Malaysia Considering Second Global Sukuk

Malaysia is considering the option of issuing a second global sukuk (Islamic bond), following the pioneering US$600 million global sukuk that it launched in 2002.

"Right now, most of our financing is from domestic sources, some of which are Islamic-based. From time to time we have to look at accessing international funds," said Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz in an interview on the sidelines of the Second Islamic Financial Services Board Summit in Doha on May 24.

"But that (decision) will be based on many considerations... certainly we`re considering (second global sukuk) as one of the options to access global funds," she said.

The Islamic finance market worldwide has been widely estimated at around US$250 billion, and growing at 15 percent annually.

The international market for sukuk alone crossed the US$1.7 billion mark in 2003 when Qatar launched its record-breaking USD$700 million global sukuk, following the Islamic Development Bank`s US$400 million issue.

On May 21, Dubai-based airline Emirates disclosed plans to launch an international sukuk of US$500 million to US$600 million next month to finance the construction of its new corporate headquarters and engineering facilities.

It will be the first time that the airline is floating an Islamic bond internationally, although it earlier used Islamic finance through banks to raise US$600 million to purchase seven wide-bodied aircraft.

Describing the phenomenal advancement of the industry in Malaysia and in the Gulf region as "mutually reinforcing", Zeti said Islamic banking and finance is an important bridge between Asia and the Middle East, the two regions with the highest economic growth rates in the world today.

"What we want to see is the global development of Islamic banking and finance, which is happening now," she said.

She added that funds are being raised and subscribed to, while domestic (Islamic) banks in the Middle East region are venturing outside. At the same time, Malaysian banks are opening branches in the Middle East, and (Islamic) investment flows are occurring.

Therefore, the development of Islamic banking and finance in Malaysia and the Middle East are "mutually reinforcing", rather than competing, as linkages between Malaysia and the Middle East are strengthened, she explained.

Asked whether the aggressive interest shown by neighbouring Singapore was a challenge to Malaysia`s drive to be the regional hub for Islamic banking and finance, Zeti said the participation of Singapore and other neighbouring countries like Brunei and Indonesia is welcome for the advancement of the industry at large.

Certainly, Malaysia is progressively developing its financial infrastructure towards becoming the region`s hub for Islamic banking and finance, she said.

For how long Malaysia could remain a model for Islamic banking and finance "is for others to judge", she added.

Source: Bernama

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