It is a legitimate ambition for Hong Kong to play some intermediary role in the fast growing world of Islamic finance. But the way officials have gone about it suggests ignorance of the issues and a public relations-motivated desire to be seen to be active.
Last week I attended a seminar in Kuala Lumpur on Islamic Finance. Various financial and legal experts, mainly from the Gulf and Southeast Asia, were there for discussion on some of the finer points of sharia-based finance and prospects for its growth.
Representatives from Singapore and even Japan laid out the specifics of tax and regulatory changes that had been made to accommodate the concepts of sharia, which relies on asset-trading and share of profit rather than debt funding to give a return to investors. And then there was Hong Kong's belated attempt to jump on the Islamic bandwagon.
The director of the Investment Products Department of the Securities and Futures Commission spoke of Hong Kong's virtues for trading with China, but was vague about regulatory changes to accommodate sharia-compliant products.
The way this should work is that the private sector sees an opportunity to sell or trade sharia-based products here and the authorities follow up with seeing whether local tax and regulatory regimes can reasonably be adapted to facilitate it. Instead, this was an initiative by Chief Executive Donald Tsang Yam-kuen and the bureaucracy, seeking a part of the industry without first preparing the ground.
To support it has come the suggestion by the Airport Authority that it may make a sukuk issue. A sukuk - there are several types - is a security whose performance is very similar to that of a bond but which does not involve the payment of interest. For sure, there is an appetite for such issues particularly by Gulf countries. But such a sukuk will have to be issued offshore - until such time as Hong Kong can devise a way of removing tax obstacles without blowing a huge hole in its profits tax system.
