade, linked to rising food, transport, and energy prices. “With soaring inflation, many people in West Africa are struggling to access basics such as food products,” says Ousmane Diagana, World Bank Vice President for Western and Central Africa.

However, medium-term projections are optimistic, provided structural reforms targeting macroeconomic stability are stepped up. The West African country remains on a positive economic trajectory, which will need to be strengthened to accelerate the structural transformation of its economy as envisaged in the new 2030 strategy. But malnutrition and food insecurity remain a challenge with significant regional disparities. Rural communities, notably in western and northern Côte d’Ivoire, are disproportionally more affected and vulnerable.

IsDB Group-ICIEC food security initiatives

The IsDB Group endorsed a US$10.54 billion comprehensive Food Security Response Programme (FSRP) package aimed at supporting member states in addressing the ongoing food crisis and scaling up the group’s continued efforts to contribute to strengthening its members’ resilience to food security shocks in the future.

The IsDB will contribute up to $5.7 billion in total financing to member countries, comprising new approvals worth $4.0 billion and fast-tracking of disbursements for existing projects worth $1.7 billion.

ICIEC has contributed to the IsDB Group’s FSRP by making a pledge of $500 million in insurance capacity over the three and half years (H2- 2022/ YE-2025), knowing that the FSRP is aligned with ICIEC Developmental Objectives and SDG 2 (zero hunger).

ICIEC’s contributions are being realized via the extension of Credit and Political Risk Insurance (CPRI) solutions to facilitate international trade transactions of food, seeds, fertilizers, and equipment related to agriculture projects, in addition to foreign investment in the agriculture sector aiming to increase the production and improving the storage capacity and resilience in member countries under the Building Food and Input Supply Value Chain initiative.

UN and World Bank frameworks

The UN World Food Programme (WFP) has also provided a strategic framework – the 2019-2023 Country Strategic Plan for WFP in the West African country – to mitigate Côte d’Ivoire’s pervasive food insecurity, malnutrition, and gender inequalities, which severely affect smallholder farmers as they struggle with issues of land access and frequent climate-related shocks.

The limited support for food crop production compared with the cash crop sector also continues to have a negative impact on the productivity of smallholder farmers who cultivate 84% of the arable land. Other underlying causes of these challenges include poverty, low education and literacy rates, poor dietary diversity, lack of awareness of good nutrition, health and hygiene practices, the prevalence of highly infectious diseases, and gender inequalities.

The World Bank is deploying short and long-term responses to boost food and nutrition security, reduce risks, and strengthen food systems. The actions form part of the institution’s global response to the ongoing food security crisis, with up to $30 billion in existing and new projects in areas spanning agriculture, nutrition, social protection, water, and irrigation. This financing will include efforts to encourage good and fertilizer production, enhance food systems, facilitate more significant trade, and support vulnerable households and producers.

The WFP’s $715 million Food System Resilience Programme is another approach. It aims to benefit more than four million people in West Africa by increasing agricultural productivity through climate-smart agriculture, promoting intraregional value chains, and building regional capacity to manage agricultural risks.

ECAs can play a significant role in backing the food and water sectors in this West African country. For instance, in August 2020, Swedish ECA, SEC supported a loan to finance the construction of 1,000 drinking water boreholes with solar pumps and the construction of drinking water supply plants and water pipelines to supply 189 Ivorian villages.

Green Future

As global food security challenges mount, tapping the potential of these ambitious climate-smart investments is essential for making Côte d’Ivoire’s economy more resilient, achieving inclusive growth, and combating food insecurity. ICIEC has already supported a raft of ESG-related projects in Côte d’Ivoire, which will positively impact climate mitigation.

“When these elements are put together, not only does it transform the economy, but jobs are created too. That allows young Africans to stay in Africa and make a living from their work by being in Africa,” says the World Bank’s Diagana.

The 2019-2023 Country Strategic Plan for WFP in Côte d’Ivoire, based on the 2018 Zero Hunger Strategic Review, aligns with national priorities. It also seeks to harness the comparative advantages of the various United Nations agencies operating in Côte d’Ivoire to provide a holistic response to food security and nutrition needs. Furthermore, ICIEC can play a more integral role in bolstering agency finance in the West African country, from supporting agriculture and water projects to solar schemes linked to farming.

Mr. Yerlan Alimzhanuly Baidaulet, Director General of the Islamic Organization for Food Security (IOFS), discusses the role of IOFS in advance of the occasion of the 48th Annual General Meeting of the IsDB Group on 10-13 May 2023, Jeddah, Kingdom of Saudi Arabia.

As an entity specialized in food security, can you please highlight the specific roles of the IOFS, from how it functions to how its activities are funded?

Yerlan Alimzhanuly Baidaulet: Allow me firstly to share that the IOFS core mission is ensuring food security, sustainable agriculture and rural development within the OIC geography. In this regard as per its strategic framework, IOFS should safeguard sustainable food security in OIC Member States through their socio-economic development and systemic promotion of targeted programs related to agriculture, science, and technology, humanitarian food aid and intra- OIC food trade.

Secondly, the IOFS has 16 strategic thematic programs, which were designed to respond to challenges identified within 5 main pillars (Food Security Governance, Food Crises Response, Capacity Building, Industrial development and Resource mobilization) towards boosting cooperation between Member States, national, regional, and international organizations for the benefit of agriculture and food sectors and the welfare of people within OIC geography, and Plan of Action for the systemic development of strategic commodities (wheat, rice and cassava) that would need close cooperation with Member States through the dedicated electronic Center of Excellency for all indicated commodities.

Thirdly, programming activities of IOFS are funded basically through mandatory contributions by the Member States or through partnerships with relevant international organizations, including the Islamic Development Bank (IsDB). It should, however, be clarified that the work of IOFS Secretariat emanates from the mandates and interests Member States have provided to. Therefore joint efforts among the Member States focused on the initiatives of IOFS, as the sole OIC specialized Institution focused on the matters related to food security, could also improve their respective agricultural policies. We have been meeting several high-level delegations from different Member States and continuously requesting them to embrace IOFS Strategic Framework and IOFS Vision 2031 as their own documents and as their tools to facilitate intra- OIC cooperation in the field of agricultural development and food security.

To conclude, it is important to note that the development of sustainable agriculture sector and food systems in OIC Member States is mired by a multitude of constraints concerning agricultural resources, infrastructure, policy and international commodity markets. Member States, therefore, are urged to work closely with the IOFS towards addressing such constraints delaying their agricultural efficiency for it to be used as the basic tool for ensuring national food security in OIC geography.

At present, the membership of the IOFS is comprised of 37 countries (out of 57 OIC Member States). Are there plans to get new States on board in 2023 and beyond?

Of course, we want to increase the number of Member States that have full-fledged status with the Organization. In addition to the indicated number of Member States, in 2022 the Republic of Turkmenistan joined IOFS with the Observer status. This is why when there are solemn gatherings at the OIC, including the recently held 49th Session of Council of Foreign Ministers (CFM) in Nouakchott, Mauritania, we call remaining OIC Member States yet not members of IOFS to seize the opportunity to sign its Statute. There is also a stand resolution of CFM calling these same countries to join the IOFS, and in my capacity as Director General of IOFS, I undertake visits to such countries with understanding of clarifying the important work the Organization is implementing and to show them how they would respectively enjoy the benefits of Membership. One of the visits, actually, paid the desired result, as when I was in Ndjamena, Republic of Chad, in May 2022, relevant local authorities embraced the Agenda of IOFS, and in July of the same year, they adhered to the Organization. We will therefore continue with this work, and we expect some countries to join this year and probably at our 6th General Assembly to be held on 02-03 October 2023 in Doha, State of Qatar. We may have new Members signing the IOFS Statute. We expect that the total IOFS country membership as the end of 2023 would exceed 40. In this regard, our country department is dealing with designing all country profiles and following up on all country visits and meetings of the Director General with high authorities of these countries.

What MoUs have IOFS recently signed in its bids to create awareness and promote the importance of food security among Member States?

The Islamic Organization for Food Security (IOFS) maintains a consistent collaboration with a variety of partners within the Member States, including but not limited to business and private entities, civil societies, non-governmental agencies and quasi governmental bodies. Since 2018 and till April 2023 64 memoranda of understanding (MoUs) and Action Plans have been signed with various partners, all aimed at raising awareness and promoting the significance of food security among the Member States. Recent MoUs were signed with Saudi NGO Almukarramah, D-8 Organization for Economic Development, Inter Islamic Network on Water Resources Development and Management (INWRDAM), Nagashima Holdings Co. Ltd, and Arab Bank for Economic Development in Africa. Additionally, IOFS collaborates closely with OIC institutions and has signed an MoU with the Union of OIC News Agencies (UNA), which supports all programs about food security awareness among the OIC Member States.

Which of the OIC Member States have been hit hardest by food security? Are there any emergency initiatives that can be rolled out immediately – and what does long-term support look like in comparison?

The state of hunger and malnutrition within the OIC geogtaphy is better understood by different reports issued by relevant UN Agencies, including the Food and Agriculture Organization (FAO) and the World Food Program (WFP), particularly the Hunger Hotspots Report 2021, conveying the drastic situation of food insecurity in 11 OIC Member States (Afghanistan, Burkina Faso, Mali, Niger, Nigeria, Sierra Leone, Somalia, Sudan, Mozambique, Lebanon and Yemen), which is affecting around 66 million people.

As our work is based on the official mandates, we are now focused on implementing the Afghanistan Food Security Program (AFSP), based on the special resolutions of the 17th Extraordinary Session of OIC CFM, (Islamabad, Pakistan) as of December 2021. This is because, since the events that have unfolded in Afghanistan in August 2021 and culminated with the change of Government on 15th of the same month, international humanitarian agencies have been taking action to avoid the widespread famine continuously now affecting Afghans. It is understood from several reports that job losses and soaring prices as well a big proportion of drug addicted (as per UNAMA statement, 6 million, including kids and women), are creating a new class of hungry in Afghanistan. 22.8 million of Afghans – or more than half of the population – are not consuming enough food. The country has been on the brink of economic collapse, with the local currency at an all-time low, and food prices being on the rise. Acute malnutrition has been above emergency thresholds in 27 out of 34 provinces.

As for African countries, the 49th OIC CFM adopted the resolution on the IOFS Africa Food Security Initiative (AFSI) right after productive Year of Africa in 2022. In this context, we are in consultations with Member States and relevant Institutions to mobilize the necessary cofunding to implement the designed programmes and projects. For instance, we intend to develop the national food security reserves for Mauritania and other countries in the Sahel to ensure that they have food stockpiles in times of crisis. We have initiated there high-level consultations which the IOFS Team undertook in Nouakchott to exchange views with the local authorities on how to proceed. We expect to do the same with other Sahelian countries once the pilot project in Mauritania is successfully implemented.

Another case is an Integrated Water Plan in Niger with support of eminent technical partners as INWRDAM (Jordan), CEDARE (Egypt), and KGS (Kazakhstan Aerospace Authority)

Given the impact of the Russia-Ukraine war on supply chain in general, and the respective disruptions to wheat and barley exports globally in particular, are there any other macro-economic factors driving food security challenges in the OIC Member States? And how can further such challenges be mitigated by the IOFS?

My initial thought is that the Russia-Ukraine issue has, somehow, unmasked the current situation and level of food insecurity within many of OIC Member States. As such, while being unfortunate, it could also be an opportunity for all of us active in the field of food security and agricultural development within the OIC geography to rethink the way forward and how to scale-up joint efforts to mitigate the consequences from the crises we are witnessing.

You may be aware that there are other factors contributing negatively to food security aside the armed conflict. Those are, for instance, increasing population and level of urbanization, poverty, degradation of resources, high movement of refugees, and climate change, and the nefarious Covid-19 pandemic.

If we look closely to the issue of climate change, we come to the understanding that it is especially noticeable in the most of Muslim majority countries, having an historical tendency of an agriculture production to be unfortunately vulnerable to the weather. This situation is worsening by the population growth and other factors mentioned above, posing a real challenge for the food security for a major part of our Member States.

In this regard, the IOFS is working towards fostering climate-smart agriculture and agriinnovations for food production by implementing its Program “Climate Impact/ Resource Management” under IOFS Strategic Vision 2031. We at the IOFS therefore encourage programs related to climate change and the rational management of resources to reduce poverty and hunger in the OIC Member States based on three clear goals:

1. Combat desertification and mitigate the effects of drought with the particular focus on i) Irrigation environmentally friendly technology and ii) Sky management and clouds to cope with drought.
2. Agriculture & Natural Resources by i) Preservation of Agricultural Ecosystems and ii) Valorising natural resources.
3. Reducing Greenhouse Gas emissions in agriculture without compromising food security by cultivation practices to reduce carbon dioxide, Methane and Nitrous oxide in the soil, while encouraging organic farming and smart agriculture, as well as livestock and feed additives.

Basically, the Key Objectives of IOFS in the nexus climate change vs food security is to address problems posed by desertification, deforestation, soil erosion and salinity.

The second challenge is also related to technological gap that affecting most of the Member States, particularly in the field of basic agriculture. To this extent, the IOFS is, at present, developing the Vertical Farming Industry project aiming at using the most advanced technologies in this field and decrease of cost production of all 6 different components (like aluminum profiles, fertilizers, plastics etc.), which all are available in the IOFS hosting country, so the OIC Member States would easily afford and enjoy such a technological advancement.

The other issue influencing food security within the OIC geography is trade between regions and across borders, which may help adjust to changing conditions affecting food production as a result of climate change, well-functioning regional value chain across agro-food sectors also opens up opportunities for producers in developing economies (as most of the OIC Member States) to contribute to economic development in their local communities.

Also, the IOFS has developed a simple, understandable, and robust Index to measure the level of food security in member countries. The IOFS Food Security Index (FSI) is a critical tool in understanding the level of access, availability, and utilization of food resources among member countries. The FSI model is an essential instrument for monitoring and evaluating food security programs and policies and ensuring effective implementation. And therefore, IOFS pays special attention to conducting relevant studies to assist and promote the sufficient improvement of food security, statistics specially upon its unique Food Balance Database.

It is therefore very important for OIC Member States to scale up their intra-OIC cooperation in this particular field, as well, and the IOFS, as always, is ready to support the Member States by providing the platform for business exchanges, particularly, through its Subsidiary entity, Islamic Food Processing Association (IFPA) which recently relocated to Dubai (UAE) as a global business hub.

Food security in a fragile world has come starkly to the fore as an issue given the backdrop of conflict in Ukraine, recent natural disasters, climate change, and the impact on access to vital agricultural products and food. Here we look at the initiatives ICIEC has been supporting, the partnerships made, and the impact they can have in improving food security and underpinning the development of more resilient access to food.

The global food security crisis is having a particular impact on many OIC member states, and ICIEC is ready to address the challenges its member states face. Food security has always been one of ICIEC’s core objectives in its singular position as the world’s only Shariah-Compliant trade and investment insurer catering to the needs of its member states in the Islamic world.

The second of the United Nations’ 17 Sustainable Development Goals (SDG2) is to end hunger, achieve food security and improved nutrition, and promote sustainable agriculture. By the UN’s admission, the world is not on track to achieve SDG2 by 2030, and the Organization has asserted that a ‘profound change’ is needed in the global food and agricultural system to stand a chance of reaching the goal.

In the Food and Agriculture (FAO) of the UN, the data is stark. Chronic undernourishment is a burden for more than three-quarters of a billion people worldwide, and according to the World Bank data from 2020, at a time before the COVID pandemic had unrolled, the Middle East and North Africa (MENA’s) share of the world’s acutely food insecure people was 20%, disproportionately high compared to its 6% share of the global population. The combination of geopolitical tensions, the war in Ukraine, the aftermath of the COVID pandemic, high energy prices, and a slew of natural disasters and climate issues have all combined to increase food insecurity and commodity price pressures for countries that have had to import many vital agricultural goods.

ICIEC’s response is also part of a global context and can be set amid the backdrop of the UN’s Global Crisis Response Group on Food, Energy, and Finance (GCRG), which was set up in March 2022, and the Islamic Development Bank Group’s comprehensive Food Security Response Program (FSRP), launched last July. GCRG allows the UN Secretariat to coordinate the global response to the worldwide impacts of the war in Ukraine on global food, energy, and finance systems.

The IsDB Group’s contribution is a US$10.54 billion comprehensive FSRP package supporting member states, including 27 in Africa, in addressing the food security crisis. In that program, ICIEC has the potential to provide US$500 million in Credit and Political Risk Insurance (CPRI) coverage.

In all, IsDB Group backs total financing support of over US$20.6 billion for agriculture and food security in 1,538 operations – and its ‘One Group One Goal’ approach enables all areas of food security to be covered cohesively throughout the group.

ICIEC’s role in the routes to ensure food security

There are many different routes to ensuring food security – and one key track is to help provide the crucial infrastructure that underpins a country’s ability to transform its resources. Supporting the agricultural sector in member states to help improve food security and help end hunger has been a critical tenet of ICIEC’s endeavors.

Since it was established in 1994, ICIEC has supported more than US$ 1.5 billion in the agricultural sector, which has helped improve the incomes of farmers and food producers, particularly in the least developed member countries (LDMCs).

Regarding projects that underpin SDG 2, ICIEC has stood firmly on both sides of insuring the trade and investment needs of the agriculture sector in member states. In practical terms, that means providing comprehensive protection for exporters of agricultural goods, technologies, and equipment. That support allows exporters to sell goods into riskier countries and helps support their cashflows and potential operational risks.

Indeed, ICIEC’s CPRI for agricultural machinery exporters means the companies can export to more risky countries, which has the knockon effect of allowing governments and companies in those riskier countries access to more productive assets. This bridges the gap that enables countries to develop their local food market productivity and, for instance, ultimately helps them become less reliant on expensive imports.

For instance, in 2022, Komatsu, one of the world’s largest manufacturers of agricultural Machinery, was able to export vital agricultural equipment to Turkmenistan from Japan as a result of a US$40 million insurance policy issued to ING Bank (Tokyo branch). The cover to mitigate non-payment risk comes under the Non-Honouring of Sovereign Financial Obligations for the extended financing facility to the Government of Turkmenistan through the State Bank for Foreign Economic Affairs.

ICIEC in the FRSP – a mandate to 2025 that’s already ahead of the target

The FRSP program will reach through 2025 and is principally focused on working on cuttingedge interventions to address structural weaknesses and root causes of food insecurity in the medium and long term. Common themes need to be addressed, including low productivity, rural poverty, and lack of resilience in regional and national agricultural food systems. The six primary initiatives being undertaken are:

1. Building agricultural resilience to climate change
2. Food and input supply value chains
3. Improving market access and productivity for smallholders
4. Supporting rural livelihoods
5. Developing livestock and fisheries
6. Building resilient food supply systems.

Within the FRSP, which spans to December 2025, ICIEC’s contribution of US$500 million in insurance capacity is being made through the extension of CPRI solutions to facilitate international trade transactions (food, seeds, fertilizers, and equipment related to agriculture projects) and foreign investment in the agriculture sector aiming at increasing the production and improving the storage capacity of, and resilience in member states under the initiatives on building food and input supply value chains.

In practice, ICIEC has been facilitating banking transactions in its member states to help with imports of agricultural equipment, fertilizers, sugar, wheat, other grains, soya beans, and canola. It has also been supporting investments to improve the modernization of the agricultural sector in member states.

By the end of the first quarter of this year, total approvals under the program relating to food security had already reached US$301 million, up dramatically from the total approvals that had already reached US$159 million at the end of December.

Who can access ICIEC interventions? In short, importers, contractors, investors, and financial institutions for member states. The main focus is on the Least Developed Member Countries (LDMCs), and beneficiaries come from all geographies, including Sub-Saharan Africa, Asia, and MENA.

The countries receiving approved support under FRSP by the end of March 2023 include Egypt, Uzbekistan, Uganda, Senegal, Bangladesh, and Indonesia.

ICIEC is also mobilizing external financial resources to get member states to benefit from its international reinsurance partnerships. This reinsurance support is possible through short, medium, and long-term portfolio-based treaties and facultative arrangements on automatic facility or a single transaction basis.

Building on the lessons learned during the COVID crisis

Under the Strategic Preparedness Response Program (SPRP) developed during the pandemic, ICIEC helped advance US$169 million to the food sector in 15 member states. The SPRP was designed in three parts (the three Rs) – to respond, restore and restart member states’ economies during and after the crisis and deliver immediate and long-term support for resiliency.

In the broader context, from US$514 million of approvals in 2020, the first year of the SPRP, ICIEC reached US$1.4 billion by the end of December 2022, nearly ten times the initially pledged amount of $150 million. This total applied to 46 transactions and projects in favor of 15 member states.

It also included US$271 million under the ICIEC ISFD COVID-19 Emergency Response Initiative (ICERI) program in cooperation with the Islamic Solidarity Fund for Development (ISFD). Discussion is progressing to expand the reach of the structures used under ICERI to use under FRSP and to help support more significant deals with longer tenors.

Putting partnerships on food security into practice

Ensuring and improving food security is a delicate topic and necessitates wide arms around deep partnerships to make it happen in practice. ICIEC emphasizes its outreach to public and private sector bodies through relationships with other multilaterals and industry bodies and direct contact with companies internationally.

ICIEC has signed Memorandums of Understanding and Strategic Partnership Agreements with the Islamic Organisation for Food Security (IOFS) and its specialist subsidiary, the Islamic Food Processing Association. ICIEC has been collaborating on food security enhancement since signing an extensive MoU two years ago with IOFS [See also the profile interview with IOFS Director General, HE Professor Baidaulet].

ICIEC also signed an MoU in 2022 with the Islamic Chamber of Commerce and Industry (ICCIA), an affiliated institution of the OIC and the umbrella body for the private sector in the 57 Islamic member states. Cooperation will be broad and includes helping the development of the Halal industry worldwide.

These arrangements allow for the sharing of ideas and specific cooperation in attracting and promoting foreign investment in agribusiness and food security as well as in the technical and financial infrastructure, such as due diligence, KYC, and credit search documentation.

Other notable MoUs with private companies in 2022 include that with Al-Rajhi International Investment Company (RAII), a subsidiary of Sulaiman Abdulaziz Al-Rajhi Awqaf Holding. This is one of the largest business groups in Saudi Arabia, with core activities including investments in the food and agricultural sectors, both domestic and international. The company owns the biggest organic agricultural project in Saudi Arabia and an integrated poultry project in Egypt, and it exports its products to neighboring GCC countries, Yemen, China, and Vietnam.

[For further information on ICIEC’s role in helping improve food security, see the interview with our team member Lotfi Zairi, the lead underwriter of operations for sovereign risks in the underwriting operations department at ICIEC]