Historical ties open doors for HK
While the Islamic finance sector has only registered on the international investment radar for about three decades, the mainland's ties with the Middle East date back many centuries. Evidence exists that Zheng He, the Muslim Chinese admiral who inspired the Sinbad-the-Sailor legend in The Arabian Nights saga, repeatedly journeyed to ports of the Persian Gulf during the early 1400s.
Islamic finance expert Dr Khoo Guan Seng, head of the innovative unit at the Singapore Stock Exchange, believes it is these historical ties and the recent rejuvenation of trade relations between the mainland and Middle Eastern countries that is opening doors for Hong Kong to build an Islamic finance platform.
'Hong Kong could be part of the new economic Silk Road,' Khoo told participants at the 'Islamic Finance: Opportunity and Risk' seminar jointly organised by Classified Post and Kornerstone.
Despite the unrest in the Middle East, Khoo believes now could be the time for Hong Kong to seize the opportunity to expand Islamic finance activities. 'The Chinese word for 'crisis', which some people believe the Middle East is facing, is the same as that for 'opportunity', which Hong Kong could tap into,' he said.
Khoo high-lighted the growing trend of cross-investment between the mainland and the Middle East and the vast opportunities that exist for Hong Kong to play a strategic role as an intermediary.
In the decade since diplomatic ties were established between China and Saudi Arabia, bilateral trade has grown from about US$1 billion to more than US$40 billion.
Elsewhere, home to about 4,000 enterprises dealing in Chinese products comprising showrooms, shopping areas, restaurants and warehouses, the Dragon Mart in Dubai is one of the largest Chinese trading hubs outside of the mainland.
Khoo also pointed out that investment opportunities are two way. For instance, Saudi Arabia estimates it will invest about US$90 billion in domestic power generation over the next 15 years. Other Gulf states are also investing heavily in infrastructure projects. 'Because of the size of new deals, Islamic banks need to partner with international banks to take advantage of their larger distribution networks,' he said.
Khoo believes the time is ripe for Hong Kong's financial institutions to follow Citigroup, HSBC, Deutsche Bank, UBS and Standard Chartered Bank, which to varying levels offer Islamic investment opportunities in Hong Kong.
Managed from Dubai, HSBC's Amanah global Islamic financial services division is the largest Islamic financial services team of any international bank and provides opportunities for employees to work in the Middle East and the Asia-Pacific region, including Hong Kong. 'The opportunities for Hong Kong to develop an Islamic platform are wide ranging. However, to succeed requires commitment,' Khoo said.