www.theislamicglobe.com - The Hong Kong government is pressing ahead with legislation to make it become an Islamic finance player.
Financial secretary, John Tsang, used his annual Budget speech to flag up the territory’s plans to amend current legislation and put Sukuk on an equal footing with conventional bonds.
He said: “We are close to finalizing the draft amendments to the relevant kegislation with a view to leveling the playing field for common types of Islamic bonds vis-à-vis their conventional counterparts as far as profits tax, property tax and stamp duty are concerned.” (source)
He added that the government planned to carry out a second market consultation on the measures during the first quarter of this year, with a view to introducing an amended bill during the next legislative session.
Tsang did not give any further details on the proposed changes, but the government has previously said it intends to adopt a prescriptive approach to the issue, in line with the one put in place in the UK.
It will amend the Inland Revenue Ordinance and Stamp Duty Ordinance regulations to put Sukuk on an equal footing with conventional bonds, but it has signaled that it does not plan to introduce any advantages or incentives for Sukuk, in the way that Malaysia has done.
The government has also previously said the legislation will not cover all types of Sukuk, but will apply to both assetbased and asset-backed Ijarah, Mudarabah, Murabahah, and Musharakah contracts.
Once it has established a local Sukuk market, it will consider taking steps to promote other Islamic products. The amended law is not expected to make any reference to Shari’ah, in line with the UK, in a bid to provide more market certainty and avoid potential disputes over its interpretation.
The Hong Kong government first announced plans to transform the city into an Islamic financial center as far back as 2007, but scant progress was made on the initiative, with Tsang recently admitting the government had been distracted by the global financial crisis.
Despite the Hong Kong Monetary Authority previously saying it will grant exemption for Sukuk on a case-by-case basis until the amended legislation is put in place, no Hong Kong-based issues have yet gone ahead.
Darren Bowdern, partner at KPMG China, still thinks Hong Kong has the potential to take off as a Sukuk center. He said: “There certainly is a lot of demand (for these products) from Middle Eastern investors.
We’re seeing a lot of investment coming from the Middle East and people [in HK] are trying to tap capital from the Middle East.”
He added that Hong Kong’s close financial links with mainland China and its position as Asia’s key financial center also make it an attractive place
Source : http://www.theislamicglobe.com/enews/2012/The_Islamic_Globe_No_50_080212.pdf- Feb 8, 2012
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