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Office workers are seen illuminated at dusk as they sit inside the Dubai International Financial Centre (DIFC) in Dubai. Dubai, one of seven sheikhdoms that make up the U.A.E. and home to the country’s second-largest stock market, announced a plan this year to become capital of the global Islamic economy. Close
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Photographer: Bryn Colton/Bloomberg
Office workers are seen illuminated at dusk as they sit inside the Dubai International Financial Centre (DIFC) in Dubai. Dubai, one of seven sheikhdoms that make up the U.A.E. and home to the country’s second-largest stock market, announced a plan this year to become capital of the global Islamic economy.
The United Arab Emirates is in the
final stages of creating debt issuance and listing regulations
that will help develop a domestic credit market and encourage
the sale of Islamic bonds, the market regulator said.
The Securities and Commodities Authority, or SCA, has
circulated draft rules that for the first time treat sukuk and
non-Shariah compliant debt separately. The regulator is seeking
feedback from market participants by the end of the year and
“hopes” to enact the regulations early in 2014, according to
Obaid Al Zaabi, director of research and development at SCA.
The U.A.E., the second-biggest Arab economy, must develop
local debt markets to help state-run and private companies find
alternatives to bank loans, Central Bank Governor Sultan Al-Suwaidi said last month. The country is the only one in the six-nation Gulf Cooperation Council that doesn’t have a domestic,
local-currency debt market.
“The new sukuk and bond regulations are built around
giving more room for local issuance to be listed in local
markets, instead of going abroad,” Al Zaabi, who is leading the
team that developed the sukuk regulation, said by phone
yesterday. “We’re opening the door for them and trying to make
the regulations more durable and more feasible.”
Islamic Hub
Global issuance of Islamic bonds, which comply with the
religion’s ban on interest, will climb to $60 billion next year,
Moody’s Investors Service said in a report last month, up from
about $51 billion in 2013. The rules will boost issuance and
listing of sukuk in the U.A.E., Al Zaabi said.
“Sukuk essentially is not considered as a debt
certificate, but rather a certificate of ownership,” Al Zaabi
said. “The requirements, in terms of disclosure, listing, and
trading, totally differ to conventional bonds. So the SCA
management saw it was a good idea to make it separate.”
Dubai, one of seven sheikhdoms that make up the U.A.E. and
home to the country’s second-largest stock market, announced a
plan this year to become capital of the global Islamic economy.
The emirate’s ambition is one of the incentives for the SCA to
put the rules in place as soon as possible, Al Zaabi said.
Rival Malaysia
Dubai and the U.A.E. have a lot of catching up to do before
domestic sukuk issuance rivals that of Malaysia or Saudi Arabia.
The Asian country’s issuers have sold about $168 billion, or
two-thirds of all outstanding Shariah-compliant bonds, while
Saudi Arabia has about $22 billion of domestic sukuk
outstanding, according to Moody’s.
The U.A.E.’s debt rules will bring listing and issuance in
line with best practices, Al Zaabi said. Clifford Chance LLP was
appointed to develop the sukuk regulations, while Bracewell
Giuliani LLP worked on the bond rules, he said.
“The upgraded rules for both bonds and sukuk will cover
all aspects of industry requirements,” Al Zaabi said. “From
the application onwards there will be continuous disclosure
requirements.”
To contact the reporter on this story:
Samuel Potter in Dubai at
spotter33@bloomberg.net
To contact the editor responsible for this story:
Claudia Maedler at
cmaedler@bloomberg.net
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