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Tuesday, 30 June 2015

Malaysia set to double sukuk sales

Islamic bond sales in Malaysia are set for the best quarter in more than a year as infrastructure firms take advantage of the lowest borrowing costs in 16 months.
State-owned DanaInfra Nasional Bhd. led companies in raising RM17.9 billion since March 31, compared with RM8 billion in the first three months, data compiled by Bloomberg show. The yield on Malaysia’s top-rated 10-year debt sank to 4.59% on June 5, the lowest since February 2014, and was at 4.61% as of June 19.
Sales this year in the world’s biggest sukuk market will probably climb to the highest level since 2012 as Malaysian companies tap a record RM625 billion of Islamic banking assets to fund Prime Minister Datuk Seri Najib Razak’s plans for more railways and roads, according to CIMB Group Holdings Bhd.
The top sukuk arranger in 2014 says companies will bring forward issuance to lock-in low rates before the Federal Reserve raises interest rates.
“The window to sell is between now and the end of the year,” said Badlisyah Abdul Ghani, the Kuala Lumpur-based chief executive officer at the Islamic banking unit of CIMB Group.
“We have a healthy pipeline of companies looking to tap the market this year.”
DanaInfra, formed to finance the country’s MRT project, asked bankers to submit proposals for a RM40 billion Islamic debt programme this month. SapuraKencana Petroleum Bhd plans to sell RM7 billion of such notes.
Najib, who is pushing for higher spending to help Malaysia achieve its goal of attaining developed-nation status by 2020, said in his October budget work will start in 2015 on projects valued at RM75 billion.
This year’s sukuk issuance could surpass RM70 billion, the highest since a record RM109.5 billion in 2012, according to CIMB and and AmInvestment Bank Bhd, Malaysia’s fourth-biggest arranger of Islamic notes.
RHB Capital Bhd., the top arranger this year, expects sales to be similar to last year’s total of RM65.1 billion as a slowing economy prompts companies to review their spending plans.
(The Malaysian Insider / 30 June 2015)
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What happened to Islamic banking in Malta?

In the budget speech, the Government had announced the introduction of Islamic Banking in Malta. A year has nearly passed but there has been no word from Government about this initiative. In the wake of the terrorist attacks in Tunisia, Somalia, Kuwait and France, does our Government still intend to introduce this sort of financing? Does it still see it as beneficial or is it now perceived as a threat? Without any doubt the introduction of Islamic Banking will be a challenge to our young democracy.  
To my knowledge, there was no legislation in this regard, even if, one cannot exclude that it is being quietly carried out by one of the private banks. Introducing formally such a new financial service is going to be a challenge for Malta and this is irrespective of IS terrorists attacks or not. The budget speech lacked information about this financial mechanism, which is highly provocative in structure. No one was expecting details during such a speech, as budgets are there to outline policy. But nothing else was heard, at least, in the open.
Definitely, my assessment about the introduction of Islamic Banking is that should this happen, it is going to be a challenge to both Government and the Opposition. There can be no doubt that the Government looked at the matter from a purely commercial point of view without paying any attention to certain core values. These were simply ignored as is only too often happening these days. But the attacks by ISIS are bringing the issue of core values to the fore again. This is not only relevant to Islam but also to the Western world.
Possibly, the Opposition thought that if it decided to oppose it and question Government, it risked being faced with an accusation of being negative and of hindering Malta’s further expansion as a Financial Centre. One needs to remember that Malta’s development as an International Finance Centre had never been the source of political controversy and the PN received all the support from the then Labour Opposition. At least, this was a point, which both John Dalli and the late Lino Spiteri agreed on.
I am sure that any negative approach by the PN to Islamic Banking once it is implemented would provoke an easy spin for Government to put the PN on an off course. The simple argument would be that if Islamic Banking is acceptable in the UK, then what's wrong with Malta? Well, maybe we ought not to compare Malta with the UK but even the UK is starting to question a number of core values and accommodating policies to Islam.
But do we need to take the UK as a model? One needs only to remember that the Muslim community in the UK is now 4.2% of the population. There are streets in the UK where Sharia law reigns ‘unofficially’ supreme. It has been unceremoniously introduced by Muslim residents. British, non-Muslims and moderate Muslims now fear to enter a number of Muslim areas.
The UK is now starting to debate whether it is time for the introduction of the Islamic inheritance system, which bluntly discriminates against women, and is all in favour of men. In other words, if this is done, the UK will be going back to the Middle Ages, when the feudal system reigned supreme. In Quebec, Muslims are also demanding the introduction of Sharia Law and the secular state is in difficulties not due to principle but as those protesting are being financed by America’s Arab friends.   
On the other hand, should the PN publically endorse Government’s proposal, would it be seen by the rank and file of the Party to be compromising its core values and principles? Perhaps this explains its silence on this issue. It is here, where Government and Opposition need to tread with care but it is about these points that the PN Opposition should be pressing and concentrating. Allow me to explain this by making a few observations.
Currently Malta is seen as one of the top countries in the fight against money laundering and terrorism funding (see for example the Basle AML index). With the introduction of Islamic Banking, the biggest preoccupation would be whether such a position would be negatively affected. Definitely, if Islamic Banking is introduced, we (as a country) must put in place strong safeguards against financing terrorism. Is the Government really ready to take up such a challenge? Has it got the means?
As a Financial Centre and following the introduction of Islamic Banking, does Malta run the risk of being downgraded in the perception of the international community? Perhaps one would argue that England has introduced Islamic Banking and apparently, it remains a world centre of Finance, but the way that Cameron is reacting to migration points to a change of policy. 
My other concern is on the role of the Regulator. I am still at a loss on this. Despite a long Budget Speech, such an essential issue was not tackled by the Minister of Finance. I do not consider that I will be throwing any bad light on the institution if I say that MFSA is far from being prepared for such a proposal. But there again, should MFSA be the Regulator? The recent controversies into which MFSA was dragged in relation to money funds that had gone astray and the answers given by the same MFSA leave much to be desired as well as to the reality of how well equipped and well prepared is such an Authority to act as Regulator. Can this institution guarantee that our good reputation in the banking sector does not go amok thanks to the introduction of Islamic Banking? I have some misgivings on the matter.  
(Malta Independent / 29 June 2015)
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