HK, Dubai collaborate on Shariah-compliant products

Hong Kong and Dubai financial centres are forging ahead in their tie-ups, the latest being a venture to develop Shariah-compliant financial products.

On May 20, the Hong Kong Monetary Authority (HKMA) and the Dubai International Financial Centre (DIFC) Authority signed a memorandum of understanding (MOU) to foster "co-operation in the development of Shariah-compliant financial products and the financial infrastructures in their respective jurisdictions".

The MOU sets out the framework agreed between the two authorities to cooperate, communicate and share information on a number of areas, including the development of Islamic finance in the DIFC and Hong Kong, the exchange of advice on the development of legal and regulatory frameworks and the "harmonisation" of standards.

Hong Kong and Singapore are two Asian international financial centres that have turned their attention to the Islamic financial market, estimated to be worth US$1 trillion (RM3.24 trillion) globally and is expected to grow by 15% a year.

In November 2007, Hong Kong's financial secretary John Tsang said it is planning to develop an Islamic bond market to tap Middle Eastern and other Islamic investors eying opportunities in China. At its end, Malaysia which is home to a number of Islamic banks and takaful operators, has floated the concept of Malaysia International Islamic Financial Centre (MIFC).

The HKMA and DIFC Authority MOU also sets out to promote training and educational programmes and the facilitation of dialogue with Shariah boards and scholars.

The two regulators are also looking at exploring ways to foster Islamic financial activities on a cross-border scale to trade sukuk and other Shariah compliant financial instruments, develop payment systems and forge technical co-operation and linkages between each party's financial infrastructure developments.

"I am confident that the MOU will enhance the co-operation between the HKMA and the DIFC Authority, particularly in the development of Islamic finance, which in turn will benefit Hong Kong as an international financial centre," said Eddie Yue, deputy CEO of HKMA in a statement.

DIFC Authority CEO Nasser Al Shaali said the tie-up will enable the regulator to find solutions for critical issues by promoting shared expertise and consultation with industry.

In January, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz had led a Malaysian delegation to Hong Kong to expand cooperation on Islamic finance.

In March 2007, the central bank signed a MOU with the Qatar Financial Centre Regulatory Authority (QCFRA) and Dubai Financial Services Authority (DFSA) for collaboration on the Islamic finance front.

(By Habhajan Singh, THE MALAYSIAN RESERVE, June 2, 2008)