World Bulletin / News Desk
Turkish President Abdullah Gul said, "the international economic system seems almost to act on a balance of economic terror," emphasizing the need to formulate a new global financial system.
Speaking at the opening ceremony of the International Forum on Financial Systems at Wow Convention Center in Istanbul, Gul said the global economy had been going through very turbulent times recently.
The root cause of the turbulance comes from the issues in the financial system, which ultimately has impact on the whole world, said Gul, addng that the idea of having the forum was very important to search for alternative finanical systems and methods to speed up the process of overcoming the crisis.
Gul noted that Islamic finance had fallen behind conventional banking since the issue of Islamic banking and finance instruments had long been only an interest area for academics.
Reminding that the world has been undergoing a speedy globalization since the 1980s, Gul said the crisis which emerged in the American mortgage sector in 2008 had impacted Europe first and then the rest of the world.
"Therefore the states spending large amounts of funds to save the financial system in the beginning, in time themselves began to face crises in their own economies. As we assess the situation, we should be mindful of the fact that the crisis has not yet been completely overcome, global risks and uncertainities continue.
"Balance of economic terror"
Gul said, "the international economic system seems almost to act on a balance of economic terror."
"For that reason the architecture of the modern financial system is increasingly being questioned. The most important reason of this discussion is that the means and ends have been confused," added Gul.
Highlighting that the fundamental principle of the financial system, raising the prosperity level of societies, had unfortunately been totally disregarded in the process which ended with the 2008 crisis, Gul said, "the financial system's architecture is based on expectations vis a vis a future, instead of real economic value. Financial instruments are not used for creating more employment, prosperity or income, but to satisfy increasing greed on the part of the financial actors in the system."
"Risk of social unrest is high"
Gul emphasized the human cost of the crisis, reminding that about one percent of the world population dominated 40 percent of the world's accumulated wealth, while about 70 percent of the world population owned only about 3 percent of the wealth.
"Almost 1 billion people face hunger and malnutrition, unemployment continues to be an increasing problem especially among the youth, there has been a significant decrease in the disposable income that people have. As a result life has been much more difficult for an ordinary person," said Gul.
"Under these circumstances, the risk of social unrest is high. If such structural problems in the international system cannot be resolved, the impact of the crisis could have impacts on the fabric of socities."
With respect to the solution, Gul said that the shortcomings in terms of the early morning supervisions and regulations in financial markets had to be taken into consideration.
"Secondly it is important to minimize and eliminate the risks that emerged from derivative products, and finally liquidity loans and financial instruments, and the access to these instruments within the crisis environment is an issue which needs to be adressed very seriously."
Gul pointed out that all these factors made it necessary to come up with new global mechanisms and instruments which would organize the financial architecture, and that Bretton Woods and the conventional system's instruments have not fulfilled this goal.
"There is a need for a new regulation appealing to the interests of all actors inluding the developing countries."
Gul noted that the new finacial architecture must also take into consideration the need of developing countries within the global economy and therefore the G-20 was a very important platform.
"Turkey is an active member of the G-20 and will continue to contribute to these efforts. As the international financial architecture is restructured, it is also very important to support alternative approaches," he added.
Gul also said Turkey had taken improtant steps in the area of finance, as with the Istanbul Financial Center Strategy in Action plan.
"The plan which is being carried out for the Istanbul Financial Center is important not only for Turkey, but also for our region. With the Istanbul Financial Center, we also envision the emergence of new financial instruments for the global financial system, including Islamic financial instruments. Turkey is one of the countries with the greatest development in terms of Islamic finance."
The International Forum on Financial Systems is organized by Independent Industrialists' and Businessmen's Association (MUSIAD), BORSA Istanbul, Statistical, Economic & Social Research and Training Centre for Islamic Countries (SESRIC), Participation Banks Association Banks of Turkey (TKBB) and Islamic Development Bank (IDB) with the theme of "Sustainable Finance for Sustainable Development" at Wow Convention Center in Istanbul.Last Mod: 11 Eylül 2013, 14:43