Korea looks to Islamic investments

Korean companies such as GS Caltex Corp. and Hyundai Motor Co. will be able to sell Islamic bonds as economic growth picks up and ties with the Middle East improve, according to Citigroup Inc.

“With early signs of an economic revival in Asia and the Middle East, Korea’s move to position itself as an investment opportunity for Islamic investors is timely,” Mudassir Amray, the U.S. bank’s head of Islamic banking, said at a conference in Seoul yesterday. “Islamic funds are looking for diversification in their portfolios.”

Korea plans to provide Islamic bonds with the same tax benefits as conventional debt, the Ministry of Strategy and Finance said on Sept. 29. Korea Exchange Inc., the nation’s bourse operator, will consider introducing an Islamic equity index to aid companies tapping finance compliant with Shariah law, Acting Chairman Lee Chang-ho said at the conference yesterday.

Muslim Shariah law forbids interest payments and speculation. Sukuk are asset-based securities paying a profit distribution to investors, rather than interest.

Industries including infrastructure, utilities, telecommunications, retail and transportation would be acceptable, Amray said. Those involving alcohol, entertainment, pork producing and conventional finance would be prohibited, according to Amray. “Sukuk can be issued by any entity whose business is Shariah compliant,” he said. Bloomberg