Malaysia will host D-8 Working Group on Islamic Finance

Kuala Lumpur, Malaysia | July 06, 2007 by D-8 Secretariat

Among the results taken during the 23rd D-8 Commissioner Meeting last May in Jakarta, Indonesia, was Malaysia's confirmation of her readiness to host a Working Group on Islamic Finance. A distinctive issue that will be discussed in the working group is the importance of sukuk (Islamic Bond), as an instrument in Islamic Finance that recently gains a significant interest in the world of economy, and how the D-8 member countries can be benefited from this instrument to support infrastructure projects in their respective countries.

The first international sukuk was issued by the Government of Malaysia in 2002 and in January 2006 part of the acquisition of P&O by Dubai Ports World was funded by a $3.5bn (£1.76bn) sukuk by Dubai's Ports Customs and Freezone Corporation (PCFC), suggesting that the sukuk had become simply another product in the armoury of bankers.

Sukuk structures have evolved rapidly in response to the demands of issuers and investors, from simple sale and leaseback (ijara) structures, such as the $1bn (£502.54m) Dubai Department of Civil Aviation sukuk issued in November 2004, to the $2.53bn (£1.27bn) trust finance sukuk structure issued by Aldar Properties in March 2007, demonstrating the flexibility of Islamic finance principles.

Meanwhile, recently the Sarawak Enterprise Corporation Bhd (SECB)'s subsidiaries, Mukah Power Generation Sdn Bhd (MPG) and Sarawak Power Generation Sdn Bhd (SPG), are issuing up to RM950 million Sukuk Murharabah and RM215 million Sukuk Musyarakah papers for the Mukah power plant project. This Mukah power plant project is scheduled for completion in the fourth quarter of 2008, and serves the sole purpose of generating electricity for sale to Syarikat SESCO Bhd, which is involved in the generation, transmission, distribution and sales of electricity in Sarawak.

Commenting on this, the D-8 Secretary General says that the D-8 member countries should focus more on this development in Islamic Finance, such as Syari'ah Banking system, and Islamic Bonds, since they have growned to be a powerful tool in the financial world that even Western, non-Islamic banks are starting to eye for a share on this financial system and plans to assign London as the center for Syari'ah Banks, and Islamic Bonds.

"So we should be rolling up our sleeves, and start to work on this issue to keep pace with the world", he says. D-8 has an approximately 900 million population with large moslem majority, and is supposed to be also a major actor in this Islamic financial system.

To find more information about sukuk, please click here to read Special Report from the Financial Time.

Source: http://ftalphaville.ft.com/blog/2007/05/23/4731/islamic-finance-an-ft-special-report/

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