Hong Kong's financial sector can tap opportunities in Islamic finance by working closer with their counterparts in Ningxia, the northwest autonomous region on the mainland which has deep links with the Arab world.

"Hong Kong has been actively developing Islamic finance. Ningxia, with one-third of its population being Muslims and wider connection to the Arab world, presents room for cooperation with Hong Kong in this regard," said Financial Secretary John Tsang Chun-wah. He was attending the Ningxia Economy, Culture and Tourism Week, which kicked off in Hong Kong on Tuesday.

In a nutshell, Islamic finance seeks to promote its own form of social justice by prohibiting the payment of interest, gambling with derivatives and options, or investing in firms that produce pornography or pork. Potential demand by the world's 1.9 billion Muslims for Sharia (Islamic law) compliant financial products fit into the city's ambitions as a global financial center.

In his 2007 Policy Address, Chief Executive Donald Tsang Yam-kuen pledged to promote Islamic finance in Hong Kong. However, very few concrete steps both at the policy level and by market participants have been taken since then. The Hong Kong Airport Authority planed to issue sukuks (Islamic financial certificates or Islamic bonds) in 2008, but later said it decided to defer the issuance.

The financial secretary urged Hong Kong financial service providers to tap opportunities in Ningxia, as the autonomous region enjoys natural advantages in getting connected to the Arab world. The second China - Arab States Economic and Trade Forum will open in Yinchuan, the provincial capital, this September. Last year, the forum attracted more than 6,000 government officials and businessmen from 66 countries, regions and international organizations.

The Ningxia Economy, Culture and Tourism Week, which lasts until June 3, has brought 150 enterprises from Ningxia aiming to sign deals amounting to 34.6 billion yuan ($5.34 billion), according to Wang Zhengwei, Chairman of Ningxia Hui autonomous region.

Riding on the nation's 12th five-year economic blueprint, Ningxia is striving to transform its economic development patterns, upgrading its agricultural and industrial sectors, said Wang.

"We are a less-developed inland province, so we need to double our economic indicators such as GDP, fiscal revenue, and per capita income in the next five years so as to match the national pace of building a well-off society," said Wang.

Hong Kong has been the largest source of overseas direct investment of Ningxia. According to official figures, investment flowing from Hong Kong to Ningxia amounted to $60 million in 2010, representing 78 percent of overall overseas direct investment for that year. Up to present, Hong Kong has invested in a total of 419 projects in Ningxia worth $150 million.

China Daily

(HK Edition 06/01/2011 page2)