by Zainal Izlan Zainal Abidin
Executive Director, Islamic Capital Market
Securities Commission Malaysia
ASEAN Capital Markets Forum
Islamic Capital Market Regional Workshop
15 January 2013
Ladies & gentlemen
It is truly my privilege to welcome all of you to the ACMF Islamic Capital Market Regional Workshop. We are very pleased to have most ASEAN member countries represented here today, together with our colleague from the Maldives, and I thank you all for your presence. Your participation in this Workshop demonstrates the growing recognition in the region on the increasingly important role of Islamic finance in general and the Islamic capital market in particular within the overall global financial markets.
I would also like to express my special appreciation to the Asian Development Bank for supporting this Workshop which I believe is in line with ADB’s initiatives to encourage greater regional collaboration across the ASEAN capital markets.
The sustained growth of the Islamic finance industry despite the global financial crisis and the rising number of jurisdictions and institutions that have gotten involved in Islamic finance activities especially over the past decade reflect its reach and appeal not only in the so-called core markets of Muslim-majority countries but also in many developed and emerging economies. Within the Islamic capital market space, the sukuk segment has enjoyed strong growth and registered another record year in 2012 with total issuance size of US$144 billion globally, a 56% increase over the 2011 level. Total sukuk outstanding as at end-2012 stood at US$280 billion compared to US$210 billion at end-2011. Over three-quarters of the sukuk issuance and 70% of sukuk outstanding are domiciled in this region.
In the Shariah-compliant equity segment, if we are to take the Dow Jones Islamic Market ASEAN Index as an indicator, the market capitalization of its component stocks amounted to US$613 billion as at end-2012. The significant size of both the sukuk and Shariah equity segments provide a solid base for the development of Islamic capital market products and services in this region.
Opportunities for Islamic capital market activities and transactions within and across ASEAN member countries are tremendous. With a total population of about 600 million and a combined GDP of US$1.8 trillion, ASEAN is one of the fastest growing regions with a relatively well-diversified economic base. With GDP growth projection of 5.8% in 2013 for the ASEAN-5 by the IMF, ASEAN member countries have significant potential to grow our respective capital markets together. Economic development projects and international trade as well as business dealings within the ASEAN region represent key platforms which require capital market activities such as capital raising and investments, thus providing bright prospects for the Islamic capital market given its value proposition and key attributes.
Raising capital through the issuance of sukuk for instance provides the issuer with a wider investor base as institutions and individuals that seek Shariah-compliant instruments can invest in the sukuk together with conventional investors. This may have the effect of lowering the cost of capital for the issuer. Meanwhile, businesses that require capital and investors that seek medium to long-term opportunities may contribute towards faster development of the private equity and venture capital industry, which is inherently Shariah-compliant. Growing affluence of the population arising from reasonably healthy economic performance in the region will also generate greater demand for investment instruments and services, thereby spurring growth of the Islamic fund management industry.
Regional collaboration in the Islamic capital market space should not be confined only among ASEAN member countries but also between ASEAN and other parts of the world. ASEAN member countries should combine our substantial resources and capabilities to seek the numerous opportunities available to undertake cross-regional transactions and activities in the Islamic capital market in order to enhance our collective competitiveness and achieve greater economies of scale. For instance, given the generally favourable growth prospects of the ASEAN region, investors from the GCC and the rest of the Middle East will be keen to identify and take advantage of Shariah-compliant investment opportunities in this part of the world.
As an Islamic fund management centre, ASEAN can also attract the fast-growing pool of funds especially from the developed markets that seek socially-responsible and ethical investing opportunities, given their similarities with Shariah-compliant investing in terms of the principles and values.
This two-day Workshop aims to provide broader and deeper understanding of the value proposition of the Islamic capital market, to highlight and discuss major enablers, issues and challenges in achieving regional development of the Islamic capital market, and to identify potential areas for regional collaboration and cooperation. These areas may be in training and capacity building, product distribution and Shariah, to name a few. The range of topics and the diversity of speakers have been carefully selected to facilitate us to achieve the Workshop’s objectives. It is my hope therefore that we all maximize the opportunity throughout this Workshop to network, exchange views and share experiences among ourselves particularly in the Islamic capital market area.
Before I conclude, I would like to express my sincere gratitude once again to all of you for your presence and participation in this very important Workshop. Given the vast potential and opportunities in the Islamic capital market to be tapped, I look forward to your contributions in the discussions and deliberations over the next two days. I wish all of you a productive and fruitful Workshop.