Of BIBD and IT expansion
BANDAR SERI BEGAWAN
Pehin Orang Kaya Lela Raja DatoSeri Laila Jasa Haji Abdul Rahman Haji Abdul Karim
On human asset, Islamic tenet is very precise and clear: trust or amanah is vital. Clever but deceitful is lethal. And super-sophisticated IT is fast and difficult to audit. Super-sophistication IT system is nebulous - invisible.
You only know it when it hits you.
IT involves "a dense web of interlocking relationships" (to borrow the expression in "Foreign Affairs" (USA), Jan-Feb 2012), such as transfer pricing.
In Islamic banking principles, never engage in any systems or products that are complex and not directly related to the needs of the real economy and financing needs for halal productions and services, employment and earned incomes.
Thus, IBB system and functions were not of "18th century" quality. The ancient wheels were round, efficient and sturdy. Our 21st century cars and jet planes are still using those round wheels.
Lots of mathematical formulae now being used by 21st century scientists were the brainchild of ancient people, but their practical legacies are super-modern. So, it is nothing archaic about IBB then.
Its "basic round wheels" had been efficient, competitive and very profitable, transparent, open which made its individual shareholders very happy.
It is so simple and convenient to just indulge in one's day-dreaming, especially when it uses "OPM" ("other peoples' money") and hence, other peoples' cash dividends.
Maybe I am an old fashioned, 18th century man, but the simple practical logic is: What is a bank which, to quote Dr. Ladics, "do not have customers to come to branch and have a full banking service"? Banking operations are basically banking on human relationship, face-to-face interactions for due diligence checks and balances. How could a bank properly compete if it did not know who its customers were?
Relationship and trust can never be nebulous, virtual; it must be real, face-to-face interactions as required in Islam.
Then, Dr. Ladics stated: "BIBD is to compete in space beyond Brunei." Where? In Turkey, for example? BIBD could not do this virtually through its IT. How could it assess the qualitative aspect of its customers? Frauds would be rampant. What a great self-contradiction! (Please refer my letter: "Beware of Cross-Border Financing", The Brunei Times, 19th Nov 2011).
Is this cross-border financing one of the arcane causes why BIBD's cash dividends have been reduced?
Take care of immediate members of your family first before you divert your scare resources to others; in far away lands?
To re-quote Dr Ladics: "I like to go for push dates - to see it up before the year end - as opposed to setting convenient time line", yet in the same breath, Dr Ladics was indecisive: "How we exactly do that I don't know, but this is the direction we are going towards strategically ,with whom and how, that is yet to be decided." "With whom"? The BIBD shareholders must be very vigilant on this loaded hint. This is all about mind-reading and transfer pricing. Remember the earlier hint that "Telecos Threat To Banking Section" (The Brunei Times, 22 Oct 2011) as a precursor to this: "With whom"? Dr Ladics offered this sweetener: "the bank (BIBD) is also open to both Bruneian and foreign partners to materialise the idea."
Any IT cost and IT transfer pricing are potential threats to cash dividends to BIBD individual shareholders.
"He who holds the ladle measure the other's share." - Korean proverb.
The serious question is why the haste? Yet the means and goal are elusive. The English say: "Haste makes waste".
There are numerous empirical examples that IT is always costly not only in terms of cash (shareholders' cash dividends reduced) but, also frustrations, feelings of being abused and the internet problems of cyber security, both internal and external; its management and maintenance costs, some even use IT project as their training ground and subtle transfer pricing.
When I was the Director of the State Financial Services in the 1980s, I eventually, after years of costly patience and frustrations, had to dismiss that IT company which had been driving the Treasury Department round and round the circles clocking it fee-meter. I wrote to the Public Service Commission to approve the appointment of one of our local IT officers to head the computer unit and from there we locals took charge.
Using emotive statements and belittling the previous successes of IBB (now named BIBD, when it was 100 per cent successfully and profitability managed and operated by the Bruneians) to hastily promote and implement the lofty IT agenda is very alluring. But those very costly and frustrating failures of USA and Great Britain Governments' IT projects should be seriously considered and taken heed of.
Apart from the probable potential of costly failures, how much will it cost? Who will pay for the costs? Who will directly and indirectly benefits from it series of transfer pricing, and for how long?
Would the total BIBD customer number and users justify the means to achieve the elusive end? The usual economise of scale evaluation and consideration is vital. What would be the administrative and maintenance costs? The 24-hour security costs against internal/external frauds/attacks, upgrading costs, etc?
Actually, directly related to this latest open belittling of our local Bruneian officers' capabilities and successes in managing that IBB was this earlier was questioned by the then Acting Managing Director, Javed Ahmad, as reported by the Brunei Times, 27 Oct, 2009: "Islamic Banking Industry Must Innovate".
Putting question mark on our successful efforts and contributions in converting IBB into a profitable Islamic system and operations are:
"Actually, IBB, the whole setting up, in terms of Islamic course for example TAIB, was very much to consultancy and advisory from Bank Islam (Malaysia). But once these institutions, were established, in a conservative society like Brunei, immediately the society felt this is basically doing their banking activity in compliance with their faith."
Then, Mr Javed Ahmad laid his strategy to bring foreigners into IBB with these hints: "how do we get talent within the Islamic finance industry? A lot of talent, on the global stage. A lot of Islamic institutions are still very basic and are still managed more like a family business.. how do we raise the bar, the standards, so that we will be able to attract the best of the best.."
As my colleagues and I were 100 per cent Bruneian officers from the Brunei Treasury and the Brunei Investment Agency, Ministry of Finance, were fully tasked from A to Z to set up from scratch TAIB in September 1991 and to convert IBB to an Islamic Bank of Brunei in January, 1993, it was therefore galling to read Javed Ahmad's belittling of our capabilities and successes.
It was our working habit in the Ministry of Finance, the Brunei Investment Agency, even in IBB and TAIB, that we never ever trumpeted what we were tasked to do, to develop and subsequently implement. We shunned publicity and public-glare.
I conclude by saying do not ever get involved in "IT sophisticated", cash dividends will be further cut. We have already similar global alert, from those problematic car industry which gets more sophisticated! Malaysian Starbiz, 4 March 2010.
And in Islamic banking and finance, economics and business, do not ever get innovative with banking products which are dubious, inducing customers to be wasteful and in debts. Convenience is toxic.
Concentrate on financing local needs to develop the national real economy.
Even in conventional, riba-based banking there had been calls to Singapore Government to disallow "products that make no sense". ( "Government must block finance products that make no sense." The Strait Times, 22 July 2009).
The views are author's own and do not necessarily reflect those of The Brunei Times
The Brunei Times