Hong Kong and the hookah of Islamic
investment By Kent Ewing
HONG KONG - This city has a well-deserved
reputation as a financial center catering to a
diverse range of international investors, but so
far the Muslim world has been left out of the
picture. Realizing the tremendous potential of
Islamic investment, however, officials are now
acting to correct that oversight with the launch
of Hong Kong's first Islamic retail fund.
Hong Kong comes late to the game of
Islamic finance - cities such as London and
Singapore have already jumped far ahead - but the
opening of the Hang Seng Islamic China Index Fund, run
by
Hang Seng Investment Management Ltd, signals an
important start. Hong Kong's Securities and
Futures Commission (SFC) authorized the fund's
launch last week, and for months the city's
financial secretary, John Tsang, has been talking
up Islamic investment - estimated to be worth as
much as US$1 trillion and growing 15% annually -
as a way for Hong Kong to enhance its
international portfolio of financial services. The
SFC hopes the world's Muslims will see the new
fund as the beginning of Hong Kong's commitment to
serve as the gateway for Muslim investment on the
mainland.
"Facilitating the development of
the Islamic investment market is a high priority
of the SFC," said the regulator's executive
director of intermediaries and investment
products, Alexa Lam, adding: "The introduction of
Islamic retail funds gives us added variety to our
retail fund market and underscores the versatility
of our asset management industry."
Tsang
made Islamic investment a priority in a speech he
delivered in September at the Annual Conference of
the Hong Kong Investment Funds Association, saying
"now is the time" for Hong Kong to wake up to the
financial potential of the Muslim world.
"There is enormous potential for Islamic
finance to expand and develop," the financial
secretary said. "Many leading international banks,
most of which have offices in Hong Kong, devote
considerable resources to creating and servicing a
variety of Islamic financial products to meet this
demand."
Tsang pointed out that Hong Kong
is well equipped and positioned to serve as
middleman for investors in the Middle East looking
for opportunities in the mainland market.
"As the mainland's financial center, we
are in a unique position to attract investors in
the Middle East and elsewhere," he said. "Many
investors in the Middle East are already eyeing
opportunities in the Chinese market. In this
connection, Hong Kong is best placed to be the
most effective intermediary for structuring and
marketing Islamic investment in products to meet
the needs of mainland enterprises and Middle
Eastern investors."
Hong Kong Chief
Executive Donald Tsang also pushed Islamic
investment in his annual policy address last
month, calling for the development of an Islamic
bond market. Now, with the launch of the Islamic
retail fund, the leadership's vision may be
turning into reality. That said, however, Hong
Kong still has a lot to learn about Islam if it
wants to win over the hearts, minds and capital of
the Muslim world.
While Hong Kong is home
to 300,000 Muslims, most of the city's population
of 7 million - including those working in the
financial sector - remain largely ignorant of
Islamic traditions and habits of life. Ramadan
passes largely without notice, and mosques are few
and far between. Moreover, there are not many
financial experts schooled in the special rules of
Islamic finance.
Many Muslims plan their
investments according to Islamic law, or sharia.
That means they are prohibited from investing in
companies involved in gambling or the sale of pork
or alcohol. While sharia allows profit sharing, it
forbids interest payments - regarded as a form of
usury in the Koran. Indeed, even credit cards,
which sharia permits, can be tricky.
Muslim-investor.com offers this advice:
"For the Muslim, a credit card can be had, but
extreme care must be taken not to be late in
paying the statement balance in full so as not to
incur interest. If you travel on a regular basis,
you may miss a statement, so maybe you want to
talk to your bank about this and explain that you
travel and make other arrangements."
It is
clearly time for Hong Kong's financial services
sector to bone up on the rules of Islamic
investment, but Muslim voices in the city are also
calling for this greater awareness to extend
beyond their money to their spiritual and culinary
needs, as well to their entertainment preferences.
Saeed Hamad Aljunaibi, consul general for the
United Arab Emirates in Hong Kong, was quoted in
the South China Morning Post, the city's leading
English-language newspaper, as saying Hong Kong
needs to become more "Muslim-friendly" if it hopes
to attract investors from the Middle East.
He has a point. For example, it is far
easier for Muslims traveling to Singapore, Bangkok
and Kuala Lumpur to find hotels that supply a
bedside copy of the Koran, Arabic translators,
arrows on the ceiling pointing toward Mecca and
prayer rooms to accommodate the Koran's dictum of
five daily supplications. In these cities, Muslims
are also much more likely to find restaurants that
have received halal certification, making
them acceptable under Islamic law, as well as
fashion and entertainment tailored to their
tastes.
Among Western cities, London is
considered the most accommodating to the Muslim
lifestyle and to Islamic investment, despite the
terrorist attacks on the city's transport system
by Islamic extremists in July 2005, which killed
52 commuters and injured more than 700.
So
Hong Kong starts its quest to attract Muslim
investors at a disadvantage and faces a steep
learning curve, but the payoff could be big. No
doubt one quick lesson the city should learn is to
offer potential investors easy access to the
hookah - a water pipe that, when filled with
aromatic tobacco, has become a social institution
in the Middle East. The Hong Kong deal-striking
standard of cognac and a Cuban cigar may, at
times, have to give way to sweetened tea and a
shisha pipe.
No interest, no gambling, no
pork and no alcohol - that is asking a lot of a
city that loves them all. Above everything,
however, Hong Kong values the bottom line - which
in this case is a share in the US$1 trillion, plus
15% annual growth, that Muslims have invested in
the world economy. That is something to smoke
about - and the preferred instrument should be the
hookah.
Kent Ewing is a teacher
and writer at Hong Kong International School. He
can be reached at kewing@hkis.edu.hk.
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