Sunday, November 22, 2009

A Promising Market for Islamic Finance in Russia

The number of Muslims is Russia is around 47 million. That is bigger than in Malaysia or Saudi Arabia.

The market for halal products as well as Islamic finance and takaful should be big enough for us to grab the abundant opportunities.
Below article written

There are around 47 million Muslims in Russia, which means that Muslims make up around one third of Russia's overall population. This figure is expected to rise to 50 percent by 2050 due to the high birth rate among the Muslim community, the decrease in the non-Muslim Russian population which is decreasing at a rate of 1 million people per year, as well as the immigrations of Muslims from central Asia into the Russian Federation.

The Islamic presence in Russia is centered in the Caucasus, Siberia, and Moscow. Russian Muslims heaved a sigh of relief at the collapse of the Soviet Union; they reaffirmed their identity and began to practice their religion openly once more without fear or shame.

In 1990 there were as few as 98 mosques in Russia, however today there are more than 7200 mosques throughout Russia. This is something that characterizes the Muslim zeal for their religion, and the [Russian] Muslims desire to follow the tenets and teachings of their religion, something which they were prevented from doing under the former Soviet regime.

This is something that makes the Muslims in Russia eager to apply Islam to all aspects of their life, including Islamic Shariaa Law. Therefore the [Russian] Muslims are in dire need of all types of Islamic financial institutes, such as Islamic banking, investment, and insurance institutions that meet with their [religious] requirements.

Only one bank offering Islamic financial services is operating in Russia, and this is the "Badr Forte Bank." This bank was instituted in 1997 by the Forte Bank to offer Shariaa-compliant financial services to Muslims [in Russia].

As for Shariaa-compliant insurance services, a Russian – Tatarstani insurance company sought to establish an Islamic Takaful Insurance company, and in 2004 an agreement was concluded with the Dubai Islamic Insurance and Reinsurance Company [AMAN] to study the possibility of establishing a Takaful Insurance company in Russia. However this agreement was terminated in 2005 and no Takaful insurance company has yet to come into existence in Russia.

There can be no doubt that Russia represents one of the major markets for Islamic finance due to the existence of a large Muslim population that – as I mentioned above – is eager to follow the tenets of Islam. In addition to this, the Russian Muslim community enjoys an annual growth rate of more than 6 percent, and Russia has enormous oil and natural gas resources.

Following the outbreak of the global financial crisis, the Russian market – in the same manner as other international markets – opened up to Islamic finance, and Vice-Speaker of the upper chamber of the [Russian] Federal Assembly called for effective ties to be established with the Islamic Banking system in order to allow Russia long-term access to Islamic financial resources. Torshen also did not rule out the Central Bank of Russia amending its rules to allow Islamic banks to open in Russia, despite admitting the disparity between the operational mechanism of Islamic finance and the Russian banking system. Russia's largest financial companies are seeking to take advantage of the [financial] liquidity of Islamic banking at a time when there is a lack of financial liquidity in the global financial system.

This is why FDP Capital, one of the leading financial companies in Russia, is seeking to introduce Islamic financial services in its operations in collaboration with the Liquidity Management House which is affiliated to the Kuwait Finance House, with memorandums of understanding being signed by the two parties to this effect.

I therefore call on the Islamic Development Bank, the Islamic Chamber of Commerce and Industry, and the General Council for Islamic Banks and Financial Institutes to take advantage of this opportunity [in Russia] by inviting the heads of major Islamic financial institutes to meet and draw up a unified strategy to seize this opportunity, as it is one that will not recur.

The Islamic financial industry has a great opportunity to serve itself [in a unified manner], rather than waiting for individual institutes to take the initiative separately. The financial crisis proved that many major Islamic financial institutes lack the human and financial potential to develop long-term strategies, alternate plans, and ambitious visions, from in-depth study of market research. Initiating this [unified] strategy will allow the Islamic financial industry to seize opportunities as they arise, rather than wasting time considering opportunities and drawing up plans, as ultimately this may result in the opportunity going to waste.

Dubai Ruler downgrades key aides

This revamp by downgrading certain key officials is inevitable post financial crisis 'disaster management' or 'recovery plan.'

The Bloomberg report below indicates the severe situation which needs new blood injection in terms of key players in the business. It is a right move in the right direction to regain the confidence as well as to make a quantum leap out of the current doldrums.

I am fortunate to get to know some of these personalities during my previous attachments and they have of course contributed to Dubai's success to a certain level as heads of business empires.

Time to move on and to return to normalcy, even it may take some time while strengthening every level of support and delivery system.

And of course, about time to learn from the past, especially on the downturn part of the success story.

Dubai Ruler Tightens Control of Emirate, Downgrades Key Aides

By Henry Meyer

Nov. 22 (Bloomberg) -- Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum has consolidated his hold on the debt-laden emirate, downgrading powerful figures behind the city-state’s boom that turned to a bust.

Sheikh Mohammed on Nov. 20 sacked the governor of the Dubai International Financial Centre, Omar Bin Sulaiman, who had led efforts to transform Dubai into a Middle East finance hub. A day earlier, he dropped Mohammad al-Gergawi, Sultan Ahmed Bin Sulayem and Mohammed Ali Alabbar from the board of Dubai’s main holding company, the Investment Corporation of Dubai. The three were at the forefront of a construction drive that began in 2002 and collapsed last year after the global financial turmoil engulfed Dubai.

The moves herald greater consolidation of so-called Dubai Inc., the web of competing, state-owned companies that Sheikh Mohammed used to accelerate diversification of the second- largest member of the United Arab Emirates away from oil. Dubai is struggling under $80 billion of debt amassed in the process.

The replacement of the DIFC governor is part of efforts to improve the efficiency of government institutions and companies, and “consolidate the emirate’s growing importance as an international center for finance, business, trade, tourism and all services,” Mohammed Ibrahim Al Shaibani, director-general of the ruler’s court, said in an e-mailed statement on Nov. 20.

More Transparency

This needs to be accompanied by much greater transparency and better coordination between the various state-run companies, said Tristan Cooper, a Dubai-based Middle East sovereign analyst at Moody’s Investors Service.

“It’s difficult to read too much into the personnel changes at this stage, but it would be encouraging if it helped to improve coordination and information flow within Dubai’s large and disparate public sector,” Cooper said by e-mail.

Bin Sulayem is chairman of Dubai World, a state-run holding company that has about $59 billion of debt and other liabilities. It controls property developer Nakheel PJSC, which has had to cancel plans for a new waterfront development the size of Hong Kong Island. Nakheel has to repay a $3.52 billion bond maturing in December.

Al-Gergawi is chairman of Dubai Holding, which owns developers including Dubai Properties LLC, Sama Dubai LLC and Tatweer LLC. Tatweer has put on hold a project to build “Dubailand,” a Disneyland-style leisure park that would be three times the size of Manhattan. Alabbar is chairman of Emaar Properties PJSC, the largest developer in the U.A.E., which is building the world’s tallest tower.

‘More Careful’

The emirate will study the viability of projects more closely in the future, Sheikh Mohammed said Sept. 9. “We’ll be more careful now,” he said.

Dubai’s real-estate market was the worst affected by the global financial crisis. Home prices have tumbled about 50 percent from their peak, and may drop another 20 percent this year, Deutsche Bank AG said in June.

The actions of Dubai’s ruler may also be aimed at helping him shore up his position with regard to the wealthier neighboring emirate, Abu Dhabi, said Jean-Francois Seznec, a professor at Georgetown University’s Center for Contemporary Arab Studies in Washington.

Abu Dhabi, which has 90 percent of oil in the U.A.E., holder of the world’s sixth-largest crude reserves, bailed out it’s fellow emirate in February with a $10 billion Dubai bond issue subscribed entirely by the U.A.E. central bank. Dubai is seeking to raise another $10 billion, a significant portion from the federal government in Abu Dhabi.

Merging Assets

Sheikh Mohammed is trying to salvage his business empire by merging assets, said Christopher Davidson, a professor at Durham University in the U.K. and author of the 2008 book “Dubai: The Vulnerability of Success.” “The ruler’s main government-backed companies are on the verge of bankruptcy and rapid centralization of these bits and pieces is needed to hold them above water,” he said by phone.

In June, Emaar said it was in talks to combine with Dubai Properties, Sama Dubai and Tatweer as it aims to control the supply of new buildings amid a glut of homes.

Alabbar shrugged off his removal from the board of the investment body. “As business goes on, all organizations restructure,” he said Nov. 20. Al-Gergawi didn’t pick up his mobile phone and Bin Sulaiman and Bin Sulayem didn’t respond to interview requests via their spokespeople.

Al-Tayer, Al Shaibani

Ahmed Humaid al-Tayer, the new governor of the DIFC, which is home to regional offices of banks including Goldman Sachs Group Inc. and Deutsche Bank AG, said yesterday he would pursue the same strategy as his predecessor. Al-Tayer is also chairman of Emirates NBD PJSC, the U.A.E.’s biggest bank by assets, and remains a member of the ICD board along with Al Shaibani, the head of the ruler’s court. The other four board members are Sheikh Mohammed, two of his sons and his uncle.

The four sidelined Dubai powerbrokers have to some extent been made scapegoats, according to Simon Henderson, an expert on the Gulf monarchies at the Washington Institute for Near East Policy.

“They were given authority and access to capital and told to go out there and expand Dubai, they were given a license and latitude, and to that extent, they were obeying orders,” he said.

Seperti Singapura, apakah kita perlu seorang bertaraf Menteri untuk negara Timur Tengah/Arab?

Dalam salah satu dialog antara komuniti bisnes dan profesional Malaysia di Dubai dengan kedutaan dan Matrade baru-baru ini, salah satu isu yang dibincangkan diluar dialog sesama kami ialah, Malaysia tidak seserius Singapura dalam mendekati negara-negara Arab, terutama dikalangan negara-negara Arab Teluk yang mempunyai sumber tenaga dan kewangan yang besar.

Visit by Senior Minister Goh Chok Tong to Doha, Qatar and Dubai, United Arab Emirates 28 January to 3 February 2008

Saya diberitahu, Singapura mempunyai seorang yang berjawatan menteri kanan untuk menjalankan tugas sebagai 'ketua pemasaran' dan sentiasa berada di negara-negara Arab Teluk setiap bulan. Malah Lim Kuan Yew pernah tinggal beberapa lama untuk membantu dalam beberapa projek besar.

Bukan sahaja menteri kanan ini bertemu dengan pemimpin-pemimpin peringkat ketua negara, kabinet, pegawai tinggi kerajaan malah pemain industri. Interaksi dan komunikasi peringkat tinggi sering memudahkan usaha.

Kesannya boleh dilihat sehingga ada beberapa institusi kerajaan termasuk bidang pendidikan negara Arab tertentu yang diketuai atau dikuasai atau dipengaruhi oleh Singapura. Sikap agresif Singapura dalam melebarkan pengaruh memang diketahui sejak lama, malah Dubai sendiri sering mengakui yang Singapura adalah negara model.

Satu perkara yang tidak mengherankan sekali.

Contohnya, Dubai school of Government mempunyai hubungan terus dengan Lee Kuan Yew School of Government. Peringkat yang menonjolkan pengaruh Singapura.

Saya tidak pasti ada inisiatif atau usaha bersepadu dikalangan agensi kerajaan Malaysia dalam meneroka pelbagai peluang seperti agensi kerajaan Singapura. Malah kadang-kadang kita melihat pihak duta Singapura sendiri amat proaktif untuk bertemu pemimpin agensi kerajaan tempatan seperti lawatan dan diskusi.

Sewaktu masalah kewangan global yang turut melanda Dubai misalnya, pihak Singapura turut menghantar wakil bertemu agensi-agensi kerajaan Dubai yang tidak membayar hutang kepada syarikat-syarikat Singapura dalam usaha membantu syarikat-syarikat ini.

Kalau kita tahu perangai orang-orang Arab yang suka interaksi begini, cara kerajaan Singapura ini memang berkesan dan dalam gempa gempita 1Malaysia, kita akan terus ketinggalan dari segi pengaruh dikalangan negara-negara Arab Teluk yang mempunyai simpanan sumber tenaga dan kewangan besar.

Bandingkan sahaja jumlah pelaburan Arab di Singapura berbanding dengan di Malaysia. kalau sekadar 2-3 bilion seperti yang diwar-warkan oleh Najib Razak dalam lawatan singakt ke Saudi beberapa bulan lalu atau pelaburan UAE di Iskandar Malaysia, sekadar lekat celah gigi sahajalah.

Kita sering tersalah fokus malah dalam beberapa perkara, kita sekadar pencetus dan pemula idea (seperti perbankan dan kewangan Islam), begitu lemah dalam perlaksanaan dan tindakan susulan.

Harap para pemimpin kita terfikir dalam mengejar apa yang kita terabai dan ketinggalan sebelum terlalu lambat dan terus dibuai retorik 'persaudaran Islam!"