DOES DUBAI WORLD SPELL THE END?
Despite the Dubai World debacle, Islamic finance remains an area of interest for Australian investors. When General Electric became the first major United States company to enter the sukuk market, it seemed Islamic finance was finally heading for its day in the sun. While the global financial crisis had shaken the western world, according to Bursa Malaysia global head of Islamic markets Raja Teh Maimunah, the Islamic market had escaped relatively unscathed.
“It has been really interesting times in the last nine to 12 months as we’ve seen the landscape change due to what I would call the western financial crisis, but everybody just calls it the global financial crisis,” Maimunah said.
“Governments in non-Islamic markets that never used to have any interest in Islamic finance are beginning to show interest and we have had calls inviting us to all corners of the earth.” One of the stumbling blocks in melding modern finance with Islamic law had been the prohibition of the payment of interest, according to a report in The Wall Street Journal. But the GE Capital deal, which involved a five-year, $500 million Islamic bond, signalled a bright beginning. “We intend to be regular issuers in the sukuk market and are heartened by the support we have seen in this first transaction,” GE Capital senior vice president Kathy Cassidy told The Wall Street Journal. And Siraj Capital chief executive Ibrahim Mardem-Bey said the transaction was a “big deal”. “People in the industry have been eagerly awaiting something good like this to reignite the market,” However, mere days after the transaction was made public, property developer Dubai World announced it was seeking to delay debt repayments, with its property unit, Nakheel, seeking a standstill agreement on a US$3.5 billion ($3.8 billion) bond due for repayment on 1 December. (more…)
