Bisnis Indonesia Daily News – 05-JUN-08

JEDDAH: The Islamic Development Bank predicts global sharia financial asset grows by 20% per annum to US$2 trillion by 2010 from the current US$900 billion, thanks to oil price fluctuation and sub-prime mortgage crisis.

Executive Governor of the IDB for Malaysia Dato Ahmad Husni Mohammad Hanadzlah argued the sub-prime crisis and oil price fluctuation had made investors shift from established financial instruments to safer and more transparent sharia-based ones.

“Investors forecast sharia financial assets will grow by 20% per annum,” said Ahmad, who is also the Malaysian First Deputy Minister of Finance at the 33rd Annual Meeting of the IDB’s Board of Governors in Jeddah yesterday.

Therefore, he continued, the IDB should reposition itself and capture an opportunity to expand sharia financiang and capital market.

Ahmad asked the IDB to realize the goal by improving partnership with the International Islamic Financial Services Board (IFSB).

According to him, the IDB needs to look into possibilities to attract petrodollar into the sharia finance and capital market.

“The proceeds can be used to finance infrastructure developments, which are needed by all member countries of the Islamic Conference Organization (OKI).”

Funds to Indonesia

The IDB, Moslem country governments, and private investors are expected to invest more sharia funds in Indonesia following the issuance of the Islamic Bond Law.

Executive Governor of the IDB for Indonesia Anggito Abimanyu said the issuance of the Islamic Bond (Sukuk) Law was part of Indonesia’s efforts to meet funding requirements. The new law, he explained, is a legal foundation to support Islamic bond-based funding instruments.

“We hope the IDB, governments, and private parties will utilize our latest sharia instruments,” he said on the same occasion.

The IDB, he inserted, had made contribution to the development of Indonesia. In the agricultural sector, the IDB had allocated funds for developing rural areas, irrigational networks, health-care, and public services.

The three-year joint program (2008-20011) will cover infrastructure critical areas with a total US$701 million investment.

“Indonesia in the next two years actually needs US$3.7 billion to finance its infrastructures. So far, the government has only been able to raise US$1 billion, leaving us with a significant amount of fund shortage,” he said. (Bisnis/mfm)