Answering a question posed by Abdulkader Thomas regarding the attractions Asia can offer GCC investors, Ahmed Hariri noted that the political will of both regions and the existence of a conducive business environment have resulted in positive developments between the two markets.

“When King Abdullah took over the administration of Saudi, he had a ‘Look East’ administrative policy and thus visited China, India and Malaysia to foster close ties with the countries. To reciprocate, the Malaysian prime minister recently visited all the GCC countries. This political will from both regions has encouraged positive developments, including the recent RM11 billion (US$3.23 billion) investment in Maxis by Saudi Telecom,” he exemplified.

Faisal Hasan then shared three factors that have fostered closer relationships between the two regions — the political factor, corporate developments and the retail level growth. “GCC is estimated to have US$2.5 billion to US$3 billion in excess liquidity and they are looking for ways to manage this wealth. The political ties between the region, via exchange visits between the heads of nations, have spurred activities at both the corporate and retail levels. At the corporate level, we could see a trend of capital flows into Asia (via direct investments or the setting up of GCC banks in the Asian region) and technical expertise flowing into GCC from Asia. Retail investors, on the other hand, like fixed income instruments, which are currently not available in the GCC region. Thus, Islamic banking in Malaysia could attract this retail capital via the fixed income instruments that are available here,” he enlightened.

Sohail Jaffer then highlighted investment opportunities that the investors are looking into, such as real estate, infrastructure and private equity.

Isaac Fokuo noted that there is also growing interest in socially responsible investments in which Islamic finance could play a big role. “Malaysia’s sound regulatory environment and innovation provide a platform for ethical investment. Currently, there are several European and Canadian pension funds looking into Malaysia as a prospective investment avenue.” Faisal also stressed that there is currently strong interest from Malaysian funds mulling investment opportunities in the GCC. Sohail added that trade and tourism also foster greater links between the regions as Dubai serves as a gateway into GCC while Malaysia serves as a gateway into Asia.

Faisal also stressed that there is currently strong interest from Malaysian funds mulling investment opportunities in the GCC. Sohail added that trade and tourism also foster greater links between the regions as Dubai serves as a gateway into GCC while Malaysia serves as a gateway into Asia.

Indonesia is another potential market. Faisal said, “The privatization program in Indonesia provides a strategic investment avenue for GCC investors because the government is aiming to reduce its state-owned entities from 300 currently to 50 entities by 2010. This will present direct investment and diversification benefits to GCC investors.”

As for the flow from Asia to GCC, Cook highlighted two impediments to investments — differences in the regulatory approach in each country and the small number of GCC papers issued.

In addition, the demand for financing is also increasing in the GCC and this calls for them to enter the capital market. For example, it is envisaged that Qatar will need US$130 billion for infrastructural development in three to five years; however, it only has a population of 850,000. This will force Qatar to tap into the capital market to raise funds, Cook said.

A participant then asked why Islamic finance players have only focused on high-end projects in real estate. Cook explained that real estate is easy to structure in Islamic finance and investors like this investment. Nonetheless, the market is also keen to expand into project finance in the areas of power projects and petrochemical projects.

Abdulkader then explained that the focus of Islamic bankers on luxury condominiums need not be something bad.

“First of all, these condos would not have been built if there were no buyers and second, the construction contracts do provide wealth creation opportunities in other countries. For example, if a luxury condo is built in Singapore, this may provide business to a sand company in Malaysia, a brick company in Indonesia and a steel company from another,” he said ending the session.