Islamic finance 'to gain from Asia's closer ties with Mid-East'

ASIA'S closer economic and financial ties with the Middle East will add impetus to the expansion of Islamic finance globally, said Trade and Industry Minister Lim Hng Kiang yesterday.

The increasing connectivity between the two regions comes even as Islamic financial activities here have kept growing over the past year, said Mr Lim, who is also deputy chairman of the Monetary Authority of Singapore (MAS).

He was giving the opening address at the World Islamic Banking Conference held at the Pan Pacific Singapore hotel.

"The broadening and deepening of economic and financial ties between Asia and the Middle East, the two major centres for Islamic finance, will also provide further impetus for future growth of Islamic finance globally," he said.

Mr Lim noted that the economic ties between the two regions have grown beyond the energy- related sector, with non-energy trade fast expanding.

Already, 40 per cent of the Gulf Cooperation Council's (GCC) non-oil exports are to Asia, said Mr Lim. The GCC comprises the United Arab Emirates, Bahrain, Kuwait, Oman, Qatar and Saudi Arabia.

He added: "Saudi Arabia is the leading petrochemical supplier to China's textile industry, and China's exports to the GCC are estimated to be growing by 30 per cent annually."

Financial flows between the two regions are also rising significantly, said Mr Lim.

Fuelled by a rapid rise of foreign reserves from an oil windfall, these GCC countries are seeking to rebalance their foreign investment portfolio with a greater allocation to Asia, he noted.

Consultancy firm McKinsey observed that about 11 per cent of the GCC's capital outflows from 2002 to 2006 were to Asia, and this share could increase to an estimated 20 per cent by 2020.

Asia is also investing in the Gulf, particularly in infrastructure projects, said Mr Lim.

There is also a rise in the number of financial intermediaries to facilitate cross-border dealings between the two regions, he noted.

For example, key Middle East Islamic banks have set up shop in Malaysia, and leading GCC banks are using Singapore as a base for expanding into East Asia and to facilitate Asian business expansion into the Middle East.

Mr Lim said: "The presence of all these active players makes for a vibrant Islamic finance ecosystem in Singapore."

Islamic financial activities here have also grown, he noted, and there are more sukuk issuances in the pipeline. A sukuk is an Islamic bond.

Mr Lim also said home-grown Mustafa Group is considering an Islamic financing facility to fund its expansion into neighbouring countries, while Swiber has announced its intention to set up a sukuk programme here in the coming months.

alfoo@sph.com.sg

BACKGROUND STORY

Increasing connectivity

-Forty per cent of the Gulf Cooperation Council's (GCC) non-oil exports are to Asia.

-About 11 per cent of the GCC's capital outflows from 2002 to 2006 were to Asia, and this share could increase to an estimated 20 per cent by 2020.

-Asia is also investing into the Gulf, particularly in infrastructure projects.

-There is also a rise in the number of financial intermediaries to facilitate cross-border dealings between the two regions. Islamic financial activities here have also grown and there are more sukuk issuances in the pipeline.

VIBRANT LANDSCAPE

The presence of all these active players makes for a vibrant Islamic finance ecosystem in Singapore.

- Trade and Industry Minister Lim Hng Kiang, on leading GCC banks using Singapore as a base for expanding into East Asia and to facilitate Asian business expansion into the Middle East

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