resources, making sound, timely and market responsive investment choices, winning and retaining customer ’ s loyalty through better service standards and lower product prices or user charges and contributing to the expansion of the economy through taxes, dividends etc. i would take the most debated example – that of the ptcl – as an illustration of the general point i am making about the economic rationale for privatizing profit making public sector enterprises. the most oft pronounced arguments against privatization of profit making enterprises are ( a ) why fix it when it ain ’ t broke? ( b ) protection of workers ( c ) a better and more professional management can bring about the same results as under privatization. the basic reason for privatizing these enterprises is that the government should not be in the business of running businesses but regulating businesses. the role of the government should be that of a neutral umpire, who lays down the ground rules for businesses to operate and compete, to monitor and enforce these rules, to penalize those found guilty of contraventions and to adjudicate disputes between the competing business firms. if the government owned firm itself is one of the players in the market, there is a strong conflict of interest and the other market players lose confidence in the neutrality of the umpire. under these circumstances, the market becomes chaotic, disorderly and unruly as there is no neutral ‘ person ’ to monitor and enforce the rules. the economy thus pays a heavy price for this loss of the market mechanism in the production, sale and distribution of goods and services. the present controversy between the pia and private airlines is a manifestation of this tendency. if the ‘ umpire ’ favours its owned enterprise i. e. pia and discriminates against the rival private airlines, the ultimate result would be the winding up of these airlines. the growth of aviation industry would suffer as the present competition is cutting down the prices and stimulating demand for air travel in the country. in absence of such competition, the pia would have the sole monopoly and the planes would fly with empty seats as the ticket prices would not be market based but arbitrarily high. the consumers of airline industry – existing and potential – will be the loser in this bargain. the same argument can be applied in case of ptcl. if the government had continued to own and manage ptcl, the private sector competing firms would have felt that they would always remain at a disadvantage in relation to the ptcl. the constant fear that the government ’ s coercive

of wealth. islam is deadly opposed to exploitation of an individual or institution by the other for selfaggrandizement. riba or usury is considered exploitative by its construct and is therefore prohibited. the equitable distribution dimension of islamic finance is therefore an add - on that is clearly absent from the conventional modes of financing. if we examine these properties of islamic finance, it becomes apparent that these will appeal to a large number of individuals and institutions whose set of beliefs and faith conform to these principles. it is not necessary that only the muslims can subscribe to this particular mode of financing but the fact that it is being widely accepted and adopted in different parts of the world including europe attests to its intrinsic value and strength. ladies and gentlemen, the islamic financial services industry is the fastest growing component of the financial services industry, with an annual rate of growth ranging between 15 to 20 per cent. at least 70 countries all over the world have some or other form of islamic financial services available in their territorial jurisdictions. it is instructive to note that almost all major multinational banks such as citigroup, hsbc, bnp paribas, ubs, credit agricole, standard chartered, etc. are offering these services. why are these services spreading so fast? i can think of several possible reasons. first, there are around 15 million muslims residing in non - islamic countries in europe, mostly in france, germany and the uk. islamic finance is effectively contributing towards penetration of financial services and inclusion of this particular target group which previously avoided using existing banking facilities due to their faith. the members of the islamic community in europe that was not benefiting from the conventional banking on religious grounds are now participating through this particular mode in conformity with their beliefs. this group naturally provides the scale for the financial services industry to build upon. second, there are investors who in their quest for diversifying their portfolios are looking for new asset classes, new instruments and new products with low correlation with the existing asset classes or products. islamic financial products cater to this particular need and have, therefore, become attractive to that investors group. third, there is a growing trend, particularly among the younger population to show unethical or socially irresponsible investment funds and businesses. many funds have emerged that are exclusively devoted to meet the specifications of investments in ethical products or socially responsible services. islamic finance conveniently fits into this food chain because of its natural affinity and congruence with its