China, the rest of Southeast Asia, Eastern Europe, India, most of Latin America and significant swathes of Africa are eager to improve the lot of their people through full participation in the global economy. In doing so, they have become serious competitors for capital, including that plentiful and affordable capital we at the Federal Reserve have created. In a cyberized, globalized world, those with the means to create jobs will gravitate to those places that provide the best prospect for a return on the investment of the abundant capital on business’ balance sheets or available to them in the marketplace or from eager bankers. Just as many people and firms within the United States have relocated to Texas from other states, investment will flow to countries anywhere in the world where it is most welcome. Our fiscal authorities must not only figure out the way to contain the nation’s runaway deficits and public debt accumulation, but they must do so in a manner that is competitive with others who seek access to our money, and do so in a manner that does not pull the rug out from under the meager recovery we are experiencing. The Committee of 12 and the president have an awesome task. Essentially, they must reboot our entire system of economic incentives and come forward with an updated tax and spending and regulatory regime that incentivizes businesses to invest in the United States and create jobs for American workers rather than gravitate to foreign shores.
It takes a long view to recognise returns beyond profits where social and environmental gains are also equally valued. This will represent a major paradigm shift in many institutions. For this, strong and visionary leadership that sets the tone from the top, starting from the board and senior management, is certainly crucial. Far-sighted leadership to transform culture, systems and people will be central to this paradigm shift. To facilitate the process, the recently issued Strategy Paper on VBI will be complemented with an implementation guidance that is currently being developed by the Bank in collaboration with the industry. Second, VBI will require greater stakeholder activism through increased transparency on its adoption. This is a new initiative and it is imperative that our efforts go hand in hand with creating greater awareness and understanding of key stakeholders. The public sector and advocacy groups play an important role. But customers and business ventures should also play their roles wisely and use the power of their wallets to make informed choices. To catalyse this change, a value-based scorecard will be introduced to realign behaviours and expectations towards the desire to impact the community and the environment in a positive way. The scorecard will capture important dimensions of qualitative performance that are geared towards creating sustainable outcomes by Islamic financial institutions. The third critical area is adopting a collaborative approach to implementing VBI which will be key to mobilising change.