Malaysia seeks reforms

KUALA LUMPUR: Malaysian Sharia finance experts, backed by the central bank, are studying possible conflicts between civil and Islamic law amid a raft of high-profile legal disputes which have dampened the industry's appeal.

Legal wrangles have taken centre stage in Islamic finance in the last year as difficult economic conditions triggered defaults and exposed gaps in legal systems, some of which struggled to deal with Sharia banking disputes for the first time.

Where sukuk holders rank in priority of payment when default occurs and the competence of civil courts to adjudicate on Islamic banking disputes are some issues that have come to the fore in the $1 trillion industry.

Lawyers, bankers and Sharia scholars in Malaysia, which has the world's largest sukuk market, are looking into civil law provisions which may conflict with the Sharia and impede the use of Islamic finance.

"We are producing Islamic products in conventional surroundings. The other laws that are applicable - land law, contract law, all other laws - are conventional laws," Abdul Hamid Mohamad, a former Malaysian chief judge who is heading the expert body, said on the sidelines of a law conference.

"So the question arises whether the implementation of Islamic banking is Islamic."

Any conflicts could be addressed with an amendment of the legislation, he said adding that the group would seek the industry's views.

Islamic banking matters in Malaysia are heard in civil law courts, with one judge dedicated to hearing these disputes.

The $130 billion sukuk market has been a source of financing for issuers from Bahrain to Japan but its reputation has suffered in recent years.

The near-default in December of the dollar-denominated sukuk from Dubai property developer Nakheel shattered perceptions that Islamic financing instruments were a safer alternative.

Source : Gulf Daily News

President Yudhoyono calls on businessmen to remain steadfast

Batam (ANTARA News) - President Susilo Bambang Yudhoyono called on business companies operating in the free trade zones in Batam, Bintan and Karimun to remain steadfast in the current global economic crisis.

He made the appeal during a dialogue with Indonesian and Singaporean businessmen at Turi Beach Resort here on Monday evening.

"While the storm is not yet over, it is certain that exports will drop whereas Batam, Bintan and Karimun are relying on exports. So I ask for your understanding that the world market is indeed weakening and shrinking. Well this year we have to struggle to survive, so that in time later we could rise again," he said.

To ease the burden of businessmen, the President said, the government has since September 2008 cooperated with the central bank and some businessmen to issue special policies such as government regulations in lieu of laws, incentives, stimulus and others.

"They are all aimed at calming the market and reducing the burden of businessmen to maintain the real sector," he said.

To maintain the people`s buying power, the business community needs to give their contribution by reducing prices if possible, he said.

"If there is an opportunity to maintain prices or even lowering them, demands will be maintain, and there will also be buyers," he said.

The head of state said the essence of economic recession is declining demands and therefore the only way to solve the problem would be safeguarding demands.

President Yudhoyono also called on the people not to cut their spendings. "Those who can afford to buy things need to keep buying so that products from the real sector are maintained. Let us act like business is as usual in a positive sense," he said.

The President said the general elections Indonesia would hold in the near future would be one of the forms of economic movement.

"Indonesia will conduct general elections. A lot of colourful flags have been raised and in the not too distant future campaigning will be done and in April voting for legislative candidates will take place which will be followed later by presidential elections. They are business. I appeal to parties to raise as many flags as possible, make as many campaign T-shirt as possible and hold as many music performances as possible so that singers get a fortune and economy is moving," he said.

He said the government was ready to lose or to see the foreign exchange reserve to drop so long as people did not lose.

Regarding the country`s economic condition President Yudhoyono said quoting "The Economist" that it was so far so good.

"I think it was issued last week. There was a small article about Indonesia there titled "So far so good". Articles written by the Economist or the Times must have no political motives," he said.

It was said Indonesia`s economy grew 6.3 percent in 2007 and 6.1 percent in 2008. He said it showed that the real economy in 2008 still moved and so if Indonesia could withstand in 2008 it would certainly be able to do it too in 2009.

"Last year we could withstand so I hope the economic growth target that we have already revised could be achieved and I ask for your cooperation for it," he said.

The government has corrected the country`s economic growth to 4.5 and 5.5 percent.

Central bank to continue promoting sharia-based economy

Boediono, Bank Indonesia (BI) governor

Jakarta (ANTARA News) - Bank Indonesia (BI) governor Boediono said here on Tuesday that the central bank would continue promoting the shariah-based economic system in the country.

"There must be no doubt that BI supports the development of shariah-based economy," he said in his speech when installing executive board members of the Shariah Economic Community (MES).

He said right now the world was looking forward to a shariah economy following its disappointment over the present economic system that had led to an economic crisis.

He said BI did not only support from outside but also inside the organization for the development of the economic system. "At least two BI deputy governors are board members of the Shariah Economic Community. So it is guaranteed," he said.

Two BI deputy governors, namely Muliaman Hadad, is general chairman of the MES, and Siti Fadjriah as MES' deputy to the advisory board.

Muliaman Hadad after his instalment said he would continue developing the shariah-based economic system because it could be one of the supporting factors of the country's economy.

"I think it needs to be articulated again that the shariah-based economic system is not only an economic foundation for preventing an economic crisis like we are experiencing now but it is also a solution to a crisis," he said.

Former MES chairman Aries Muftie meanwhile said that according to a World Bank report in 2020 Indonesia would be one of the countries with a strong economy.

"And according to the report the development of the country's economy is supported by its shariah-based financial sector," he said.

In view of that, he said the development of the shariah-based economic system had to be boosted to support national development.
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"Right now the shariah-based economy only contributes not more than three percent of the country's total economy. It has to be further boosted to support the national economy," he said.

Source : Antara

European takes closer look at Islamic financing

PARIS: With commercial bank financing tight, Europeans have been taking a closer look at Islamic banking.
"The potential is there," Ahmad Jachi, the first deputy governor of the Central Bank of Lebanon, said at a conference this past week in Paris. "It's a matter of really enabling and creating the market."
Islamic banking has already been integrated into the British and German banking systems, and banking executives at the conference said efforts were under way to allow Muslims in France to bank and invest under regulations that conform to Shariah, the legal code of Islam.
Estimates of the Islamic banking market's current size vary from $500 billion to $1 trillion. It has only about 5 percent of the overall banking market, but attendees at the conference, which was sponsored by The Economist, said Islamic banking has a huge potential for growth, since one-sixth of the world's population is Muslim.
The International Monetary Fund estimates that the Islamic banking sector has grown 10 percent to 15 percent a year over the past decade.