BRUNEI should look for investment projects outside the country in order to accelerate the growth of its Islamic capital market, industry players said yesterday.

With the Sultanate aspiring to become a global player in the Islamic finance industry and develop the local market for Islamic finance, the opportunities that will allow the country to achieve those goals may not be abundant domestically, they said.

Key industry players and experts at the Brunei Islamic Finance News (IFN) roadshow 2013 on Thursday suggested that Brunei start looking for opportunities in neighbouring countries as infrastructure projects in the Sultanate may remain limited or “too small” of a market.

Nazim Rahman, Group CEO at Malaysia Government-linked investment agency Pelaburan Mara Berhad, said that Brunei should determine whether there is excess liquidity for the country to invest.

He suggested that the government consider introducing public private partnership (PPP) investment models to create room for private participation and obtain funding for infrastructure projects. Nazim said Brunei should also look beyond its own borders and participate in debt securities issued by the private sector from the developing countries.

In an interview with The Brunei Times, Nazim said that in accelerating the growth of its Islamic capital market, Brunei has to factor in the economic development within the region.

“Because I think one of the key areas if you were to develop the Islamic capital market locally is to determine whether or not there are sufficient investment assets that the funds or the liquidity in Brunei can invest in. I think that is a key area,” he said.

“So if there are no sufficient assets, then I suppose Brunei has got to look beyond its market into the region for example we are witnessing tremendous activities going on at the moment especially in the region.”

He said countries such as Malaysia, Thailand, Indonesia are going through numerous big infrastructure projects in which debt securities may be issued and Brunei can participate.

Brian Wong, Country Manager of CIMB Investment Bank Brunei, said that investments in a foreign country may not necessarily grow the local Islamic capital market but acknowledged that the opportunities are there for Brunei.

He said that the Sultanate just needs to be certain on the types of investments it wants to take part in.

Wong, however, said he believes that in growing the local financial market, the challenges lies in local companies and the market being “too small”.

The banker shared that he had been approached by several small and medium enterprises (SMEs) that sought funding for projects of small value.

“Anything (projects) below $300 million is too small to be issued as bonds,” he said.

Khurram Abdullah, Head of Asset Management at Dar Al Sharia Legal and Legal Financial Consultancy of Dubai Islamic Bank, said that cross-border investments may be the right option for Brunei considering the size of its local market.

He, however, pointed out that the projects do not necessarily have to be in the form of physical monetary investments but rather in terms of providing technical know-how to industry players.

Khurram said due to varying schools of thoughts between the Gulf countries and major regional players such as Malaysia and Indonesia, the general comprehension of Syariah-compliant banking is somewhat inconsistent.

This is where Brunei can “bridge the differences” and standardise the business concept by focusing on Arabic standards, he added.

“By offering that neutral jurisdiction, the products will be more generally accepted by the major players in the Arab world especially,” Khurram explained.

The half-day IFN roadshow, held at The Empire Hotel & Country Club in Jerudong, featured prominent players in the Islamic finance industry who shared their expertise and knowledge of the market.


Copyright 2013 ,The Brunei Times (by Fitri Shahminan)