Moderator Dato Dr Nik Ramlah Nik Mahmood asked Zainal Izlan Zainal Abidin how Malaysian intermediaries can play a more effective role in developing new and innovative Shariah compliant products and the availability of onshore/offshore options that would allow greater flexibility in structuring products.

Zainal said one of the critical factors for innovating products is the skills set or human capital. Secondly, the infrastructure that facilitates the creation of the development of new products also ties to the regulatory environment in that particular market. Another factor is collaboration with relevant parties or those with expertise to assist in the formulation of the products. From the Malaysian companies’ perspective, having a presence or visibility in the international market place is also critical. It is not useful when there’s a product but the rest of the world is unaware of it. Building on networking is also key, as well as proper distribution. Customer needs are also important for institutions in developing new product structures.

Responding to Nik Ramlah’s question on the role of fund managers in translating the aspiration into reality and bringing investors to Malaysia, Sharizad Juma’at said there are two areas where fund managers can play a key role: Islamic fund management and enrichment of Islamic human capital. Fund managers look at both the “buy” and “sell” sides. On the “buy” side, they are consistently looking out for good Islamic investment options and creating demand for the Islamic products.

On the “sell” side, they look for new products and promoting innovation and product services. The market is lacking in Shariah compliant investment options. To this end, JMF Asset Management has initiated a few moves. Two years ago, it issued the first collateralized loan obligation in the market with a bank, but held on because of the market conditions.
Subsequently, it launched a US$250 million real estate fund jointly with Kuwait Finance House (KFH). It also launched the first Islamic shipping fund, Al Safeena.

Nik Ramlah then sought Asim Basharullah’s views on his experience at an international Islamic bank and the role that they can play in promoting Malaysian products and services to the international community. Asim said MIFC, aside being a great platform for both issuers and investors to raise capital and fund management activities, offers a fantastic tax regime and these have attracted foreign Islamic banks to create a presence under the banner of MIFC.

Conversely, there are several Malaysian firms wanting to expand their geographic footprint in the area of infrastructure and utilities, the main area for growth in the Gulf. There are enough opportunities for banks especially from the Middle East to set up under MIFC to attract Gulf investors in terms of capital raising or fund management activities. Asim said Al Rajhi’s long-term plan is also to see how it can tap into the Asian market.

He said MIFC can perhaps look into tapping into the Middle East or do more road shows. In Saudi Arabia, any locals or borrowers who want to raise money from offshore banks incur a 5% holiday tax. Nothing of that sort exists in Malaysia. Hence, MIFC can attract investors and issuers to raise capital in a more tax efficient way.

Seohan Soo said the Malaysian success story in the Sukuk market for the last two decades has been spectacular. However, success has been predominantly in the local currency, but Malaysia has the vision to move into regional currencies. Malaysia has the potential, capitalizing on its strong track record.

Before the session ended, Nik Ramlah asked all five panelists where they see competition for Malaysia is coming from. Their answers were as follows.

Crawford: We have Singapore and Hong Kong but Malaysia will take the lead.

Asim: It is probably coming from Hong Kong and Singapore who are beginning to wake up. Malaysia has the advantage for having the regulatory framework.

Sharizad: Singapore, when we lost our own talents to this market. But we carry the competitive advantage, because we are very much ahead in terms of the business environment, incentives, infrastructure and others.

Zainal: Hong Kong and Singapore, but I also like to see these places as opportunities and potential for collaboration rather than competition.

Soo: Competition is healthy.