REPORT: Islam really under siege in Malaysia, says Dr M

The constant fear Malaysian Muslims have of Islam being attacked in the country where they are the majority is a legitimate fear, Tun Dr Mahathir Mohamad said today (18 Feb 2014).

The still influential former prime minister also accused the Malaysian Christian community of deliberately testing the tolerance of their Muslim countrymen by insisting on using “Allah” to call their God, reports The Malay Mail Online.

“It is a legitimate fear; if we lose our influence on the country, obviously lots of things which are offensive to Muslims will be found here,” he told reporters after officiating the Global Peace Foundation Chair for Global Peace at the International Islamic University Malaysia here.

Dr Mahathir said the respect Malaysians have for traditional values and customs will disappear should Malays lose political power and backed calls by certain Malay and Muslim rights groups here to rally to defend Islam.

“All this while, during the British time and after independence, it was agreed that the word ‘Allah’ should not be used in the Christian text.  But now you purposely bring it up and make all kinds of claims so as to agitate people and the reaction to that is for them to object,

“This is a reaction to the way people treat Islam in this country today. They have no more respect for Islam, they do things that would be objectionable to Islam and suddenly they come up with this idea that they should call their god ‘Allah’ as well, which is very confusing,” he said.

To illustrate his point, he cited neighbouring Singapore, where he claimed non-Muslims there are less sensitive and considerate to Muslims.

“We see in Singapore for example, while it is not forbidden for us to sit and eat when others are eating pork, but traditionally we don’t allow that.

“But in Singapore, they say so long as you don’t eat, you can put a roast suckling pig in front, but for Malays, this is something they cannot accept,” Dr Mahathir said.

FULL REPORT HERE.

KFH scale down Singapore operations

by Habhajan Singh
Kuwait Finance House (KFH) has scaled down drastically its Singapore operations just over a year after opening the subsidiary to tap into the region’s fund management scene, sources say.
It is understood that the regional operations for the Islamic bank’s fund management act ivit ies in the island-state would be brought back to Kuala Lumpur and handled directly by Kuwait Finance House (Malaysia) Bhd. In May 2008, KFH Malaysia had announced that its wholly-owned subsidiary, Kuwait Finance House (Singapore) Pte Ltd that it had received the go ahead from the Monetary Authority of Singapore (MAS) to commence its fund management activities. It is understood that the Singapore operations, manned by about a dozen staff, had been reduced to just one staff.
"I think they have been a little impatient with the results from their Singapore operations. Perhaps they had expected a little too much, too soon," an executive at an Islamic bank told The Malaysian Reserve.

This is just one of the recent apparent bumps in the operations of the Kuwaitibased Islamic outfit. In mid-December 2009, KFH Malaysia had pulled out from a RM920 million deal to purchase 50% of Menara YNH from YNH Property Bhd’s unit.
In a statement on Dec 15, YNH had told the stock exchange that KFH Malaysia had informed it ‘in writing’ on that matter, and that it may seek damages from the Kuwait-based Islamic bank. In an emailed statement a day later, KFH Malaysia had said that that there was "no legally binding agreement between KFHMB and YNH Land Sdn Bhd." Explaining the rationale of the move, KFH Malaysia had informed its staff that KFH Asset Management Sdn Bhd (KFHAM), which was established in 2008, would "act as the strategic platform for the KFH Group for Asia Pacific".

In the memo, seen by The Malaysian Reserve, KFH Malaysia said: "As such, this consolidation exercise will affect the KFH Singapore office, since there is a duplication of business functions. We have had to make a painful decision in the employee and resource realignment in Singapore, and to minimise our workforce at the KFH Singapore office.
"The move is a necessary adjustment to ensure that our investments are tightly aligned with current and future revenue opportunities. The current environment requires that we continue to increase our efficiency. With the KFH Singapore decision, we optimise our employee deployment."
The bank also told its employees that the company had appointed a ‘reputable outplacement company’ to assist affected employees to find news jobs who, it added, were give ‘severance pay and other benefits’ which were ‘beyond the legal requirements’.

On the decision to eliminate jobs, the internal memo stated that it was ‘crucial’ to its ability to adjust the bank’s cost structure, so that we have the resources to drive future profitable growth’.
The memo, dated Dec 12, 2009, was signed by chairman Shaheen Al-Ghanem and acting CEO Ab Jabar Ab Rahman. In a statement when the Singapore subsidiary was established, Shaheen had said that the move the establishment of KFH operations in Singapore was a ‘testament of our commitment in the Asia-Pacific region’.

(This story appeared in The Malaysian Reserve on 18 Jan 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

Islamic Bank of Asia may shun LME transactions

The Islamic Bank of Asia, a venture of Singapore’s DBS Group Holdings Ltd, aims to stop using London Metal Exchange transactions as the basis for products after religious advisers said some may not comply with Shariah, reports Bloomberg (May 14, 2009).
The bank is in talks with Olam International Ltd to use its trading in commodities such as rice, coffee, cotton and cocoa as the basis for financing compliant with Muslim law, its chief executive officer, Vince Cook, said in an interview in Singapore recently, it said.
"Industry practice is based on the LME, but our Shariah board would like us to explore alternatives as they’re concerned some t rades through the LME may not involve the physical movement of goods," Cook told the newswire.
THE REPORT GOES ON:
Using contracts including Murabahah sale-and-deferredpayments and Ijarah leases, Islamic banks seek to comply with Shariah’s ban on interest and stipulation that financial agreements are based on the transfer of goods or services.
With the help of Shariah scholars who judge which products are compliant, the Islamic finance industry has attracted as much as US$1 trillion (RM3.56 trillion) of Muslim wealth, according to the Malaysia-based International Islamic Financial Services Board.
The Islamic bond market was roiled last year after a group of scholars led by Pakistan-based Sheikh Muhammad Taqi Usmani said as much as 85% of the securities may not comply fully with the precepts of Shariah. Sales of Islamic bonds, known as sukuk, plunged to US$13.9 billion in 2008 from a record US$31 billion a year earlier, according to data compiled by Bloomberg.
"Olam are doing real business, buying and selling food commodities," Cook said.
"We think we could use this to facilitate an awful lot of our business.
"There would be no time difference and it would also help the local commodity industry create better liquidity."
Olam, which is also based in the city-state, operates in 60 countries and trades more than five million tons of commodities each year, according to its website.
Pioneering work with The Islamic Bank may lead to the creation of a trade-finance system that other banks can use, according to K Ravikumar, Olam’s chief financial officer.
"There is a great requirement in the Islamic world for a product like this," he said in a phone interview from Singapore recently.
"Our commodities are all agri-products and are all Shariah-compliant, so no meat or tobacco."
The Islamic Bank’s board of Shariah scholars comprises Sheikh Nizam Yaquby, Sheikh Mohammed Elgari, Mohammed Daud Bakar and Abdul Sattar Abu Ghuddah, according to its website.
Bahrain-national Yaquby has advised the Islamic units of banks including BNP Paribas SA, Citigroup Inc and Standard Chartered plc, while Saudi Arabia-based Elgari’s clients have included Merrill Lynch & Co, according to the website of HSBC Holdings plc’s Amanah unit.

[See The Malaysian Reserve report on May 11, 2009, entitled 'Islamic organisation bans use of organised tawarruq']

‘Islamic finance not a panacea for all ills’

By Sumathi Wong
The global economic crisis may not necessarily have been averted by Islamic finance as the sector has yet to reach a critical mass to prove it, says the head of a foreign bank in Malaysia.
HSBC Bank Malaysia Bhd deputy chairman and chief executive officer Irene M Dorner said another critical issue for Islamic finance is the preparedness of regulators to modulate the industry, especially when it moves beyond replication of the conventional product profitsharing and risk-sharing.
"Whilst Islamic banking is definitely the future, please don't go away with the idea that it's the panacea for all ills. It's not. "If you move into the next phase of Islamic banking, beyond the conventional products — the profitsharing, risk-sharing, and so on — I'm not sure how you can regulate that," Dorner told the 13th Malaysian Banking Summit 2009, organised by the Asian Strategy and Leadership Institute (ASLI), in Kuala Lumpur yesterday.
Other panelists at the CEO forum, entitled "Coping with tough times: How banks can survive and thrive amidst the global financial crisis", were Malayan Banking Bhd (Maybank) president and chief executive officer Datuk Seri Abdul Wahid Omar and Hong Leong Bank Bhd group managing director and chief executive officer Yvonne Chia.
Dorner noted that there have been suggestions the current crisis would not have happened if the whole world had been utilising Islamic finance. "There have been various pundits in the press saying it wouldn't have happened.
"Actually, there's insufficient Islamic finance in the world for anybody to say whether that is true or not true," she said.
Malaysia's Islamic banking sector registered double-digit growth over the past eight years with an average annual growth rate of 20% in terms of assets. As at the end of 2008, the share of Islamic banking assets in the total banking sector has expanded to 16.7% compared to 6.9% in 2000. Dorner's caution, particularly on the critical role of the regulators, was also was raised at the 6th Islamic Financial Services Board (IFSB) Summit held in Singapore last week.
IFBS secretary-general Prof Rifaat Ahmed Abdel Karim told the summit that "every financial institution requires close supervision, regardless of whether it is conventional or Islamic".
Monetary Authority of Singapore's (MAS) managing director Heng Swee Keat in his welcoming remarks at the meeting said, "While Islamic finance has features that make it robust, there are also risks such as liquidity and concentration risks that demand special attention."

(This story appeared in The Malaysian Reserve on May 12, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

Singapore: Guidelines on Islamic banking

THE Monetary Authority of Singapore (MAS) has issued another two regulations on Islamic banking - an area which it says will become more popular in the post-crisis world. The regulations mean that with immediate effect, Singapore-based banks may enter into what is known as diminishing musharaka financing and spot murabaha transactions, MAS managing director Heng Swee Keat told an Islamic finance conference on May 7, reports Singapore's Straits Times.
A diminishing musharaka transaction, for example, is a joint ownership arrangement where a bank gradually sells its portion of the jointly owned asset to the customer. This allows the bank's share of the asset to 'diminish' over time. Ultimately, the ownership of the asset - which can be in the form of property, vehicles, machinery or commodities - is transferred entirely to the buyer, the report added.
The central bank has also issued a 'consolidated set' of guidelines that provide 'greater clarity and certainty' for financial institutions offering Islamic banking products here, the report said.
MAS said the guidelines basically consolidate the various regulations and clarifications that it has made about the 'regulatory treatment of various Islamic finance structures under its rules'.
Mr Heng, who was speaking at the sixth Islamic Financial Services Board summit, said Islamic finance will assume a more prominent role in the coming years.
'In this crisis, both conventional and Islamic financial markets have been affected, but the restrictions on the use of leverage and speculation has put Islamic finance in a better stead,' he said.
Global Islamic finance assets today range from US$700 billion to US$1 trillion, according to some estimates. Oliver Wyman, an international management consulting firm, has even estimated that global Islamic finance assets could potentially grow to US$1.6 trillion by 2012.
Mr Heng stressed that MAS will continue to work towards a regulatory approach that is clear, relevant and consistent across the range of Islamic financial activities.
'We face challening times, but the dynamism of Asia, including the Middle East, will return and the structural economic changes are likely to accelerate,' he said. 'The focus on the role of finance to develop productive sectors will raise the profile of Islamic finance, and create new opportunities.'

Islamic banks have weathered sub-prime crisis well: Regulators

ISLAMIC banks and financial institutions managed to avoid the fallout from the sub-prime crisis, largely because they refrained from investing in toxic assets that were deemed 'un-Islamic', reports The Straits Times (May 08, 2009).
And this prudence has put Islamic finance in good stead with investors looking for safe havens, said Professor Rifaat Ahmed Abdel Karim, secretary-general of the Kuala Lumpur-based Islamic Financial Services Board (IFSB), the report added.
The IFSB is an umbrella group of Islamic financial regulators. It was formed in 2002 and counts Saudi Arabia, Qatar, Indonesia, Bahrain, Sudan, Pakistan and Singapore as members.
Prof Rifaat, who is in Singapore for the IFSB summit this week, told the Singapore daily that a lot of lessons could be learnt from the financial crisis.
"What I think people have realised is that Islamic banks have a model that they can study,.
"They provide not an alternative to conventional finance, but a model to financial institutions which others can learn," he said, adding that he is under no illusions that Islamic finance can replace the now discredited Wall Street financial services model.
"When you say 'be an alternative', it means to say to replace it. I don't think that would happen," he said.
The report goes on:
Instead, the global crisis has highlighted the strength of the Islamic methods of banking and finance, where syariah-compliant rules govern the business model, behaviour and practices of Islamic banks and financial firms, he added.
For instance, a basic rule of Islamic finance prohibits Islamic bankers from dealing in second-hand interest-bearing mortgages, or from even engaging in trading debt instruments.
'They're not allowed to participate in what you call toxic assets like sub-prime mortgages,' Prof Rifaat said.
He said that while Islamic banks have avoided the worst excesses of the toxic-asset problem because they never invested in certain asset classes, some Islamic banks could still be hurt as the impact of the global crisis spreads.
'It all comes down to risk management. You've to have proper risk management and proper governance and practices so that an institution doesn't fall down,' he said.
'The point is that you really need good risk management practices and good governance, whether it's an Islamic financial institution or otherwise.'
When the economy weakens, Islamic banks may suffer too.
'If we now move from a financial crisis to an economic crisis, then Islamic banks might be affected like any other banks,' he said.
'For example, if a country is export-oriented and there's a decline in exports, businessmen or firms will not go and ask for financing from banks, including Islamic banks.'
He thinks Islamic finance will become stronger with more products and services on offer, and also more banks.
(This article was first published in The Straits Times.)

Liquidity squeeze hits Islamic finance: SBT

While Islamic finance continues to develop, it has been hit by a liquidity crunch. The sector is grappling with the plunge in oil revenues and the impact on many of the Middle East countries, reports Singapore's The Business Times (May 07, 2009).
The slump in property prices is another big headache, given the asset-based nature of Islamic finance. In February, Abu Dhabi gave a US$10 billion ($14.78 billion) bailout to neighbour Dubai as it reeled from the property bust.Dubai has accumulated US$80 billion in debt to build real estate projects, including the world's tallest building, the report added, noting that there have also been dire warnings that some Islamic banks may be forced to merge later this year if liquidity does not improve.
"While the industry is not exposed to the triggers of the sub-prime crisis, it is not immune to the secondary effects, such as the liquidity crunch, slowdown in economic activity as well as transaction flows.
"Nonetheless, the industry is at a nascent stage of development and still has plenty of room to grow. The global sukuk market, for instance, while depressed, is gradually gaining acceptance in the Gulf as a preferred means of financing and investment," Vince Cook, chief executive of the Islamic Bank of Asia (IB Asia) told the business daily.
The report goes on:
Sukuk or Islamic bonds issuance has contracted and is slated to be lower than in previous years.
Malaysia's capital market regulator last week estimated that global Islamic bond issuance this year would be worth at least US$10 billion, said a Reuters report.
New sales of Islamic bonds fell to US$15.77 billion last year from US$46.65 billion in 2007, the Islamic Finance Information Service (IFIS), which tracks data in the Islamic finance industry, said.
Against this backdrop, Singapore this week plays host to the 6th Islamic Financial Services Board (IFSB) summit, a high-profile event which brings together regulators, major market practitioners, especially from the Middle East, and academics involved in Islamic finance.
The theme of the summit is the future of Islamic financial services.
The IFSB, which is based in Kuala Lumpur, serves as an international standard-setting body of regulatory and supervisory agencies that have a vested interest in ensuring the soundness and stability of the Islamic financial services industry.
The 6th IFSB summit will be the first time that the event is held in East Asia.
According to the Monetary Authority of Singapore, the president of the Islamic Development Bank (IDB) and eight central bank governors and deputy governors have confirmed their participation in the summit.
The governors/deputy governors are from the Middle East and Asia (Bahrain, Jordan, Korea, Malaysia, Qatar, Saudi Arabia and the United Arab Emirates), and Sudan.

Singapore Islamic bank seeks Asia, Gulf growth

The Islamic Bank of Asia, backed by South-East Asia's top lender, is on the hunt for acquisition opportunities in Malaysia and Indonesia to gain a foothold in the populous Muslim retail markets, reports Reuters.
Islamic banks are turning to retail consumer demand for growth as the explosive rise of the Shariah bond market slows markedly amid the global credit crisis. Rising demand for ethical investments and growing interest by non-Muslims in Islamic finance have also turned the retail business into a potential major growth market.
Singapore-based Islamic Bank of Asia is considering various options to enter Malaysia and Indonesia, including taking a stake in banks in these countries, said the lender's chief executive Vince Cook, the report said.
"Singapore presents a very good platform for wholesale and crossborder business and both Indonesia and Malaysia would complement that by giving us the ability to build a very sizeable retail business," Cook told Reuters in a telephone interview. "In Malaysia, sometime during this year we will certainly have decided exactly how we want to proceed. We've surveyed the existing institutions...there hasn't been one as of yet that sort of become clearly the preferred target."

OCBC eyes Brunei, Jakarta and S’pore for Shariah growth

OCBC, Singapore's number three bank, will expand its Islamic business in Brunei, Indonesia and in Singapore itself, which it sees as the fastest growing Asian Shariah finance markets, its Malaysian unit said yesterday.
The bank will use Malaysia as a springboard to tap demand for Islamic products in these countries, OCBC Bank (Malaysia) Bhd chief executive Jeffrey Chew said. Demand in Brunei and Singapore would be driven by the Islamic treasury business while Indonesia's large Muslim population provided a large consumer market, he added.
"We are of the opinion that Brunei and Jakarta will probably also move quite quickly in the next couple of years," Chew told reporters at the launch of OCBC Malaysia's Islamic subsidiary in Kuala Lumpur yesterday. "We believe that Islamic banking on the wholesale side for Singapore will also take off over time as well," Chew said.
The Islamic banking market has expanded beyond the traditional centres of the Middle East and Malaysia as lenders seek new sources of growth and a larger share of the Gulf oil earnings. Indonesia has passed a banking law to encourage foreigners to set up Shariah banks and the Indonesian government plans to sell its first global Islamic bond in an effort to spur the growth of its nascent Shariah market.
Singapore has also jumped into the race to lure in Islamic investments, with a 5% concessionary tax rate on income derived from Shariah-compliant fund management, lending and insurance.
The tiny oil-rich sultanate of Brunei has been issuing Islamic bonds to capitalise on the rising demand for Shariah assets. OCBC Malaysia said its Islamic subsidiary, OCBC Al-Amin, would open five branches by 2009, three of which would be in the area around the capital of Kuala Lumpur.
The Islamic subsidiary will start operations on Dec 1 and is licensed to offer the full range of Shariah-compliant universal banking services including Islamic hire-purchase and Shariah-compliant corporate finance activities. OCBC Bank's Islamic assets stood at RM3.7 billion as at Dec 31, 2007. — Reuters

Spore billion-dollar sukuk deal

Billion-dollar sukuk deals may be new to Singapore corporates but syariah-compliant lending has been growing rapidly in recent years, reports The Edge Singapore.
Singapore-listed property firm City Development Ltd (CDL) has until now depended on traditional ave­nues of funding. However, as the credit crunch squeezes, even a large player like CDL has been forced to look at more exotic instruments like ijarah-based sukuk. CDL's plunge into Syariah-complaint borrowing comes in the wake of local banks adopting a far more cautious approach to corporate lending, according to the report.
Singapore's second largest property firm had inked a deal for an unsecured S$1 billion (RM2.39 billion) Islamic multi-currency medium-term note (MTN) programme, or sukuk — the largest Syariah-compliant financing obtained by a listed Singapore corporate.

Spore-based IBA to play an active role in Malaysia

By Habhajan Singh
The Islamic Bank of Asia (IB Asia), a unit of Singapore's DBS Bank, intends to play an active role in Malaysia, one of the key international hubs for Islamic finance.
The first Islamic bank to be established in Singapore will certainly play a role in neighbouring Malaysia as it was conceived as a regional bank, said its chief executive officer Vince Cook.
"We cannot be credible as a regional bank unless we are active in the most developed Islamic finance market in the region. So, we have to be active in Malaysia," he told The Malaysian Reserve in a recent interview.
However, he admitted that without a local licence, the bank's activities are limited, but it has "taken a number of equity-based opportunities", including when companies are looking for strategic partners or new business partners, or even new equity investors.
"This is something that we are very happy to do," he said.
IB Asia has the option of following the path taken by Unicorn International Islamic Bank Malaysia Bhd (Unicorn Malaysia), which became the first Islamic bank licensed under the Malaysia International Islamic Financial Centre (MIFC) initiative. It could also collaborate with local partners.
"We are now at the analysis stage," Cook said when asked to elaborate on the bank's plan for its operations in Malaysia. The unit of South-East Asia's biggest bank by assets has been an aggresive player on the Islamic finance front in this region since it was established in May 2007.
In May 2008, IB Asia announced that it had signed over 20 significant cross-border capital transactions worth more than US$500 billion (RM1.62 trillion) in its first year of business. IB Asia has committed US$200 million of deals in the first quarter (1Q) of 2008, DBS Group Holdings Ltd said in a statement. Among the deals inked are for it to act as the mandated lead-arranger in a US$250 million syndicated Mudaraba financing facility for Tamweel PJSC, a United Arab Emirates-based Islamic mortgage company.
Headquartered in Singapore, IB Asia is a joint venture between DBS Bank and 34 investors from families and industrial groups based in the Gulf Cooperation Council (GCC) countries. DBS holds a majority stake of 50% plus one share. The bank opened its representative office in Bahrain in conjunction with its first anniversary in June 2008.
Cook said the bank is now on focusing on building a robust platform in wealth management and structured product activities.
In its first year of operation, IB Asia focused on establishing itself in the wholesale financing markets and developed a platform of financing structures including trade finance and large-scale syndications. It also built a range of treasury services from the provision of foreign exchange to money market activities.
(The Malaysian Reserve, p32, Aug 25, 2008)