WASHINGTON, DC - Tuesday, May 10, 2011 -
Kazakhstan has reaffirmed its commitment to release a $500 million sovereign sukuk, or Islamic bond, by the end of 2011.
The Kazakh-issued sukuk will be the first such one to originate from the Commonwealth of Independent States (CIS). The global sukuk market is expected to grow by 60 percent in 2011, amounting to $22 billion, the Reuters news agency predicted in January.
The Central Asian country, which boasts the largest and most advanced economy in the region, also plans to bring in up to $10 billion in Islamic financial transactions over the next five-to-seven-year period, a release from the Kazakh Embassy in the United States said last week. That amount would constitute 10 percent of the nation’s banking assets.
“Islamic finance is crucial for economic development and innovations,” Kazakh Deputy Prime Minister Asset Issekeshev said during the Kazakhstan Islamic Finance Conference (KIFC) held in March in the Kazakh capital Astana.
“It has weathered financial crises and is proven for its quality, reliability and transparency. Having understood the vital role it can play to attract investments from Islamic nations, the Government has extended the state patronage by amending the laws. We are confident that Islamic finance will lead the way to attract funds, especially from the Gulf countries and other Muslim countries to develop all these sectors.”
Kazakhstan is set to take over the Organization of the Islamic Conference (OIC) in June and is working on expanding relations with the Muslim world in both finance and trade.
Fresh off its widely successful chairmanship in 2010 of the Organization for Security and Cooperation in Europe (OSCE), Kazakhstan is now looking to act as a bridge between OIC member nations and Western nations and is uniquely placed to do so, given its geographic location.
Kazakh President Nursultan Nazarbayev in mid-April replaced Foreign Minister Kanat Saudebayev, who served as chairman of the OSCE, with Arabic-speaking Yerzhan Kazykhanov to oversee Kazakhstan’s stewardship of the international Islamic organization.
“(Kazykhanov) is an experienced Arabist who speaks both English and Arabic,” Nazarbayev said on state television following the foreign minister’s appointment. “We worked well in the European direction last year. Now it is time to work likewise with the Arab, Islamic world.”
The country’s entry into the sukuk market has also been the result of steady progress to developing the legal framework to facilitate Islamic trading in the country.
The country is in talks with Malaysian national financial group Amanah Raya to open the country’s second Islamic bank, while Kazakhstan’s first Islamic bank, Al-Hilal, opened its doors in March 2010. The bank is a joint venture between the United Arab Emirates (UAE) and the Central Asian government.
In January 2011, the Kazakh government prepared legislation that would allow Kazakh corporations to sell Islamic bonds. The KIFC in March to promote the development of the Islamic capital markets both in the Central Asian state and in the CIS region.
Kazakhstan has been looking for financial alternatives after being hard-hit by the global financial crisis in 2009, by over-investing on Wall Street and the City of London and weathering a severe domestic banking crisis as a result.
“It might make sense for Kazakhstan to start building its liability structure with a different investor base,” the Director of Emerging Markets at Knight Libertas Ltd. in London, Richard Segal, said in the Kazakh Embassy press release, published on Thursday.
Kazakh businessmen have also been looking to enter the Hong Kong Stock Exchange to focus their financial dealings on Asian markets rather than Western ones.