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BRIEFING Gcc


sukuk pIpElINE 2012 IssuER


aCWa Power International Etisalat Sukuk Company Saudi Electricity Company al Hilal Bank Dubai Bank


abu Dhabi Islamic Bank abu Dhabi Commercial Bank


Sakana Holistic Housing Solutions Dar al Dhabi Company


CouNtRy Saudi arabia UaE


Saudi arabia UaE UaE UaE UaE


Bahrain Kuwait


sIzE


$300 million $1 billion


$1 billion – 1.5 billion $500 million - $1 billion $500 million (rumoured) $544.5 million (rumoured) $95 million (rumoured) $50 million (rumoured)


$363.1 million (rumoured) Holding 00 million struck since Easter.


Sukuk are less risky, up until the point that the issuer defaults. Still, Sukuk have proved wildly successful among Gulf investors that crave an alternative to speculative, debt- leveraged Western banking models. Many say the Islamic finance


vehicle’s popularity is drawn from its mass appeal. Jawad Ali, law firm King & Spalding’s managing partner for its Middle East offices, says: “Sukuk is a safe play in the Gulf because you don’t alienate investors. It’s open to non- Islamic investors and Shariah compliant ones equally.” The prospect of huge construction bills for mass infrastructure projects has forced many Gulf states to turn to Sukuk. Qatar, which faces perhaps the most daunting task, will increasingly use the Islamic instruments for project finance. Some will be corporate Sukuk, issued by individual companies, but there is a stampede of governments looking to issue sovereign Sukuk. Qatar is expected to spend around


$100 billion over the next five years to prepare and deliver the infrastructure required to support the huge influx of visitors forecast to attend the 2022 FIFA World Cup. The construction sectors in Saudi Arabia and Kuwait are estimated to spend $420 billion and $63 billion, respectively, over the next three years.


38 / DECEMBER 2011


“Sukuk iS a Safe play in The gulf becauSe you don’T alienaTe inveSTorS. iT’S open To non- iSlamic inveSTorS and Shariah complianT oneS equally. ”


Sukuk fever has spread beyond the GCC, with rumours that the governments of Egypt and Libya will be next on the list to take the plunge. Both will use Sukuk for their massive rebuild. In the wake of the revolution that toppled Egypt’s long-time leader Hosni Mubarak, the country faced a serious financial crunch and a funding gap that totalled more than $12 billion. It would be the 80 million Muslim nation’s first sovereign Sukuk, after three decades of restrictions from Mubarak’s regime that stunted the Islamic finance industry. Neil Miller, global head of Islamic


finance at KPMG, says: “It’s a chance to inject new capital into a country that needs new capital.” If Egypt did issue a Sukuk it would play into the “overall narrative” of Middle East Islamic finance strengthening, versus the might of Malaysia, he adds.


Few would argue that a sovereign issue in a country with the world’s sixth largest Muslim population could be catalytic. Yet globally, Malaysia still accounts for the lion’s share of the Sukuk market, by most estimates about two-thirds. In the first nine months of 2011 it issued $43.5 billion, or 69 per cent of the world total. Eleven other countries contributed the rest. The six GCC states issued a combined $16.1 billion or 25 per cent of the total. New entrants this year include Yemen, Iran and Jordan. The GCC’s total would have been more


but experts say it was hindered partly by the unrest in the many parts of the MENA region. As 2012 arrives, the Gulf is expecting a sprinkling of new issuances. Most surprising perhaps is Bahrain, which is expected to sell a $1 billion Sukuk in the international markets, a brave move considering political violence continues to flare up in the Kingdom. Meanwhile, Dubai Islamic mortgage firm


Tamweel has suggested it will consider issuing a multi-million dollar Sukuk, hot on the heels of a similar announcement by Al Hilal Bank in September. If next year turns out to be anything close to the growth witnessed this year, there are plenty of signs for optimism. The contrast between Eurozone debt woes and the GCC Islamic bond market could get sharper.


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