Soap sales paint clearer 
picture of Indian economy

MUMBAI — For India’s biggest fund manager, S. Naren, there are better ways to gauge economic growth than the nation’s much-reviled official estimate of gross domestic product (GDP).

Naren says he relies on data for spending on soap and toothpaste, travel and electricity usage when deciding where to invest ICICI Prudential Asset Management Co’s US$29 billion (RM116 billion) assets. Double-digit demand growth for everything from fuel and air travel to air conditioners means he doesn’t worry about whether GDP data overstates the economy’s strength. Only rising oil prices or a sub-par monsoon would derail his bullish bets on power utilities and finance companies, he said.

“I’m not an economist, so I don’t understand the GDP numbers,” Naren, executive director and chief investment officer at ICICI Prudential, said in an interview in Mumbai. “I would use things like coal and power demand, two-wheeler sales and volume growth in areas like toothpaste, soaps and detergents. These areas can see huge growth, leave aside the GDP numbers.”

The question mark on India’s growth data means other indicators of economic activity are becoming more important for investors trying to gauge how successfully the country can decouple from a slowdown in China and Europe. Morgan Stanley Investment Management’s Head of Emerging Markets Ruchir Sharma said Friday India probably grew 5% to 6%, far short of the 7.6% published by the government.

Naren’s ICICI Prudential Discovery Fund has climbed 20% annually in the five years through June, surpassing 95% of its peers. That’s more than the 14% yearly gain in the Nifty Midcap Index during the period. The fund had invested about 30% of its 132.1 billion rupees (RM7.85 billion) assets in banks, engineering firms and drugmakers as on June 30, data compiled by Bloomberg show.

India’s fuel demand rose 11% in the year ended March, the fastest pace since at least fiscal 2001, while air travel grew 23% in the first five months of this year, official data show.

India’s headline numbers have puzzled investors ever since the government’s statistics department changed its method for calculating GDP in January last year. The new calculation uses market prices rather than factor costs, and a data set that includes reporting from hundreds of thousands of smaller companies and government bodies. The formula change prompted the annual growth to rise to about 7% virtually overnight from a near-decade low of 5%.

“More than a year has passed and a growing number of people have come around to the view that there’s something wrong with the method,” said Morgan Stanley Investment’s Sharma, author of The Rise and Fall of Nations. The new method “has made things worse in terms of credibility.”

Even so, India has “good, solid growth,” Sharma said, forecasting a “path of steady acceleration” for the economy.

Overseas investors, including Mark Mobius, have bought US$1.7 billion of domestic shares since April 1, the highest in Asia excluding Japan, as global risk appetite revived and Prime Minister Narendra Modi’s government took steps to bolster growth.

The S&P BSE Sensex, the nation’s benchmark stocks gauge, increased 6.5% in the June quarter, the most among markets valued at more than US$1 trillion. Only a spike in oil prices and a below-normal monsoon can upend markets, said Naren.

Naren says he huddles with senior members of his team each time crude climbs by US$5 a barrel or rainfall remains below average for a week. For an oil-importing country, lower crude prices keeps a lid on inflation and bountiful rain is crucial to sustaining the nation’s economic growth after back-to-back droughts.

Reserve Bank of India Governor Raghuram Rajan left interest rates unchanged last month at a five-year low and said good rainfall and astute food management were needed to offset higher inflation. Naren said he expects the central bank to cut its benchmark rate to 6% from 6.5% by
year-end.

“If our calls go wrong, then we have trigger meetings,” Naren, 50, said. “If oil spikes or the monsoon turns bad, we would be pro-exporters. We will go underweight on highly leveraged companies and turn cautious on financials.”

Total rainfall has been 2% below average since last month, with the deficit narrowing from as high as 25% early last month. Oil has posted its best quarter in seven years as falling US supply added to speculation the global surplus is easing.

Naren’s approach helps him beat the market as his fund invests mainly in publicly-traded companies, according to Pankaj Sharma, head of equities at Ahmedabad-based Equirus Securities Pvt.

“Looking at granular data is more sensible than tracking the country as GDP comprises data from the unlisted space as well,” Sharma said. — Bloomberg

(RM1 = 16.81 rupee, US$1 = RM4)

Oil prices dip on economic concerns, demand worries

SINGAPORE — Crude prices dipped in early trading yesterday, with Brent falling back below US$50 per barrel as economic concerns took center stage with many analysts saying oil demand will stall later this year.

International benchmark Brent crude oil futures were trading at US$49.95 per barrel at midnight, down 15 cents from their last settlement. US West Texas Intermediate (WTI) crude futures were down 39 cents at US$48.60 a barrel.

Analysts said that concerns over the global economy were weighing on the outlook for oil demand and on prices.

“The deterioration in the global economic outlook, financial market uncertainty and ripple effects on key areas of oil demand growth are likely to exacerbate already-lacklustre industrial demand growth trends,” British bank Barclays said in a note to clients.

JPMorgan also said in its latest oil market outlook that “macro-economic risks may weigh on oil prices”, although the US bank added that oil prices would still likely rise between this year and the next as stocks are drawn down, and political risk and maturing oil fields tighten the market.

JPMorgan said it expected Brent and WTI to average US$47.30 and US$46.66 per barrel respectively this year and US$56.75 a barrel for both next year.

That’s an increase of US$2 each this year and US$1.75 a barrel for both benchmarks next year, compared with the bank’s previous forecast.

In the latest sign of a glut in refined products, which traders say will reduce orders for crude oil, which is the most important refining feedstock, several tankers carrying gasoline-making components have dropped anchor off New York harbour, unable to discharge as onshore tanks are full. — Reuters

Women on boards in Bursa’s top 100 on the rise

KUALA LUMPUR — The number of women on boards in Bursa Malaysia’s top 100 public-listed corporations increased by 15.2% as at the end of May this year, according to the 30% Club Malaysia.

This was announced at the second series of the Business Leaders Roundtable meeting, held at Menara Maybank Kuala Lumpur and hosted by 30% Club Malaysia co-founding chair Tan Sri Megat Zaharuddin.

Key stakeholders from the government, such as Performance Management and Delivery Unit and the Department of Women’s Development, were present to give strong support to the business advocacy group.

Megat said in espousing the mission to ensure women made up 30% of boards of directors by the end of this year, the project has been a proven business case for improving leadership, governance and ultimately increasing shareholder value.

“This series of roundtable meetings is meaningful in creating an effective discussion amongst business leaders, coupled with valuable input from key corporate captains of various industries, to bring about sustainable change driven by merit.

“Our 30% Club campaign acknowledges that to bring directional change, we need top men and women to join us in leading the charge,” said Megat, who is also Maybank Group chairman.

He said the banking giant is in the process of adding more women onto its board in the next few months.

Fellow chair Tan Sri Zarinah Anwar emphasised that gender diversity is a business imperative and as such, gender must be a key consideration when it comes to hiring talented employees.

“We need to urge companies to place more women on boards where they are the best candidate and encourage other chairmen to commit publicly to this effort,” said Zarinah, who is chairman of Malaysian Debt Ventures Bhd herself.

The roundtable generated high senior level participation from corporate chairpersons and board directors such as Genting Bhd deputy chairman Tun Mohamed Haniff Omar, YTL Corporation Bhd managing director Tan Sri Francis Yeoh Sock Ping, and Heineken Malaysia Bhd chairman Tan Sri Saw Choo Boon.

Other participants include IHH Healthcare Bhd chairman Tan Sri Dr Abu Bakar Suleiman, Aeon Co (M) Bhd chairman Datuk Abdullah Yusof, Berjaya Corporation Bhd executive director Datuk Zurainah Musa, Maybank Investment Bank chairman Datuk Mohaiyani Shamsudin as well as professional services community representatives from Ernst & Young Malaysia and Korn Ferry.

No more plane rides

Under a grandiose and ambitious programme, Singapore and Malaysia are set to be linked all over again. If and when that happens, it promises to boost, not just commerce but every manner of interaction never before envisioned. John Alam files this story from Singapore.

IF nothing holds, Singapore and Malaysia will be reunited.

Though not politically — which was once the avowed wish of former Singaporean leaders — but commercially through the buzzword of modern times: connectivity.

Connectivity is not just in bringing both peoples closer together than ever before, but also in every known manner of interaction. That prospect if it come to pass promises every kind of spin-off; something not remotely imaginable even as recently as two years ago.

Sometime this year, Singapore and Malaysia are due to sign a memorandum of understanding affirming their joint commitment to build a high speed rail system, which if and when it does come to pass will be the next “monster” achievement in pure economic aggregates.

In a first in both nations’ histories, traveling time arising out of the 350 to 450 miles per hour trains, will be such that an ordinary commute of six hours by bus from Singapore to Malaysia will be sliced down to an incredible 90 minutes of high-speed travel.

That spin-off is not just what the heightened sense of interaction entails. Like what the website of high-speed rail in Taiwan once suggested: “It is without saying that the benefits brought by the Taiwan high speed rail are a fast and convenient way of the trans-island travel linking north to south of Taiwan, and it also brings people together leading to a prosperous and fulfilled life.”

That, in a spitting image will soon be replicated in Malaysia.

That may just be the inadvertent ripple of benefits from the high-speed rail. It is not just in whole knots of people commuting. What has not been estimated are the huge multiplier reverberations to the Malaysian economy when Singaporean style consumerism descends on Malaysia. Apart from that, it is the ease it (the high speed rail) creates when either Singaporeans or Malaysians shuttle around to each other’s shores for jobs.

Just how much of what is in store for both Malaysia and Singapore was presciently summed up by Prime Minister Datuk Seri Najib Abdul Razak: “It is clear that we have an economic plan, that it has worked and it is still working.”

“It is a long-term plan that works for the benefit of Malaysians not just today, but tomorrow, and in the years and decades to come,” Najib said, laying out what could well be a futuristic game plan of mega proportions.

As a matter of fact, there is indeed plenty to rejoice about. The entire concept behind the rail link is all part of a wider connectivity move girding the Pan Borneo Highway, the MRT and LRT as well as the Pengerang in Johor.

“We need them,” Najib declared emphatically, underscoring what the trains now project within the context of Malaysia’s future along with its erstwhile rival for regional influence in Southeast Asia and not the least, parsing these sentiments of the hassles of plane travel from going through passport handing, bag checking, walking time in the airport and finally, not forgetting that the distance from KLIA to the city central can be daunting.

Still what has never been mulled — or at least talked about in silent circles and in both nations’ chattering classes — are the gigantic infrastructure, financing and logistics minutiae of the such a system.

Chief of which is financing. With Singapore just needing some 4% of land usage for the trains, what would its share of the financing be? Another is the tender process. Will both countries operate one bidding process and jointly choose a service provider?

And will Malaysia’s political opposition and vested interests agree to such a grandiose project? And will a change in government and leaders in Malaysia perpetuate what has been agreed upon by Najib?

But even as such imponderables continue to weigh down on the project, there is hardly any death of interest from foreign companies vying for a slice of the huge, commercial pie. But just who will win the project, is anybody’s guess.

Though China has been contributing tremendously to Malaysian properties and other new projects, Japan has a reputed durability and safety record.

Whichever way the cat now jumps, there is no denying that what Najib proposed and what his Singapore counterpart accepted, constitutes one of the largest undertakings in both nations’ modern histories.

Has there ever been a moment in history when both nations had hewed so close to one another? Not by a long shot, it must seem.

These are indeed momentous times and despite his political troubles, Najib has pulled off a masterstroke worthy of historical mention.

John Alam is a journalism student at Nash School of Journalism in Singapore. He can be reached at john.alam@nautilus-network.com

Omorose expects 50% revenue jump from 2016 expansion

KUALA LUMPUR — Omorose Cosmetics Sdn Bhd’s rise in the local beauty industry is entering a new chapter as it is ready to spread its business.

The two-year old company is now looking to grow in both reach and revenue with the addition of new outlets in Klang Valley, which will be launched by the end of this year.

Its founder Terry Liau said the company is looking to open two new beauty counters, one each in Parkson Sunway Pyramid and Parkson Pavilion KL, which he said could contribute RM1 million by year end.

“The new outlets we are launching, together with associated roadshows is expected to increase our revenue by about 50%,” he said.

Looking forward, Liau said the expansion in the Klang Valley is not the only objective for the company, as he said that Omorose is looking to further expand to other states next year.

“Next year, we want to extend our reach outside of Kuala Lumpur and Petaling Jaya as we want to bring Omorose to Penang, Melaka, Pahang and Johor,” he said.

In terms of regional expansion, Liau said the company would aspire to grow further in the Asean market, with Indonesia and Singapore being the markets that they want to embark for next year.

“We would like to go to these countries and market our products there as they are opportunities for us to grow our business further,” he said.

Physical stores aren’t the only business focus. Liau said the company would be increasing its presence online as part of Omorose’s mission to sell their products through different online shopping portals.

“We are focusing more into these (shopping) websites and platforms as well as our own website. The current reception has been encouraging and that is one of the areas we want to focus on in the future,”
he said.

With the idea to make beauty accessible to everyone, Liau said the new cosmetics counters would be handicap-friendly — similar to its existing counter in Maju Junction, which he said is designed to cater everybody, including those with disabilities.

He said the lack of accessibility often dents the shopping experience for the wheelchair-bound, making this one of the rationales for the company to make its counters handicap-friendly.

“The makeup counter has to be wheelchair-friendly, because it is difficult for women in wheelchairs to reach items. They’re struggling to get close to the products, and that’s why we’re making this, to make it as accessible as possible.

“For makeovers, we have a table built for their height as well, so let’s say when a makeup artist would sit next to a customer, it is the right height and she can get really close to the product,” he said.

Following the trend of making its products accessible for the handicapped, Terry said that all of their product packagings will be braille embossed to make it easy for
the blind.

“They can actually tell by touching the product and distinguish the different items that we have. We are doing this to make it easier for them to shop.

“We have to bear 20% more in terms packaging costs because it is much more expensive to print for the consumer.

“Since 80% of the people behind the brand are living with disabilities, twe make it accessible for people with disabilities in terms of our counters and products,”
he said.

AmInvestment bags two Asset Triple A Asia Infrastructure awards

HONG KONG — AmInvestment Bank Bhd was awarded “Project Finance House of the Year” and “Best Transport Deal” awards for the second consecutive year at The Asset Triple A Asia Infrastructure Awards here recently.

The bank was honoured for its role in providing a wide range of debt products and advisory services across various sectors which includes infrastructure (expressways, ports, rail and water), oil and gas, and power sectors.

“Infrastructure is one of the vital ingredients for Asia to sustain its economic growth momentum. The Asset Triple A Asia Infrastructure Awards 2016 is one of the industry’s most prestigious awards where institutions and the deals in Asia that made a difference in supporting infrastructure projects are honoured.

“As a leading project finance house in Malaysia and a key player in loan syndication markets, we are pleased that AmInvestment Bank is being recognised for our ability to structure integrated project financing transactions using both debt and equity instruments,” acting chief executive officer Pushpa Rajadurai said.

She added, “Such proficiency of ours is built on the bedrock of our team’s market-leading expertise and solid track record in the Malaysian debt capital markets and loan syndication markets.”

AmBank Group executive vice president of capital markets Seohan Soo said the Project Finance House of the Year and Best Transport Deal awards further signify AmInvestment Bank’s capability in providing integrated financing solutions to its sovereign, corporate and institutional clients.

“We share these awards with them and we appreciate the clients’ support and continued trust in our services.”

The Asset is Asia’s leading issuer and investor-focused financial monthly publication based in Hong Kong and these awards recognise players that excelled in the industry. Quantitative and qualitative findings were combined in determining the winners.

Apac digital commerce spikes 113% to hit US$200b

SINGAPORE — Asia Pacific (Apac) continues to top the digital commerce in 2014 and 2015, with mobile retailing sales reaching US$200 billion (RM800 billion), an increase of 113% last year, according to Euromonitor International data.

“Asia became the leader in online and mobile commerce in 2013 — mobile retailing in the region is two and half times larger than that of North America, which is the second largest market for mobile retailing,” Euromonitor International retailing head Michelle Grant said.

She was speaking at the launch of the 13th Retail Asia Top 500 Retailers Ranking here yesterday.

“It is likely that more and more innovation in digital commerce will come from Asia Pacific,” Grant added.

In the rankings announced yesterday by Euromonitor and Retail Asia, the region’s top 500 retailers recorded total sales of US$964 billion (RM3.8 trillion), declining by 5% in current value terms due to the strong dollar.

However, Chinese companies continued dominating the list, accounting for 33% of the rankings.

The latest rankings highlight the increasing demand for convenience in Asia, driven by urbanisation, smaller households and an on-demand culture.

The Philippines, Thailand, and Vietnam were the only countries to see all of their ranked retailers grow last year.

The Retail Asia Top 500 ranking, based on Euromonitor International’s retailing data, ranks the top retailers from 14 key economies across Apac in terms of total sales, number of outlets, sales area and sales per square metres.

The top five Apac retailers last year were: 7-Eleven (Japan); AEON, Daiei (Japan); Woolworths, Thomas Dux (Australia); Coles, Bi-Lo (Australia); and CR Sugo, CR Vanguard Hypermarket, Tesco Legoun (China). — Bernama

iPay88 moves into 
mobile payments

KUALA LUMPUR — iPay88 Sdn Bhd is embarking into physical payment methods using mobile phones as a substitute for credit cards to purchase retail items, thus paving the way for users to get access to easy mobile payment methods.

The new method allows customers to store credit card information into their mobile phones to purchase items, via technologies such as “near field communications” (NFC) which enables devices to interact with and pay at payment terminals — an activity similar to swiping credit cards.

Payments using NFC technology have been heavily popularised through efforts of international smartphone manufacturers, Apple and Samsung via Apple Pay and Samsung Pay services respectively.

“With NFC, all the customer has to do is tap their device to the terminal and it would automatically detect the information within the mobile phone and charge their credit card,” iPay88 business development director Chong Lee Kean told Malay Mail.

Although using mobile phones for purchases is not new with services such as mobile point-of-sales, used by several local financial institutions, Chong said transactions via NFC and Quick Response (QR) codes remain largely
untapped opportunities.

“When we talk about mobile commerce, the scope of services is very big because we define it as using phones for transactions — whether it is online or offline — to purchase goods and services.

“That is where the trend will go and, it will be the future of retail payments,”
he said.

The company’s initiative to use QR codes is already underway, as iPay88 is collaborating with China’s instant messaging app giant, WeChat, to buy prepaid top-ups from local telcos.

Payment using QR codes essentially uses the mobile phone’s camera to detect a computer generated code, allowing the device to make payments.

Last year, iPay88 recorded that 3.7 million online shoppers made purchases through its systems using mobile devices, up a whopping 85% from two million users in 2014.

These numbers have continued to swell with 1.6 million online shoppers using mobile phones to make purchases via iPay88 in the first quarter of this
year alone.

“This is an area we can grow because there are more people who are using mobile phones for transactions,” Chong said.

According to the company, 40% of iPay88’s transactions in the first quarter were made using mobile phones via the company’s online payment system.

He said smartphone penetration and the reliance of merchants to do business via mobile applications are some of the factors driving more consumers to pay using mobile phones.

According to the mobility report by Ericsson, smartphone subscriptions for Malaysia is targeted to almost double, from almost 25 million last year to more than 40 million in 2021.

“If we look at the trend with online transactions, we can see that mobile payments are on the rise — in certain months mobile use has outpaced purchases made from the web.

“This is a change where previously mobile payments only accounted for 20% of total transactions,” Chong said.

He also said that there are companies who are aggressive in using apps as their only platform and consumers are adapting to that.

Collaborations between the company and local banks has helped position iPay88 as the master merchant, which maintains banks’ online payment systems and set the springboard for the payment gateway to jump into the physical market.

Chong cited joint efforts such as using existing payment methods like mobile point-of-sales with local financial institutions, and their increase in awareness to adopt mobile-based payments has made the transition easier for the company.

“That is why our vision has changed from being a payment gateway to becoming a payment company. With us, banks would only have to jump on our system and we would connect them to the merchants, making it cost-effective for both merchants and banks,” he said.

MIDF slashes GDP forecast to 4%

PETALING JAYA — MIDF Research has slashed its forecast for gross domestic product (GDP) growth to 4% this year from 4.4% previously, backed by a dimmer global outlook on economic and political uncertainties.

MIDF said exports had shrunk for the second time this year, declining by 0.9% year-on-year (y-o-y) while imports increased by 3.2% y-o-y.

“Exports had declined in four out of five months on a month-on-month (m-o-m) basis this year, coming in at RM59.9 billion this year from RM60.5 billion last year. MIDF has forecasts exports for the year to come in 0.5% lower,” its economist said yesterday.

Imports rebounded after contracting in the past two months and it can be contributed by the increase in capital imports and consumption goods, which rose by double digits.

Due to the uncertainties and volatility post-Brexit, MIDF now expects the US Federal Reserve (Fed) to refrain from any rate hikes this year.

“Any forecast longer than the six-month period will have to await further developments emerging from the Brexit saga.

“The expectation that the Fed would tighten their interest rate gradually remains although the pace of the rate hike has been slower than what was initially expected,” it said.

“Since the EU referendum (in the UK) voted for Brexit, traders are no longer expecting the Fed to increase their interest rate this year and we believe investors will once again rebalance their portfolio into emerging market economies, which will lead to the appreciation of the ringgit.”

MIDF forecasts the local currency to end the year at RM3.95 against the greenback, while inflation is expected to stay at 2.6% for the year.

Meanwhile, last month’s inflation has slipped to 2% following higher figures of 2.6% and 2.1% in April and May respectively as price shocks due to the goods and services tax implementation last year continue to fade.

“The unchanged pump price in May have kept a lid on inflationary pressures, while food and non-alcoholic beverage prices fell by 4.1% for the third consecutive month with the decline in fish prices. Personal care products prices and garments slid by 0.3% and 0.1% m-o-m respectively.

“Prices for fresh vegetables continue to rise by 4.8% m-o-m following a 1.7% increase last month, which can be attributed to tight supply and a weaker ringgit,” MIDF said.

With the Brexit likely causing a slowdown in global economy, the local house expects Bank Negara to slash the overnight policy rate by 25 basis points each in September and November, to end the year at 2.75%.

IS is far from defeated

RECENT reports suggest that the Islamic State (IS) is experiencing serious losses on the battlefront. Airstrikes have killed 25,000 fighters from IS, which may not be able to withstand for long the relentless and concerted attacks from the air by the United States-led international coalition, along with Russian and Syrian forces.

After conceding Palmyra in March to Syrian President Bashar al-Assad’s army, IS this week lost its grip on the Iraqi city of Fallujah. It is only a matter of time before the terror group will lose Mosul, the core of its territory.

IS is facing pressure not only on the military front, but also from the Muslim world which has denounced it as un-Islamic, deviant and even heretical. IS is even facing problems within its own ranks. Some fighters have quit because their wages have been slashed, and some are trying to avoid frontline duties by getting doctors to issue “false medical reports”.

The troubles with the fighters’ morale emerged as it struggles to deal with territory losses, military pressure, financial problems and poor management.

Shortages of food, water and electricity in occupied territories compound the problems as IS now also has to contend with disgruntled residents.

Military setbacks, worldwide Muslim opposition, and the adverse ground situation in Iraq and Syria do not, however, mean that defeat is on the horizon. Sunni grievances over discrimination, governance and human rights abuses against the Shia-dominated governments in Baghdad and Damascus provide IS with ample grounds for exploitation. It continues to fuel the sectarian tensions between Sunnis and Shias, attacking the latter and their places of worship.

Rivalry between the regional powers and their respective proxies and allies appear to work in IS’ favour. Their conflicting strategies, and political and military objectives have hampered an all-out anti-IS campaign.

The Saudis and Iranians are determined not to let the other side gain any geopolitical advantage in the region while the Turks seem more concerned with containing the Kurds.

Meanwhile, Russian and Syrian airstrikes are reported to have targeted anti-Assad opposition groups more than IS.

Another “advantage” IS has is its ability to market its distorted version of Islam— jihadi-Salafism — to the Muslim world.

Through its propaganda machinery, IS promotes its self-proclaimed Caliphate as religiously legitimate, and conducts suicide bombings, “lone-wolf” attacks and brutal executions. IS has called on Muslims to migrate to the Caliphate and to create provinces in and outside the Middle East.

Even if IS is defeated, leading to the collapse of its so-called Caliphate, there is the danger that its sympathisers and supporters in other locations will thrive. Groups such as al-Qaeda, Abu Sayyaf, Taliban, and Boko Haram have displayed resiliency and are able to operate with impunity despite government crackdowns and the removal of many of their top leaders. 

Likewise, IS can be expected to survive and is likely to find more creative ways to mount terrorist attacks even if it loses political power.

IS’ “Plan B” probably involves operating clandestinely in Iraq and Syria as well as relocating to another territory most conducive to its development. Libya appears to be the most likely destination.

Since it first established a presence in Libya in 2014, IS now has 6,500 fighters in the country. Should IS lose Raqqa or Mosul, it may well declare a new Caliphate with Muammar Gaddafi’s hometown, Sirte, as its new capital.

Two other vulnerable areas where IS can flourish are the lawless areas of Afghanistan-Pakistan as well as the southern Philippines’ islands of Mindanao.

IS’ defeat would also not mean the end of violent jihadi-Salafism or its propagation. Several other extremist and militant groups subscribe to jihadi-Salafism or variations of it. IS’s idea of the Caliphate will find some resonance among the marginalised and discontented.

Jihadi-Salafism also provides a convenient “religious cover” and “justification” for the many acts of banditry and violence perpetrated by separatists, rebels and what amounts to nothing more than criminal gangs. 

Whether IS survives as a rogue state, goes underground or relocates to “save havens”, it will continue to present a formidable challenge on the political, military, security and ideological fronts.

Strong military action is necessary to dislodge it from its position of power and to prevent its access to valuable resources that will allow it to sustain itself and expand.

No less significant is the demolition of IS’ jihadi-Salafist ideas about the Caliphate, jihad, suicide bombing and ex-communication (takfirism). As the venerable Muslim scholar Shaykh Abdallah bin Bayyah asserted: “If you don’t defeat the ideas intellectually, then the ideas will re-emerge.”

Efforts must be intensified to delegitimise and discredit IS ideology. Exit strategies and reintegration programmes for defeated and returning fighters will have to be developed to detoxify them of the extremist ideology they have imbibed.

This is not insurmountable, given that the group’s interpretations of the religious texts are flawed and erroneous, transgressing legal principles and juristic processes and methodology.

Neutralising IS’ violent ideology should be at the forefront of counterterrorism efforts — it will not only undermine the influence of IS and like-minded groups, but also end support for the Caliphate, the use of terror and the exploitation of religion for political and military ends. — TODAY

Ahmad Saiful Rijal Hassan is a senior analyst at the International Centre for Political Violence and Terrorism Research (ICPVTR) at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.

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