Wednesday, October 15, 2008

Opportunities in cross border business in Islamic banking

[PIX: I chaired a panel session at the Sixth International Islamic Finance Conference. I'm sitted extreme left. With me are (left-to-right) panelists PricewaterhouseCoopers Taxation Sdn Bhd senior executive director Jennifer Chang, Daud Vicary and Bond Pricing Agency Malaysia COO Meor Amri Meor Ayob] -- PIX BY IBBM's AHMAD ROSLAN JUMAAH

By Habhajan Singh
There is a huge opportunity waiting to be tapped in cross border business in Islamic banking and finance, a local Islamic banker said. Asian Finance Bank Bhd chief operating officer Daud Vicary Abdullah said local Islamic banks should be more proactive in tapping the potential cross border transactions, especially with the Middle East. "It will be difficult for a local Islamic bank in Malaysia to market their products in, say, the Middle East without having a local presence there. You can do a roadshow, but what happens after that?" he said at the Sixth International Islamic Finance Conference in Kuala Lumpur yesterday.
Daud was the keynote speaker at the two-day conference, which ended on Oct 14. The conference is jointly organised by Monash University, Institute Bank-Bank Malaysia (IBBM) and the Islamic Banking and Finance Institute Malaysia (IBFIM).
On cross border deals, PricewaterhouseCoopers Taxation Sdn Bhd senior executive director Jennifer Chang said the treatment of taxation varies from country to country. She noted that Midde Eastern businesses are used to having a tax-free regime, unlike countries such as Malaysia and Singapore. She said that Singapore and Hong Kong have effected various changes to their taxation regulation to achieve tax neutrality.
"Both Singapore and Hong Kong have replicated what Malaysia has done (on the taxation front) to be competitive.
"Indonesia, however, is a regime where you still have a high VAT (value added tax) and stamp duty," she said. This is an issue also faced by countries like Japan and China in implementing Islamic finance, Chang added.
"Until they come out with specific tax legislation for Islamic finance products, you may want to avoid dabbling in deals involving asset transfers," she told the conference.
According to Daud, for Islamic finance to grow, move forward and capitalise on the enormous growth potentials, there should be greater cooperation among the industry players and better coordination to address the issue of Shariah harmonisation.
At the same time, he added, local Islamic financial institutions also have to be proactive in analysing client demand, designing products to fit market needs, using a mix of marketing tools and media to inform their customer base and pushing to sell.
"There is also the need for more intense competition (and a) clearer message, with nuanced products having a distinguished USP (unique selling proposition)," he said.

(The Malaysian Reserve, Oct 15, 2008, Page 4)

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