Malaysia: Government support and neutrality on tax vital for sukuk issuance
KUALA LUMPUR: The main requirement for successful issuance of sukuk is support from the government to ensure that it would be tax neutral, not worse off from issuing a conventional one.
“With the government support, it is then open to the government, government-linked companies or private companies to issue sukuk,” Islamic Finance practitioner Mohamed Ridza Abdullah was reported as saying in Casablanca, Morocco by financial magazine Les Eco, which was made available to Bernama.
Ridza was invited to speak at a sukuk workshop in Casablanca to raise awareness on sukuk issuance as an alternative to capital funding in view of surging interest on Islamic bonds across Africa.
“The reform (amendment) of Act no.33-06 by the Moroccan government for a securitisation framework, which is comparable to best international standards, would allow the country to position itself as a destination of choice for the development of securitisation and Islamic finance in Morocco and Africa,” Ridza, managing partner of a Kuala Lumpur-based law firm, said.
Sukuk are syariah-compliant financial instruments, which are issued to raise funds in a Shariah-compliant manner and like conventional financial instruments, can be listed on a stock exchange.
By subscribing a sukuk, its holder receives a beneficial ownership in the underlying assets, which are acquired with the issue proceeds.
Ridza’s presentation at the workshop on sovereign sukuk and corporate sukuk was attended by participants, comprising bankers, insurance and other capital market investors, as well as executives, members of the media, shariah advisers and decision makers from the Morocco Central Bank, Securities Commission, Ministry of Finance, and insurance regulators.
He also held meetings with the Casablanca Stock Exchange to deliberate on its interest over the issuance of listed sukuk in Morocco.
Responding to a suggestion by the magazine that fewer sukuk issued by Malaysia in 2015 could bend market potential for further growth globally, Ridza said the decline was due to Malaysia’s adherence to its policy of fiscal deficit reduction against the backdrop of weak commodity prices and foreign exchange volatility.
He said, however, it has a silver lining as it also reflects increasing internationalisation and diversity of Islamic capital markets.