UOB Asset Management (B) Sdn Bhd is bullish about Brunei’s Islamic finance market as it revealed plans to set up a syariah fund from the Sultanate.
Kamal Hj Muhammad, general manager of the asset management firm, said UOB Asset Management (B) Sdn Bhd has “medium to long-term, plans of creating syariah funds which originate from Brunei” and to be marketed overseas through the firm’s vast distribution network.
In the near future, UOB Asset Management (B) sees potential in Brunei’s capital market in sukuk, he said. “It may not necessarily originate from Brunei. For example, recently the Islamic Development Bank based in Jeddah marketed its sukuk in Brunei through Bank Islam Brunei Darussalam as one of the joint-lead arrangers for the issuance,” he said.
When similar opportunities arise, UOB will play a role as an investment manager on behalf of a bank to its clients, he said.
“Our clients do not necessarily come from Brunei, but can be from anywhere in the world,” he said. “There are also talks in the papers about privatising some of the government institutions that deal in utilities and promoting private funding for some of the government projects,” he said. “Issuing sukuk will be a way to raise funds and develop the market. Again, this will give rise to an opportunity for us to bring in foreign direct investments, provided that it meets our criteria.”
He added that this would be good for the local retail market, since UOB would be able to participate directly and buy the sukuk for its own investments.
Kamal also praised the government for putting in place infrastructure to spur the growth of Brunei’s capital markets. “The commitment from the Government to develop the capital markets industry is a big plus. We anticipate more developments taking place in the financial sector, and having a presence in Brunei enables us to gain more insight,” he said. He added that the company wants to “be in Brunei, get to know the local community and get first-hand news of local developments”.
“We have the chance to be part of the industry development and grow with it,” he said.
Another strong advantage about doing business in Brunei, was that Brunei currently has a well-respected National Syariah Board, made up of syariah scholars, Kamal said. “Syariah investment products endorsed by Brunei … are syariah compliant (and) would offer an advantage in terms of global acceptance,” he said.
With respects to operating costs, “Brunei offers a more competitive cost structure than other major cities in the world, and given all the facilities that are in place, we are able to perform tasks that are similar in any other city but at much lower costs,” he said.
UOB Asset Management (B) was set up in Brunei in June 2007, with the parent company in Singapore, UOB Asset Management Ltd. The group has been keen to set up operations in Brunei since 2000.
“The objective has always been to make our presence in Brunei purposeful, so the set-up would not be limited to just a marketing office,” Kamal said. He said the operations here would also have to perform a certain level of investment management activities, which fit into UOB Asset Management’s overall strategies.
Some of the factors that the firm was looking at, which factored into the firm setting shop in Brunei, included the growth of the Islamic market, in 2007, which was at its height. “The sukuk market had grown tremendously compared to previous years, and according to the Islamic Finance Information Service, which tracks data in the Islamic finance industry, the total issuance grew to over US$46.65 billion in 2007, compared to US$7.2 billion in 2004,” he said.
Another factor was that the Government of Brunei was spearheading the growth of the capital market, in particular, the syariah financial industry. “Notably, in 2006, the Ministry of Finance issued its first sovereign sukuk based on the Ijarah concept, and that Brunei also has its own National Syariah Board.” The third factor that made Brunei attractive to UOB Asset Management was that the company had observed a growing demand for investment management services. “Our key strengths, investment capability as well as our strong track record, in Asian (excluding Japan Equity and Fixed Income), fit nicely with some of the investment objectives of the institutions in Brunei,” he said.
“Given all these positive factors, it made business sense for us to create an investment unit in Brunei, and because the demand for syariah investment was on the rise, we decided to develop our Islamic Research Centre in Brunei, that would complement our investment process,” he said. UOB would conduct the research and analyse the investments whether they are syariah compliant, and “we could work on this with established local or overseas scholars as well.
“Brunei is obviously an ideal place for all these to take place,” Kamal said.
source : the brunei times