Brunei is 'speed boat' in Islamic Finance dev't

Oz Ahmed, Associate Director, Wholesale Banking, HSBC Amanah Malaysia giving a hypothetical scenario on the future of banking during The 2011 Brunei Business Forum "Promising Opportunities, Sustainable Approaches" held at Radisson Hotel last week. Picture: BT/ Raul Padernal

Monday, September 19, 2011

IN TERMS of Islamic Finance, Brunei is a speed boat while other economies are like oil tankers, which means the Sultanate has the ability to move faster than any other country if it desires to, putting the country in a prime position to be the industry leader.

Kuala Lumpur based Arsalaan "Oz" Ahmed, associate director of HSBC Amanah's Wholesale Banking, told The Brunei Times that other economies, compared to Brunei, can move and make waves, but their movement will be slower because of the size of their economy, what they have to integrate to make sure things go accordingly, and so on.

"In my view, Brunei is certainly not at an infant stage, but you're not at an advanced stage either. From looking at specific opportunities around wealth management and investment capabilities of Islamic Finance, I feel that within the next five to 10 years, a jurisdiction could capitalise on that and become a leader," Arsalaan said.

He added: "Brunei having the infrastructure that it has, a financial centre syariah advisory board, keen people in the business, and banking institutions that is compliant, is in the position to take on that mantle and be the leader."

In terms of converging standards on Islamic Finance, Arsalaan said that Brunei should focus on a niche area and develop a holistic set up in terms of concepts, its pronouncements and a clear integration within regulatory and frameworks of those jurisdictions. Basically, the world-class regulatory framework should instills confidence with regards to Shariah standards.

"Standards (around the world) are starting to converge, but it's not happening fast enough. The industry is growing at a huge pace, and there is a role for someone to play in doing that," he said.

Arsalaan believes that if done right, it would lead to diversification in the sector and will create and important chapter for the economy.

However, he warned that any other economy can do it if it wants to do it, which means Brunei has to move fast if it wants to take advantage of the situation. "When you have petro-dollars, looking to invest in a syariah compliant way, markets have to respond," he said.

Arsalaan gave an example of an investment by a Saudi telco, looking to invest in Indonesia's Axis (also a telco). "The Saudi telco wanted to make sure that the financing was syariah compliant and it became the largest syariah compliant transaction in Indonesia. So when you have petro-dollars, Brunei will play a role in investing in that way," he said.

Arsalaan, who was one of the speakers at the Asia Inc Forum's Brunei Business Forum last week, in his presentation, credited His Majesty's vision in 1990, on Islamic Finance, where His Majesty called on Brunei to look for external assistance on the matter.

"In 1990, His Majesty said, if we are not able to do something it does not mean we should sit still and do nothing. If we are unable because we have no skilled labour or expertise, and if we are in dire need to meet demands of, example, fardu kifayah, then is it wrong (to follow) international practice or tradition of nations by mutual exchange of information or undergo training, or if necessary, hire experts for temporary employment to help us meet our needs and desires," Arsaalan quoted.

Since 1990, Arsalaan said: "We've come a long way, and the industry itself, in a very insightful way, works exactly like that."

Currently 800 financial institutions offer Islamic products, of which 350 are Islamic financial institutions. Over 750 funds comply to syariah regulations and in Brunei the market penetration is an "astounding" 50 per cent.

Arsalaan said that the industry, within the next decade or two, is moving towards $4.4 trillion, growing an enormous $3 trillion from where it is at. "This screams opportunity that is coming and can be captured," he said.

The associate director said that every country wants to become a hub in Islamic Finance, but how can Brunei do it? "There is a difference between ambition and rights. Brunei has the right to it. That right has foundations within the affinity to Islamic Finance, within itself and the population and spirit of the country itself. Also, within the infrastructure established. Because of this, Brunei has the right to win," he said.

He added: "Brunei is the abode of peace, the peace that is from Islam. That in itself is an area where Brunei can have a right to win."

Brunei has to rely on its strengths, as Islamic Finance is not just sukuk, it's much more about equity, about where you are as a country.

"It's about developing the local talent pool. People in Brunei I dealt with, are some of the most engaged individuals and have world views. Now, the Sultan's words resonate now as much as they did then. Staying true to those words, reflecting on them, can assure Brunei fulfil the promise and not just have promising opportunities," he said.

As for the possibility of HSBC Amanah's entrance to Brunei, Arsalaan said that they have ambitions to reach as many markets as possible. "Where we can, we will. And it's important to HSBC and Amanah to develop in all key jurisdictions. It'll be a miss to say that Brunei isn't one of them," he said

The Brunei Times