By Habhajan Singh

HSBC Amanah, through its Kuala Lumpur-based Islamic finance practice for the Asia Pacific, is in the running to play a leading role in Indonesia's proposed US$1 billion (RM3.26 billion) global sukuk issuance.

"We certainly hope to be part of that exercise, hopefully a lead part," managing director of HSBC Amanah, HSBC Bank Malaysia Bhd, Yakub Bobat told The Malaysian Reserve in a recent interview (For full interview see P32).

Early this month, Islamic financing policy director in the Indonesian Ministry of Finance Dahlan Siamat told Reuters that the country planned to appoint banks, around July or August, to advise the government on a US$1 billion global Islamic bond issuance.

"We have a good credit rating. Secondly, there is a kind of scarcity. We believe that in the global sukuk market now there is more demand than supply," he told Reuters.

However, HSBC Amanah is likely to face competition from other major financial institutions that have crafted Islamic papers, including CIMB Group, Standard Chartered plc, Aseambankers Malaysia Bhd and Dubai Islamic banks.

Commenting on the sukuk deal, Yakub said HSBC Amanah officials have visited Indonesia’s Ministry of Finance several times and have been holding dialogues with them for over five years.

"We have people on the ground. They are supported by the regional centre in Malaysia and the capital markets team in Dubai. "It also involves the debt capital market team from across the bank," Yakub said.

Indonesia's Parliament last Tuesday passed a new Islamic banking bill into law in a bid to tap into the potential of the Islamic finance sector. Indonesia is the world's most populous Muslim nation. The Shariah banking law allows foreigners to establish Shariah banks in partnership with Indonesian citizens or local entities.

It also offers commercial banks the option of converting their business into Shariah-compliant banks, Reuters reported.

At present, HSBC is the only foreign bank which has Shariah operations in Indonesia, but there are several domestic banks with Shariah-compliant operations that are anticipating a growing domestic market to draw investments from oil-rich Middle East countries.

Three local Indonesian banks — state-owned PT Bank Rakyat Indonesia (BRI), PT Bank Bukopin and PT Bank Negara Indonesia Tbk (BNI) — plan to open Shariah-compliant units this year. Bahrain-based Islamic lender Albaraka Banking Group (ABG) has also opened an office in Indonesia. (The Malaysian Reserve, Page 1, June 30, 2008)