CL II Project

7/25/2019 CL II Project

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Contents

1. An Introduction to the World of Islamic Finance..................................2

2. Sukuk The Core Islamic Finance Instrument.....................................3

3. Types of Islamic Finance...............................................................................5

4. Deal focus: Creation of the DP World Empire.....................................11

4.1.CEATI!"A "#$%A#P$TSE&PIE..............................................................11

4.2.DEA#ST'CT'I!"..........................................................................................125. Corporate (o)ernance in Islamic Finance............................................14

6. Determination of Shariah Compliance of #isted Stocks.................16

6.1. S*AIA*C$&P#IA!TST$C+SI!I!DIA..........................................................18

6.2.E!T,$FIS#A&ICF'!DSI!T*EI!DIA!&A+ET........................................20

7. The in-u. of So)erei(n Wealth Funds...................................................21

7.1.I!DIAP#A!!I!"AS$/EEI"!WEA#T*F'!D..............................................22

7.1.1.The need for a So)erei(n Wealth Fund for India A De0ate

................................................................................................................................24

7.2.E"'#ATI$!$FS$/EEI"!WEA#T*F'!DSI!I!DIA.................................26

8. Conclusion.......................................................................................................28

9. Anne.ure 1......................................................................................................30

10. Anne.ure 2......................................................................................................31

11. Anne.ure 3......................................................................................................32

12. eferences.......................................................................................................33

[1]


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1.An Introduction to the World of IslamicFinance

he growth of Islamic finance has been impressive !ring the past ecae" ma#ing it

a $namic growth sector in international finance. %his growth represents a ma&or

achievement" b!t has also create new challenge for investors" reg!lators" c!stomers" an

even the Islamic instit!tions themselves.1%he contemporar$ Islamic finance in!str$ is

now in its fo!rth ecae an" !ring that perio" has evelope e'tremel$ rapil$. In the

past few $ears" overall mar#et growth has been estimate at between 15(20 percent

ann!all$" altho!gh inivi!al Islamic ban#s have reporte even faster growth. In 2006"

for e'ample" )rcapita *an# in *ahrain reporte $ear(on($ear balance sheet growth nearer

to 40 percent. %oa$" the sector has estimate assets !ner management of +,- 500

billion.2

%

ar#et $namism has been felt in both the traitional Islamic finance centers an a

n!mber of other mar#ets. )ccoring to *an# /egara ala$sia the ala$sian central

ban#" the n!mber of Islamic ban# branches in ala$sia increase from 126 in 2004 to66 in 2005. lsewhere" new Islamic financial instit!tions IIs are being establishe

rapil$ in the in!str$s traitional mar#ets in the !lf 7o(operation 7o!ncil 77

co!ntries.3 %he prospects for Islamic finance have also enco!rage some conventional

ban#s to embar# on the process of converting to Islamic financial instit!tions. %wo $ears

ago" for e'ample" the !wait 9eal state *an# 9* anno!nce that it was converting

into a f!ll(flege Islamic ban#. In :ecember 2006" the 7entral *an# of !wait

approve 9*s Islamic *an#ing license" complete with name change to !wait

International *an#.

1,ee ; Islamic inance agesABibrar$A7omm!nicationA,peechesA2002Asp103.shtml3or a comprehensive view of %rae = 7ommerce activities of the !lf 7ooperation 7o!ncil" refer (http@AAwww.!str.govAassetsA:oc!mentCBibrar$A9eportsC>!blicationsA2004A2004C/ationalC%raeCstimateA2004C/%C9eportAassetC!ploaCfile226C46D.pf

[2]
http://www.standardandpoors.com/http://www.fsa.gov.uk/Pages/Library/Communication/Speeches/2002/sp103.shtmlhttp://www.ustr.gov/assets/Document_Library/Reports_Publications/2004/2004_National_Trade_Estimate/2004_NTE_Report/asset_upload_file226_4769.pdfhttp://www.ustr.gov/assets/Document_Library/Reports_Publications/2004/2004_National_Trade_Estimate/2004_NTE_Report/asset_upload_file226_4769.pdfhttp://www.standardandpoors.com/http://www.fsa.gov.uk/Pages/Library/Communication/Speeches/2002/sp103.shtmlhttp://www.ustr.gov/assets/Document_Library/Reports_Publications/2004/2004_National_Trade_Estimate/2004_NTE_Report/asset_upload_file226_4769.pdfhttp://www.ustr.gov/assets/Document_Library/Reports_Publications/2004/2004_National_Trade_Estimate/2004_NTE_Report/asset_upload_file226_4769.pdf


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2.Sukuk The Core Islamic FinanceInstrument

n Islamic ,!#!# bon is str!ct!re b$ b!nling leasing transactions b!t behaves in

practice li#e an$ highl$ rate bon. %he reason for the e'citement is rather longer.

irstl$" ,!#!# brings a new so!rce of f!ns" generall$ at attractive rates. )n seconl$" it

is vital to eveloping eeper an more liE!i Islamic capital mar#et. %here is a great eal

of s!rpl!s cash sitting in Islamic financial instit!tions waiting to be tappe b$ new

financial instr!ments.

)

%he ,!#!# pro!cts are asset(bac#eF stable income" traable an ,hariah(compatible

tr!st certificates. %he primar$ conition of iss!ance of ,!#!# is the e'istence of assets on

the balance sheet of the government" the monetar$ a!thorit$" the corporate bo$" the

ban#ing an financial instit!tions" or an$ entit$ that wants to mobiliGe the financial

reso!rces. %he ientification of s!itable assets is the first" an arg!abl$ most integral step

in the process of iss!ing ,!#!# certificates. %he Shariahconsierations ictate that the

pool of assets sho!l not solel$ be comprise of ebts from Islamic financial contracts

e.g. Murabahah, Istisna.

,!#!# investors have an inherent right to information on the !se of their investments" the

nat!re of the !nerl$ing assets" an other partic!lars that wo!l otherwise be consiere

re!nant in conventional investments.

,!#!# has ta#en the Islamic finance in!str$ b$ storm over the past two $ears" with mostof the origination in ala$sia an the 77 co!ntries. In 2006" some 80 percent of the

b!rgeoning 77 bon mar#et was acco!nte for b$ ,!#!#" !p from &!st 26 percent in

2005" accoring to the nglish 7it$ law firm %rowers = ?amlins.4

4,ee ; :eman for !lf 9ights Iss!es rebo!ning following last $ears stoc# mar#et correction" availableat [email protected](for(g!lf(rights(iss!es(rebo!ning(following(last($ears(stoc#mar#et(correction.cfm

[3]
http://www.trowers.com/news/pressreleases/demand-for-gulf-rights-issues-rebounding-following-last-years-stockmarket-correction.cfmhttp://www.trowers.com/news/pressreleases/demand-for-gulf-rights-issues-rebounding-following-last-years-stockmarket-correction.cfmhttp://www.trowers.com/news/pressreleases/demand-for-gulf-rights-issues-rebounding-following-last-years-stockmarket-correction.cfmhttp://www.trowers.com/news/pressreleases/demand-for-gulf-rights-issues-rebounding-following-last-years-stockmarket-correction.cfm


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%he global ,!#!# mar#et is still relativel$ small ; the estimate vol!me of o!tstaning

Islamic sec!rities incl!ing ala$sian iss!ances totale &!st some +,-0bn at the en

of 2006" accoring to *!siness %imes" ala$sia. %he mar#et has th!s far been ominate

b$ ala$sia. ,a!i )rabia c!rrentl$ has onl$ fo!r ,!#!# iss!ances to ate" altho!gh

*r$an rat$" acting general manager of !lf Islamic 7learing 7ompan$ I77 in

*ahrain" ha preicte that" in the f!t!re" some D0 percent of the ,!#!# iss!ances will

originate from the ingom. artners ,!#!# in the +.,.

/evertheless" there is significant potential for ,!#!# origination in these mar#ets" an in

!rope in partic!lar.5r. %homas of ,? pro&ects that ,!#!# origination an iss!ance

b$ !ropean corporates an governments will be the ne't big step forwarJ in the

mar#et" with the +.. leaing the initiative.

5 9efer ; Growth and Diversification in Islamic Finance" > International" see (http@AAwww.!s.#pmg.comAmicrositeA,Bibrar$:ot7omAocsArowthK20anK20:iversificationK20inK20IslamicK20inance.pf">age 1 ; 3

[4]
http://www.us.kpmg.com/microsite/FSLibraryDotCom/docs/Growth%20and%20Diversification%20in%20Islamic%20Finance.pdfhttp://www.us.kpmg.com/microsite/FSLibraryDotCom/docs/Growth%20and%20Diversification%20in%20Islamic%20Finance.pdfhttp://www.us.kpmg.com/microsite/FSLibraryDotCom/docs/Growth%20and%20Diversification%20in%20Islamic%20Finance.pdfhttp://www.us.kpmg.com/microsite/FSLibraryDotCom/docs/Growth%20and%20Diversification%20in%20Islamic%20Finance.pdf


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3.Types of Islamic Finance

slamic finance is limite to financial relationships involving entreprene!rial

investment s!b&ect to the moral prohibition of@Ii interest earnings or !s!r$ riba an mone$ lening"

ii haram sinf!l activit$6" s!ch as irect or inirect association with lines of

b!siness involving alcohol" por# pro!cts" firearms" tobacco" an a!lt

entertainment"

iii spec!lation" betting" an gambling maisir" incl!ing the spec!lative trae

or e'change of mone$ for ebt witho!t an !nerl$ing asset transfer"ivthe traing of the same ob&ect between b!$er an seller ba$ al inah" as well as

v preventable !ncertaint$ gharar s!ch as all financial erivative instr!ments"

forwaring contracts" an f!t!re agreements.

%hese istinctive properties erive from two religio!s so!rces preicate on the creation

of an eE!itable s$stem of istrib!tive &!stice an the promotion of permitte activities

halal an p!blic goos maslaha@ i the shariahah or shariah which comprises the

E!ran literall$" the wa$J an the sa$ings an actions of the prophet ohamme

recore in a collection of boo#s #now as the sahih haith " an ii the figh" which

represents Islamic &!rispr!ence base on a bo$ of laws e!cte from the shariah b$

Islamic scholars.

)s oppose to conventional finance" where interest represents the contractible cost for

f!ns tie to the amo!nt of principal over a pre(specifie lening perio" the central tenet

of the Islamic financial s$stem is the prohibition of riba" whose literal meaning an

e'cessJ is interprete as an$ !n&!stifiable increase of capital whether thro!gh loans or

6


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sales. %he general consens!s among Islamic scholars is that riba covers not onl$ !s!r$

b!t also the charging of interest an an$ positive" fi'e" preetermine rate of ret!rn that

are g!arantee regarless of the performance of an investment. ,ince onl$ interest(free

forms of finance are consiere permissible in Islamic finance" financial relationships

between financiers an borrowers are governe b$ share b!siness ris# an ret!rns

from investment in lawf!l activities halal. Islamic law oes not ob&ect to pa$ment for

the !se of an asset" an the earning of profits or ret!rns from assets are inee

enco!rage as long as both lener an borrower share the investment ris# together.

>rofits m!st not be g!arantee base on ass!mption an can onl$ accr!e if the investment

itself $iels income. )n$ financial transaction !ner Islamic law assigns to investors

clearl$ ientifiable rights an obligations for which the$ are entitle to receive

commens!rate ret!rn.8

?ence" Islamic finance literall$ o!tlawsJ capital(base investment gains witho!t

entreprene!rial ris#. In light of these moral impeiments to passiveJ investment an

sec!re interest as form of compensation" shariah(compliant lening in Islamic finance

reE!ires the replication of interest(bearing" conventional finance via more comple'

str!ct!ral arrangements of contingent claims.D

%he permissibilit$ of ris#$ capital investment witho!t e'plicit interest earning has

spawne several finance techniE!es !ner Islamic law. %hree basic forms of Islamic

financing methos for both investment an trae finance are mentione here@

(i) synthetic loans(debt based) through a sale-reurchase agreement

or bac!-to-bac! sale of borrower or third art"-held assets,

8 Lhile the elimination of interest is f!namental to Islamic finance" shariah(compliant investmentbehavior also aims to eliminate e'ploitation p!rs!ant to Islamic law.D 9efer ; >resentation b$ )$man ?. ). haleE an ,tephen :. :avis" #asics of Islamic Finance"International Baw ,ection" ,tate *ar of %e'as" 1Dth )nn!al International Baw Instit!te" arch 2D ; 30" 200; ,an )ntonio" %e'as. Minson = l#ins BB>

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(ii) lease contracts(asset-based) through a sale-leasebac! agreement

(oerating lease) or the lease of third-art" ac$uired assets with

urchase obligation comonents (financing lease), and

(iii) profit-sharing contracts (e$uit"-based) of future assets. %s

oosed to e$uit"-based contracts, both debt- and asset-based

contracts are initiated b" a temorar" transfer of e&isting assets

from the borrower to the lender or the ac$uisition of third-art"

assets b" the lender on behalf of the borrower.10

Islamic loansJ create borrower inebteness from the p!rchase an resale contract of an

e'isting or f!t!re asset in lie! of interest pa$ments. %he most prominent form of s!ch a

ebt baseJ str!ct!ral arrangement is the m!rabaha or m!rabahah cost(pl!s saleJ

contract. Interest pa$ments are implicit in an installment sale with instantaneo!s or

eferre title transfer for the promise pa$ment of an agree sales price in the f!t!re.

%he p!rchase price of the !nerl$ing asset effectivel$ limits the egree of ebt creation.

:ifferent installment rates an repa$ment an asset eliver$ sche!les create variations

to the stanar m!rabaha cost(pl!s sale. %he most prominent e'amples are salam

eferre eliver$ sale" bai bithaman a&il **) eferre pa$ment sale" istina or

istisna" istisnaa p!rchase orer" E!ar al(hasan benevolent loan" an m!sawama

negotiable sale. )s oppose to the conc!rrent p!rchase an eliver$ of an asset in

m!rabaha" asset p!rchases !ner a salam11 or a bai bithaman a&il12contract allow eferre

eliver$ or pa$ment of e'isting assets. ,alam closel$ s$nthesiGes a conventional f!t!res

contract an is sometimes also consiere an inepenent asset class o!tsie the asset

spectr!m of m!rabaha. )n istina contract provies pre(eliver$ pro&ect finance for

f!t!re assets" s!ch as long(term pro&ects" which the borrower promises to complete over

the term of the lening agreement accoring to contract!al specifications. ) E!ar al(

hasan signifies an interest(free loan contract that is !s!all$ collateraliGe. inall$" a

10In a ebt(bases"nthetic loan" the borrower rep!rchases the assets from the lener at a higher price thanthe original sales price" whereas borrowers !ner a lease-bac! agreement rep!rchase the assets at the sameprice at the en of the transaction an pa$ E!asi(interest in the form of leasing fees for the !ration of theloan.11Salamcontracts are mostl$ !se in agric!lt!ral finance.12) bai bithaman a'il **) contract is primaril$ !se for long(term financing an oes not reE!ire thelener to isclose the profit margin.

[]


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m!swama contract represents a negotiable sale" where the profit margin is hien from

the b!$er.13

)nalogo!s to conventional operating an finance leases" al(i&arah leasing notes14 asset(

baseJ provie creit in ret!rn for rental pa$ments15over the term of the temporar$ !se

of an e'isting asset" conitional on the f!t!re re(p!rchase of the assets b$ the

borrower.16%he lease cash flow is the primar$ component of ebt service. %he lessor i.e."

financier acE!ires the asset either from the borrower1 operating lease or sale(

leasebac#JAlease(b!$bac#J or a thir part$ at the reE!est of the borrower financing

lease or lease(p!rchaseJ an leases it to the borrower or a thir part$ for an agree

s!m of rental pa$able in installments accoring to an agree sche!le. %he legal title of

the asset remains with the financier for the !ration of the transaction. %he financier bears

all the costs associate with the ownership of the asset" whereas the costs from the !se of

the asset have to be efra$e b$ the lessee.18If the i&arah transaction is a financing lease

i&arah wa iEtina" s!ch as an Islamic mortgage" the repa$ment thro!gh lease pa$ments

might also incl!e a portion of the agree resale price in the form of a call option

13%his form of murabaha is onl$ permitte for merchant ban#s" as in the case of uwait Finance ousesin(ho!se car ealership.14 )n i'arah lease f!lfills the f!nctions of either a finance or operating lease. It is increasingl$ !se inaircraft finance b$ lessees in Islamic co!ntries an in operating lease(bac# transactions" which combine

conventional lening with Islamic investment. /ote that Islamic scholars ma#e no istinction betweenoperating an financial leases as to the classification of profits from the !se of assets against the prohibitionof interest.15?owever" rental pa$ments an their a&!stment to changing mar#et conitions for floating(rate financeassets cannot be e'presse b$ reference to an interest rate. Bessors pass own the ris# of rate fl!ct!ationsb$ s!b&ecting the rental pa$able to a&!stments b$ reference to provisions in other oc!ments e.g." ana&!stment letter lin#ing rentals to BI*


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premi!m" which allows borrowers to gra!all$ acE!ire total eE!it$ ownership for a pre(

etermine sales price.1DIf the lessee oes not e'ercise the call option at mat!rit$" the

lener isposes of it in orer to realiGe the salvage val!e p!t option. In an operating

lease with a rep!rchase obligation" the asset is ret!rne to the borrower for the original

sale price or the negotiate mar#et price20!nless otherwise agree.21 In this case" the

leners p!t option represents a rep!rchase obligation b$ the borrower at the c!rrent

val!e of o!tstaning pa$ments" which is triggere !pon certain conitions" s!ch as

elinE!ent pa$ments or o!tright efa!lt.

In Islamic profit(sharing contracts eE!it$(base" leners i.e." investors an borrowers

i.e." entreprene!rs agree to share an$ gains of profitable pro&ects base on the egree of

f!ning or ownership of the asset b$ each part$. In a tr!stee(t$pe m!haraba or

m!arabah financing contract" the financier rab !l maal provies all capital to f!n an

investment" which is e'cl!sivel$ manage b$ the entreprene!r m!arib in accorance

with agree b!siness ob&ectives. %he borrower shares eE!it$ ownership with the financier

i.e." a call option on the reference assets an might promise to b!$(o!t the investor after

completion of the pro&ect. )t the en of the financing perio" the entreprene!r repa$s the

original amo!nt of borrowe f!ns onl$ if the investment was s!fficientl$ profitable.

>rofits are istrib!te accoring to a pre(agree rate between the two parties. Investors

are not entitle to a g!arantee pa$ment an bear all losses !nless the$ have occ!rre !e

to miscon!ct" negligence" or violation of the conitions m!t!all$ agree b$ both

financier an entreprene!r. %he eE!it$ participation an loss sharing in a m!shara#a or

m!shara#ahAm!s$ara#ah contract is similar to a &oint vent!re" where both lenerAinvestor

an borrower or asset managerAagent &ointl$ contrib!te f!ns to an e'isting or f!t!re

pro&ect" either in form of capital or in #in" an ownership is share accoring to each

part$s financial contrib!tion. )ltho!gh profit sharing is similar to a m!haraba contract"

losses are generall$ borne accoring to eE!it$ participation.

1D%his str!ct!ral feat!re has been applie in Islamic mortgage eals in the +.,.20:ebt base contracts reE!ire a higher re(p!rchase price" which incl!es E!asi(interest pa$ments.21%he temporar$ transfer of stoc# ownership from borrower to lener p!rs!ant to a rep!rchase agreementwithin a lease contract implies f!ll collateraliGation if its val!e at the time of transfer eE!als the presentval!e of the borrowe amo!nt repa$able at some f!t!re ate. %he lower the present val!e of the referenceasset being f!ne b$ the contract" the lower the egree of collateraliGation.

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*verall, the different basic t"es of Islamic finance combine two or more contingent

claims to relicate the ris!-return trade-off of conventional lending contracts or e$uit"

investment without contractual guarantees of investment return or secured a"ments in

reference to an interest rate as time-deendent cost of funds. Such arrangements ma"

become comlicated in ractice, once the" are combined to meet secific investor

re$uirements under Islamic law.

)ltho!gh both Islamic an conventional finance are in s!bstance eE!ivalent to

conventional finance an $iel the same lener an investor pa$(offs at the inception of

the transaction" the$ iffer in legal form an might reE!ire a ifferent val!ation !e to

issimilar transaction str!ct!res an associate legal enforceabilit$ of investor claims

anAor sec!rit$ esign. ost importantl$" Islamic finance s!bstit!tes a temporar$ !se of

assets b$ the lener for a permanent transfer of f!ns to the borrower as a so!rce of

inebteness in conventional lening. 9etaine asset ownership b$ the lener !ner this

arrangement constit!tes entreprene!rial investment. %he financier receives ret!rns from

the irect participation in asset performance in the form of state(contingent pa$ments

accoring to an agree sche!le an amo!nt.22

22%he !nerl$ing asset transfer of Islamic lening arrangements provies collateraliGation !ntil the lenerrelinE!ishes ownership at the mat!rit$ ate. In eE!it$(base Islamic investments" leners o not have an$reco!rse !nless pre(mat!re termination enables the lener to recover some investment f!ns from thesalvage val!e of pro&ect assets.

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4.Deal focus: Creation of the DP WorldEmpire

he goal of Islamists" following in the footsteps of !hamma is to create the

Islamic #ingom of o on earth. %he strateg$ to obtain this goal in o!r lifetime

incl!es the control of the worlNs energ$ infrastr!ct!re" the transportation s$stems"

c!rrenc$" meia" elections" immigration an e!cation. %he control of the port facilities is

hence a critical element. oreign ownership" in an of itself" altho!gh important" is not as

significant as the strateg$ an goals of the owner. In the case of :> Lorl ownership"

their plan for !tiliGation of these strategic infrastr!ct!re reso!rces is to accomplish the

!ltimate goal of worl omination of the sea borne transportation infrastr!ct!re. In

similar moves" a newl$(forme :!bai consorti!m !nveile plans to bi for the

evelopment an operation of airports in 7hina" Inia an the ile ast" a mar#et the$

estimate to be worth -400 bn. %he consorti!m comprises :) )irports an si' other top

companies in the +nite )rab mirates.

%

In the case of :> LorlNs acE!isition" the prices pai for acE!isition cannot be &!stifie

base on strictl$ economic factors. %he implications of Islamists creating global port

control have strategic" sec!rit$ an religio!s implications.

4.1.CEATI!"A "#$%A#P$TSE&PIE


12/33

ports" as well as a passenger ferr$ service in !rope an a real estate portfolio. 7itigro!p

an 9othschil avise >=orts Lorl :>L.23 :>L was forme in

,eptember 2005 from the combination of the :!bai >orts )!thorit$ an :!bai >orts

International %erminals. In Pan!ar$ 2005" :!bai >orts International p!rchase the

container compan$" 7,Q Lorl %erminals" for -1.14 billion. :e!tsche *an# !nerwrote

the transaction. In ,eptember" :!bai merge its two state(owne port companies to create

:> Lorl" which operates ports from the ile ast to 9omania an Inia.

International law firm reshfiels *r!c#ha!s :eringerHwhich avise 7,Q

7orporation24on the sale of its global container terminal to :!bai >orts;was also oing

wor# for 7/ LorlNs ta#eover of >= Lorl plans to iss!e a -2.8 billion

,!#!# bon that is partiall$ convertible into shares in :> Lorl" in the event of an I> Lorl wholl$ owns the terminal.

[13]


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5.Corporate (o)ernance in Islamic Finance

orporate governance of an Islamic financial instit!tion iffers in several respects to

that of its conventional co!nterparts" most notabl$" in the nee to ens!re an

instit!tions compliance with Islamic ,hariaa. %his can be e'acerbate b$ the fact that

several Islamic financial pro!cts place the Islamic financial instit!tion in a fi!ciar$ role

to its c!stomers an the$ m!st loo# to fin wa$s to allow these c!stomers to pla$ an

active role in the governance process.26 %his is co!ple with increasingl$ comple'

corporate governance reE!irements e.g. the 7ombine 7oe" ,arbanes(


15/33

bro!ght into partic!larl$ sharp foc!s when one consiers the absol!te nee for

instit!tions operating Islamic winows an other similar arrangements to achieve an

emonstrate clear segregation between conventional an Islamic operations in terms of

their governance an reporting proce!res.2D

2D ,ee Laffi# rais an atteo >ellegrino, ororate Governance in Institutions *ffering IslamicFinancial Services - Issues and *tions" L>,4052" refer ( http@AAwww(ws.worlban#.orgAe'ternalAefa!ltAL:,7ontent,erverAIL3>AI*A2006A10A26A000016406C20061026114045A9enereA>:Awps4052.pf

[15]
http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2006/10/26/000016406_20061026114045/Rendered/PDF/wps4052.pdfhttp://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2006/10/26/000016406_20061026114045/Rendered/PDF/wps4052.pdfhttp://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2006/10/26/000016406_20061026114045/Rendered/PDF/wps4052.pdfhttp://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2006/10/26/000016406_20061026114045/Rendered/PDF/wps4052.pdfhttp://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2006/10/26/000016406_20061026114045/Rendered/PDF/wps4052.pdfhttp://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2006/10/26/000016406_20061026114045/Rendered/PDF/wps4052.pdf


16/33

6.Determination of Shariah Compliance of#isted Stocks

o assess the e'tent of Islamic investment opport!nities on the stoc# mar#et one has

to loo# at the availabilit$ of stoc#s which conform to the norms stip!late b$ the

Islamic shariah. Lhen we tal# abo!t shariah compatible stoc#s" at least three important

criteria to bear in min are@ i b!siness of the compan$" ii nat!re of contract !ner

which the investe capital of the enterprise is mobiliGe" an iii shariah compatibilit$ of

traing practices of the concerne shares of the compan$.

%

)t present there are n!mber of instit!tions that are active in trac#ing shariah compliant

stoc#s the worl over. ew ma&or among these are the :ow(Pones Islamic ar#et Ine'

:PII30" +,F the ,hariah )visor$ 7o!ncil of the ,ec!rities an 'change

7ommission ,7" ala$siaF an the eeGan Islamic !n 7riteria31" >a#istan.

)s far as primar$ activities of the compan$ are concerne all instit!tions agree that at

least the primar$ or core activit$ of the compan$ sho!l not breach Islamic law. 32%hen

there are companies whose main activit$ is not !n(Islamic b!t a part of their income is

not p!rel$ Islamic or a minor part of it comes from !n(Islamic activities" for e'ample

hotel" s!gar" entertainment etc.

!rther there are companies whose primar$ b!siness is p!rel$ Islamic b!t the$ have h!ge

cash flows an as part of their treas!r$ management" the$ #eep their monies in ban# an

earn interest. %hen there are companies whose main activit$ is not !n(Islamic" the$ o not

30,ee ( http@AAwww.&ine'es.comAmsi'AReventSshowIslamic31 ,alman ,$e )li" Islamic aital Mar!ets /roducts 0 Develoments and hallenges, Islamic

Develoment #an! Grou Islamic 9esearch an %raining Instit!te" >age 21F paper available onwww.irtipms.orgA


17/33

have large interest earning b!t their activities to a large e'tent are finance b$ loans on

interest. )lso there are companies whose assets comprise largel$ of receivables an

cash. )ll s!ch companies violate one or other criterion on which the Islamic compatibilit$

of a compan$ is &!ge.

:ifferent scholars have set ifferent criteria for selecting the E!alif$ing stoc#s. It is

obvio!s that in the real financial worl against an$ criterion one will fin a contin!!m of

companies ranging from those which f!ll$ E!alif$ with no infractions to those that are

completel$ isE!alifie !e to gross violation of the criterion. ,o the assessor has to set

E!alif$ing limits in terms of minim!m ratios or percentages whereb$ the E!alif$ing

stoc#s can be screene o!t of non(conforming stoc#s. :ow Pones" ,7" ala$sia an

eeGan all have their own E!alif$ing norms. ?owever" broal$ spea#ing the$ !se more

or less the same methoolog$ or criteria. Le" in o!r st!$" have !se the E!alif$ing

criteria as practice b$ :PII" which are as follows@

UN-ACCEPTABLEBUSINESSACTIVITIES

:PII" which in its shariah boar has some of the most respecte scholars of the Islamic

financial worl" has terme some in!stries as inconsistent with shariah percepts.%herefore investments in these stoc#s are not permitte. %hese in!stries are alcohol"

por#(relate pro!cts" conventional financial services ban#ing" ins!rance etc."

entertainment hotels" casinoAgambling" cinema" pornograph$" m!sic etc." tobacco" an

weapons an efense in!stries. In aition" in o!r screening" we have e'cl!e the s!gar

in!str$ too as the !nits in this in!str$ almost invariabl$ pro!ce potable alcohol as a

b$pro!ct from the molasses generate in the pro!ction process.

UN-ACCEPTABLEFINANCIALRATIOS

)fter removing companies with !n(acceptable primar$ b!sinesses" companies are f!rther

p!t to test on the following financial ratios.

[1]


18/33

Debt to Assets

7ompanies are to be e'cl!e if %otal :ebt of the compan$ ivie b$ its %railing 12(

onth )verage ar#et 7apitalisation is greater or eE!al to 33 percent.

Impure Income

7ompanies are to be e'cl!e if cash pl!s interest bearing sec!rities are eE!al or greater

than 33 percent of %railing 12(onth )verage ar#et 7apitalisation.33

Receivables to Assets

7ompanies are to be e'cl!e if )cco!nts 9eceivables ivie b$ their %railing 12(

onth )verage ar#et 7apitalisation is greater than or eE!al to 33 percent.34

6.1. S*AIA*C$&P#IA!TST$C+SI!I!DIA

+he following art using the shariah screening norms as adoted b" the Dow 1ones show

that Indian caital mar!et rovides tremendous shariah comliant investment

oortunities as comared to a number of Islamic countries.


19/33

capitaliGation of shariah compliant stoc#s was fo!n to be more impressive than the

growth in mar#et capitaliGation of non(shariah compliant stoc#s.

)nother remar#able fining of the st!$ is that even when the n!mber of shariah

compliant stoc#s was ver$ limite the share of shariah compliant mar#et capitaliGation

never went below 50 percent of the total mar#et capitaliGation. In fact the c!rrent share of

shariah compliant mar#et capitaliGation 61 percent is highest even when compare with

the n!mber of Islamic co!ntries s!ch as ala$sia" >a#istan" *ahrain etc. where share of

shariah compliant mar#et capitaliGation was 5 percent" 51 percent" an 6 percent

respectivel$ of the total mar#et capitaliGation.35,ector wise comp!ter software" r!gs an

pharmace!ticals an a!tomobile ancillaries were the largest sectors among the shariah

compliant stoc#s. %he$ constit!te abo!t 36 percent of the total shariah compliant stoc#s

on /,.36

'hibit 1 shows the $ear wise performance of shariah compliant stoc#s at the /,. In

arch 2002 onl$ 115 companies were E!alif$ing as shariah compliant. *!t as the mar#et

Inia starte performing better an the stoc# mar#et rose the n!mber of shariah compliant

stoc#s increase from 13 in arch 2003 to 335 in :ecember 2005. 9efer )nne' 1 an

2 %he same test was applie to *, 500 b$ an large Inias Uort!ne 500. %he res!lts

s!ggest that here again the performance of shariah(compliant stoc#s was better than the

performance of non(shariah compliant stoc#s. rom merel$ D5 companies in arch 2002

the total n!mber of shariah compliant companies on *, has risen to 112" 164" an 1D6

at the en of respective financial $ear !p till 2005.

)t *, o!t of 500 total 23 companies E!alifie on shariah parameters as at en

:ecember 2005. %he ,hare of shariah compliant mar#et capitaliGation with respect to the

total mar#et capitaliGation of the selecte companies varie between 40 percent an 58

percent !ring the perio of st!$. ?ere again the rate of growth achieve b$ shariah

compliant stoc#s were better than the rate of growth achieve b$ non(shariah compliant

35 Islamic aital Mar!et /roducts0 Develoments and hallenges" Islamic 9esearch an %rainingInstit!te" Islamic :evelopment *an#" 2005" p. 23.36,hariE /isar"Islamic Investments *ortunities in India" 9efer ;www.financeinislam.com

[1D]
http://www.financeinislam.com/http://www.financeinislam.com/


20/33

companies.


21/33

7.The in-u. of So)erei(n Wealth Funds

he creit cr!nch has le to an acceleration of investment in +, an !ropean ban#s

b$ sovereign wealth f!ns" with the amo!nt investe in the first two months of this

$ear nearl$ matching half the 200 total.

%)ccoring to ata from :ealogic" investments b$ global sovereign f!ns amo!nte to a

recor -48.5bn in 200" an -24.4bn in &!st the first two months of 2008. 38 ost"

altho!gh not all" of the investments were mae into ban#s" with financials acco!nting for

-60.bn of the -2.Dbn investe b$ ,Ls since Pan!ar$ 200.

%he fig!res cover investments b$ all sovereign f!ns" incl!ing those that have emerge

in 7hina an the ile ast. ?owever" the$ e'cl!e state pension f!ns s!ch as

/orwa$s government pension f!n. ,ingapore acco!nte for the ma&orit$ of cross(

borer investments mae b$ sovereign wealth f!ns in the past 14 months ; acco!nting

for 5 per cent of the total investe since 200. %emase# ?olings an overnment of

,ingapore Investment 7orp I7 have mae total investments abroa of -41.bn since

Pan!ar$ 200" far e'ceeing the -10.bn spent b$ the +nite )rab mirates an -8bn b$

7hina thro!gh their sovereign f!ns. ,ingapore has been partic!larl$ active in ta#ing

avantage of the creit cr!nch to b!$ minorit$ sta#es in some of the worls biggest

commercial an investment ban#s as the cit$(state see#s to become a leaing financial

centre.

%emase# anno!nce a -4.4bn investment in errill B$nch in :ecember an" together

with 7hina :evelopment *an#" bo!ght a small sta#e in *arcla$s last s!mmer to help the+ ban# in its attempte bi for )*/ )mro. %emase# has also been increasing its sta#e

in ,tanar 7hartere an now hols &!st !ner 20 per cent of the +(base emerging

mar#ets ban#.

389efer ; %he inancial %imes" arch 23" 2008.

[21]
http://markets.ft.com/tearsheets/performance.asp?s=us:MERhttp://markets.ft.com/tearsheets/performance.asp?s=us:MER


22/33

I7" together with a ile ast investor" in&ecte -Dbn into +*, in :ecember. ) few

wee#s later I7 investe a f!rther -6.Dbn in 7itigro!p. ,ingapores sovereign f!ns have

large financial reserves" with %emase# having f!ns of more than -100bn an I7 having

an estimate -200bn(-330bn. %his places their holings behin onl$ the +) in terms of

siGe.

I7 #ept a low profile !ntil its recent investments in 7itigro!pan +*, beca!se of its

traitional role as a giant asset management f!n. *!t it has become the leaing investor

among sovereign f!ns in the last $ear" acco!nting for 3D per cent of all investments

mae b$ them at -28.6bn. ,ome of the sovereign f!n investments have fallen sharpl$ in

val!e" s!ch as that in +*," while others have performe well" s!ch as that in ,tanar

7hartere. %he !wait Investment )!thorit$ ran#e secon with -1D.Dbn in eals"

incl!ing sta#es in 7itigro!p an errill B$nch. %emase# ran#e thir with -13bn.

9efer )nne' 3

7.1.I!DIAP#A!!I!"AS$/EEI"!WEA#T*F'!D

In a move to better !tilise its -280 billion of foreign e'change reserves" the government

of Inia is consiering a sovereign wealth f!n ,L with an initial corp!s of -5 billion

to acE!ire companies abroa. %he f!n ma$ also be !se for acE!iring coal mines an oil

an gas bloc#s abroa.

,overeign Lealth !n is a special p!rpose vehicle of the government" f!ne b$ foreign

c!rrenc$ assets" with a higher ris# tolerance an higher ret!rn e'pectation. %he

management of assets !ner ,L is separate from the management of the official

reserves. +nli#e official reserves" which are !s!all$ hel in short !ration +, bons" the

,L portfolio has a pro!ct mi' of ifferent fi'e income" eE!it$" commoit$ an realt$

instr!ments.

,ince the f!ning is being one in foreign c!rrenc$ an also since the investments are

one in foreign mar#ets" there can be no inflationar$ press!res !e to sterilisation which

co!l have been the case if the reserves were being !se for infrastr!ct!re f!ning" these

[22]
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23/33

f!ns are often consiere to be a win(win sol!tion for increasing reven!es. loball$"

sovereign(wealth f!ns or the state(r!n investment pools" have an estimate -2(3 trillion

!ner management an are pla$ing an important role in cross(borer investment. ile

ast" the oil(rich !lf states an cash(rich )sian co!ntries have been ver$ active.

9ecentl$" the governments of ,ingapore" !wait an ,o!th orea provie f!ns to the

t!ne of -21 billion" almost a lifeline to the istresse 7itigro!p an errill B$nch" two

ban#s that have lost fort!nes in )mericas creit crisis.

,overeign wealth f!ns or a so!rce of tapping the s!rpl!s savings of eveloping co!ntries

have proliferate in recent $ears owing to b!mper oil prices an s!rging )sian e'ports.

,ince the s!bprime(mortgage fiasco !nfole last $ear" s!ch f!ns have mobiliGe almost

-6D billion on recapitalising the rich worls biggest investment ban#s.3D

,overeign wealth f!ns are consiere a preferre choice as there is so m!ch mone$ to

invest an allows for s!ch close political scr!tin$ of the activities" f!ns are rawn to

investment opport!nities that can swallow their cash witho!t giving them too heft$ a

sta#e.

organ ,tanle$ rec#ons that sovereign(wealth f!ns have spent -35 billion since the start

of last $ear on strategic sta#es in financial organiGations. Lhile" the arg!ment contin!es

that the Inian government sho!l float s!ch a f!n or not" there are vario!s sovereign

wealth f!ns that have alrea$ fora$e into the co!ntr$. %he c!rrent tren being observe

is that these ,Ls b!$ into private eE!it$ firms thereb$ giving them an inirect presence

in the co!ntries where these >rivate E!it$ firms invest.

7.1.1.The need for a So)erei(n Wealth Fund for India A De0ate

3D Inia plans ,overeign Lealth !n with -5 billion corp!s" see www.vccircle.comA2008A02A18Ainia(plans(sovereign(wealth(f!n(with(5(billion(corp!sA

[23]
http://www.vccircle.com/2008/02/18/india-plans-sovereign-wealth-fund-with-5-billion-corpus/http://www.vccircle.com/2008/02/18/india-plans-sovereign-wealth-fund-with-5-billion-corpus/http://www.vccircle.com/2008/02/18/india-plans-sovereign-wealth-fund-with-5-billion-corpus/http://www.vccircle.com/2008/02/18/india-plans-sovereign-wealth-fund-with-5-billion-corpus/


24/33

)ccoring to a few e'perts li#e r. 9a&eev ali#" 'ec!tive :irector" P> organ 7hase

*an#" ,ingapore is of the opinion that Inia has inavertentl$ alrea$ mae a fora$ into

the worl of ,Lsb$ the setting !p of a special p!rpose vehicle that will !se a small

portion of the foreign e'change reserves to ai infrastr!ct!re pro&ects.

,Ls fall into two broa categories" epening on the so!rce of the foreign e'change

assets the$ manage. %he first #in is commoit$ f!ns" s!ch as those of )b! :habi"

!wait an /orwa$" where the main so!rces are commoit$ e'ports" s!ch as oil an gas.

%he secon #in is non(commoit$ f!ns" where the co!ntries r!nning persistent c!rrent

acco!nt s!rpl!ses that is" e'cess savings over investment eicate a siGeable portion of

the foreign e'change reserves to be manage b$ a separate entit$. %he )sian ,Ls" s!ch

as those of ,ingapore an 7hina" fall into this categor$.

%he commoit$(base ,Ls originate with the nee to manage the winfall from

higher prices of their commoit$ e'ports so as to !se them at a later ate when the benefit

of either higher commoit$ prices or the commoit$ base itself ma$ not e'ist. %he )sian

,Ls manage the increase in foreign e'change reserves owing to the central ban#s

intervention to prevent the complete mar#et(riven e'change rate appreciation.

%hree #e$ concerns are li#el$ to be raise abo!t an ,L for Inia. s!rpl!s in recent $ears owing to s!rging capital

inflows ma$ not be s!staine.

,till" there are several factors that tip the scale in favo!r of a ,L for Inia.


25/33

is rather conservative as is the case with most other central ban#s" which epresses

ret!rns owing to the importance given to liE!iit$ an safet$. %wo" higher ret!rns on

reserves can boost investment income" an favo!rabl$ affect the fiscal eficit. %hree" an

,L can pla$ a vital role in sec!ring o!r f!t!re energ$ nees" an can also pla$ a

constr!ctive an complementar$ role in o!r geo(political an economic strateg$. o!r"

the ,L co!l parcel o!t mone$ for boosting the local f!n management in!str$

investing in overseas mar#ets.

%he limitation of the twin eficits is legitimate b!t sho!l not hiner earmar#ing a small

amo!nt for a ,L" which sho!l follow high stanars for governance" transparenc$ an

isclos!re stanars.

?owever a converse view is often e'presse as is forware b$ 9a&iv !mar :irector

an 7hief 'ec!tive" I79I9. ?e believes that the temptation to establish an Inian

,L" beca!se o!r gross reserves have crosse -300 billion sho!l be resiste. +nli#e

7hina" that has b!ilt !p its reserves thro!gh s!staine large(scale c!rrent acco!nt

s!rpl!ses" $ear after $ear for a ecae an a half" an which therefore are free from an$

enc!mbrances" o!r reserves o not $et represent net savings. In o!r case" these represent

the e'cess of capital flows over the c!rrent acco!nt eficit" that the Inian econom$

generates on a reg!lar basis" e'cept for a co!ple of $ears at the beginning of this ecae.


26/33

then to foc!s the 9*Is managerial capacit$ on better estimating the rate of inflation"

ma#ing the ban#ing s$stem more efficient an streamlining an arms(length reg!lator$

mechanism. )n hence it is harl$ the time to be se!ce b$ the l!re of ,LsV

7hina Investment 7orporation 7I7" sovereign wealth f!n from 7hina" with an initial

corp!s of -200 billion" almost 8 per cent of Inias total fore' reserves H has alrea$

mae an inirect fora$ into Inia thro!gh its s!bstantial -3 billion sta#e in +,(base

private eE!it$ gro!p *lac#stone" giving it an inirect entr$ into Inia.

)mong the top three private eE!it$ f!ns active in Inia" *lac#stone alrea$ has a 50 per

cent sta#e in te'tile ma&or o#alas" 14.5 per cent in /agar&!na 7onstr!ctions" an sta#es

in even efence s!pplier %)9 %echnologies H an was even in the race for the

tro!ble p!blic sector financial behemoth In!strial inance 7orporation of Inia I7I.

,ingapore governments %emase# has been the largest investor in *harti Infratel eal.

7.2.E"'#ATI$!$FS$/EEI"!WEA#T*F'!DSI!I!DIA

%he Inian sec!rities mar#et reg!lator ,*I has state that e'isting provisions in the

%a#eover 7oe will be applicable to ,Ls" accoring to 9eserve *an# of Inia governor

WM 9e$. %he on(lening of foreign e'change reserves thro!gh II7B to Iniancompanies abroa will be treate as e'ternal commercial borrowings. loball$" man$

co!ntries have floate ,Ls" which !tilise a portion of their fore' reserves to invest in a

variet$ of assets in overseas mar#ets to earn higher ret!rns.40 In partic!lar" Inia is

watching with great interest the evelopment of global coes" stanars an practices as

regars ,Ls" both in view of the presence of ,Ls in the Inian financial mar#et an

the ongoing ebate on establishing an Inian ,L. In the Inian conte't" as per the

scheme envisage b$ the government" 9*I wo!l be investing in tranches !p to -5

billion in government(g!arantee foreign c!rrenc$(enominate bons" iss!e b$ an

overseas ,>M of Inia Infrastr!ct!re inance 7orporation II7B" a government(owne

compan$.

409efer ([email protected]/ewsA/ewsC*$CIn!str$A*an#ingCinanceCA%a#eoverCr!lesCtoCg!ieCsovereignCwealthCf!nsArssarticleshowA2D55021.cms

[26]
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27/33

%h!s" the f!ns raise wo!l be !tilise b$ the compan$ for on(lening to Inian

companies implementing infrastr!ct!re pro&ects in Inia anAor to co(finance 7*s of

s!ch pro&ects for capital e'penit!re o!tsie Inia witho!t creating an$ monetar$ impact.

%he lening b$ the ,>M !ner the arrangement wo!l be treate as e'ternal commercial

borrowings 7*s an wo!l be s!b&ect to the prescribe reporting an isclos!re

reE!irements.

%he policies towar ,Ls m!st be base on so!n empirical ata an other evience"

an sho!l not provie opport!nities for reg!lator$ arbitrage b$ treating ,Ls mar#el$

ifferentl$ than other financial instit!tions s!ch as the hege f!ns an private eE!it$.

%here is a nee to better monitor the activities of ,Ls" both nationall$ an

m!ltilaterall$. %he I" the Lorl *an# an the


28/33

8.Conclusion

he o!ble(igit ann!al growth of the Islamic finance in!str$ is evience of the

e'citing opport!nities in this sector" with a vast !ntappe mar#et of over a billion

people aro!n the worl with !npreceente wiesprea high levels of liE!iit$. %his is

an in!str$ that has mae asto!ning progress in a matter of $ears. 7ompetition

contin!es to heat !p" as the traitional large global financial pla$ers ta#e on the local

instit!tions. ,!ch competition" b$ itself" is evience of the worlwie interest this

in!str$ has generate. oing forwar" there ma$ be some consoliation within the

in!str$ while the creation of %he Islamic mega(ban#J loo#s more an more inevitable.

Inee" given the liE!iit$ generate b$ the energ$ wealth in the ile ast" it is not

impossible in the f!t!re that an Islamic financial instit!tion ma$ see# to acE!ire a ma&or

global pla$er in the financial mar#ets to generate critical mass an acE!ire mar#et share.

%o tr!l$ reach its potential" the in!str$ nees to meet the challenges hea on. In

partic!lar" it nees to contin!e to innovate in broaening the range of pro!cts available"

wor#ing han(in(han with scholars to create new offerings that remain compliant with

,haria law. )n b$ agreeing on an harmoniGing iss!es on governance" reg!lation"

reporting an ta'ation" the in!str$ can onl$ improve its profitabilit$ an gain a greater

staning in the e$es of the worls capital mar#ets as well as the inivi!al cons!mer. )

!niE!e in!str$" Islamic finance is now facing !p to !niE!e challenges. ?owever" these

are not the challenges of inepenent operation. Instea" the$ are the challenges of global

recognition.

%

%he ta'ation implications of offering Islamic pro!cts in certain &!risictions have !ntilrecentl$ largel$ been isavantageo!s" which has restricte their !se an availabilit$. In

other &!risictions" efforts have onl$ &!st beg!n to investigate the ta' treatment of s!ch

pro!cts. )ltho!gh there have been significant avancements in the ta'ation of Islamic

pro!cts" f!rther wor# is reE!ire to help enable Islamic instit!tions to compete on a

level pla$ing fiel with non(,hariaa compliant instit!tions.

[28]


29/33

Islamic inance in Inia is also gra!all$ pic#ing !p. )fter all" it has one of the largest

!slim pop!plations of the worl. rom the e'hibits" it is clear that a goo n!mber of

liste stoc#s are shariah compliant. It will not be long before Islamic *an#ing #ic#s off in

earnest. Inias first ,hariah(compliant infrastr!ct!re f!n is also on its wa$.

,pea#ing of ,Ls" the$ are emerging as heav$weight global investors. %he$ grew 18 per

cent last $ear as commoit$ prices s!rge an the foreign e'hange reserves of some

)sian co!ntries contin!e to rise. ,Ls now manage assets woth -3300 billion an will

oversee more than -10000 billion of assets b$ 2015" estimates International inancial

,ervices Bonon" which promotes + financial services aro!n the worl. )bo!th the

Inia ,L" its high time Inia floats a ,L" especiall$ in light of the fact that its foreign

e'change reserves have crosse the -300 billion mar#. ?igher ret!rns on reserves will

s!rel$ boost investment income an favo!rabl$ affect the fiscal eficit. *esies" an ,L

can sec!re a vital role in sec!ring Inias f!t!re nees" an can also pla$ a constr!ctive

an complementar$ role in Inias geo(political an economic strateg$. )n ,L in Inia

can also parcel o!t mone$ for boosting local f!n management in!str$ in overseas

mar#ets. Inia has grante special privileges to two of ,ingaporeNs ,Ls !ner the

7omprehensive conomic 7ooperation )greement. 9eportel$" %emase# has ecline to

sell its sta#e. /evertheless" this e'ample ill!strates the possible strategic an s$stemic

ris#s in ealing with the ,Ls for Inia. )s the siGe of the Inian econom$ increases

from the c!rrent -1.2 trillion" the mar#et for corporate control will also become more

contestable. *etter corporate governance is therefore no longer a l!'!r$ b!t a necessit$ if

the e'isting owners want to maintain control. Inia m!st also permit its entreprene!rs"

state enterprises" an its financial instit!tions m!ch greater latit!e in p!rs!ing

investments abroa" an in engaging in strategic alliances. Inia sho!l insist on

reciprocit$ in investment access" an in other economic opport!nities in the co!ntries of

origin of the ,Ls" while participating in shaping the international coe of con!ct for

them. %he aim sho!l be to retain polic$ a!tonom$ an fle'ibilit$ so as not to !nermine

IniaNs mei!m(term technological choices an growth options.

[2D]


30/33

9.Anne.ure 1

!ATI$!A#ST$C+E2C*A!"E#ISTED

Wear ar(2002 ar(2003 ar(2004 ar(2005 :ec(2005

%otal /!mber of 7ompanies

Biste on /,D88 D88 D88 D88 1000

,hariah 7ompliant 7ompanies 115 13 185 23 335

%otal ar#et 7ap 9s. *illion 528.D6 005.DD 10366.13 15265.83 2011.2

%otal ar#et 7ap )nn!al

rowth percent (20.02 22.2D 4.D6 4.2 32.14

,hariah 7ompliant ar#et

7ap 9s. *illion28D5.64 3801.5 6305.1 8D10.54 12311.13

,hare of ,hariah 7ompliant

ar#et 7ap percent50.54 54.26 60.82 58.3 61.03


7ap )nn!al rowth percent(26. 31.2D 65.86 41.32 38.1D

,o!rce@ 7entre for onitoring Inian conom$. /!mber of liste companies #eeps var$ing. :!ring the

st!$ perio" initiall$ the n!mber of total liste companies at /, was D88" which later on rose to 1000.

[30]


31/33

10. Anne.ure 3

%$&%A,ST$C+E2C*A!"E4%SE 5667

Wear ar(2002 ar(2003 ar(2004 ar(2005 :ec(2005

%otal /!mber of 7ompanies 500 500 500 500 500

%otal ,hariah 7ompliant

7ompaniesD5 112 164 1D6 23

%otal ar#et 7ap 9s. *illion 4634.1 5411.41 8804.52 13635.4 18262.52%otal ar#et 7ap )nn!al

rowth percent(20.D5 16. 62.0 54.8 33.D3


7ap 9s. *illion18D4.8 2234.3 4824.04 3D3.16 1028.21

,hare of ,hariah 7ompliant

ar#et 7ap40.8D 41.30 54.D 54.22 58.4


7ap )nn!al rowth percent(32.84 1.D4 115.8 2.5 45.11

,o!rce@ 7I

[31]


32/33

11. Anne.ure 8

A #$$+AT/AI$'SSWFS

[32]


33/33

12. eferences

1. )ston artin >ress 9elease. 200 )ston artin anno!nces new shareholers. 9etrieve arch 25"2008" from [email protected]$AnewsRaS1aab65(8f1a(4D3(bD88(6fc0f28821D

2. :avi Ponsson. 200 :!bai >orts ; ,trategic Implications. 9etrieve )pril 2" 2008" [email protected].!sA&onssonC!baiCports.html

3. reshfiels *r!c#ha!s :eringer >ress 9elease. 2005. reshfiels avises 7,Q on the +,- 1.15 saleof its international terminals b!siness to :!bai >orts. 9etrieve arch 24" 2008" fromhttp@AAwww.freshfiels.eAnewsAmeiareleasesAmeiarelease.aspRiS600

4. ?ami W!nis. rowth of >rivate E!it$ !ns !sing Islamic inance" Islamic inance /ews !ie.9etrieve arch 2" 2008" from [email protected]

5. ?owar :avies" 7hairman of the inancial ,ervices )!thorit$. 2002 9etrieve arch 28" 2008" [email protected].!#A>agesABibrar$A7omm!nicationA,peechesA2002Asp103.shtml

6. Inia plans ,overeign Lealth !n with -5 billion corp!s see www.vccircle.comA2008A02A18Ainia(

plans(sovereign(wealth(f!n(with(5(billion(corp!sA. Islamic 7apital ar#et >ro!cts@ :evelopments an 7hallenges" Islamic 9esearch an %raining

Instit!te" Islamic :evelopment *an#" 2005" p. 23.8. > International. 2006 Islamic inance. 9etrieve arch 2D" 2008" from

http@AAwww.!s.#pmg.comAmicrositeA,Bibrar$:ot7omAocsAislamicfinance.pfD. > International. 2006 a#ing %he %ransition rom /iche %o ainstream. 9etrieve arch 30"

2008" from http@AAwww.!s.#pmg.comAmicrositeA,Bibrar$:ot7omAocsAIslamicK20*an#ingK20anK20inanceK20(K20)K20,napshotK20ofK20theK20In!str$K20anK20ItsK207hallengesK20%oa$.pf

10. > International. 200 rowth an :iversification in Islamic inance. 9etrieve arch 28"2008" from http@AAwww.!s.#pmg.comAmicrositeA,Bibrar$:ot7omAocsArowthK20anK20:iversificationK20inK20IslamicK20inance.pf" >age 1 ; 3.

11. rivate E!it$ ; oern :a$ !shara#ahR" /ew ?oriGon.9etrieve arch 26"

2008" from [email protected](islamicban#ing.com12. resentation b$ )$man ?. ). haleE an ,tephen :. :avis" *asics of Islamic inance" InternationalBaw ,ection" ,tate *ar of %e'as" 1Dth )nn!al International Baw Instit!te" arch 2D ; 30" 200 ; ,an)ntonio" %e'as. Minson = l#ins BB>

14. 9eport b$ the !lf 7ooperation 7o!ncil 200. 9etrieve arch 25" 2008" fromhttp@AAwww.!str.govAassetsA:oc!mentCBibrar$A9eportsC>!blicationsA2004A2004C/ationalC%raeCstimateA2004C/%C9eportAassetC!ploaCfile226C46D.pf

15. 9!pert 7opeman 200. :eman for !lf 9ights Iss!es rebo!ning following last $ears stoc# mar#etcorrection. 9etrieve arch 2D" 2008" from [email protected](for(g!lf(rights(iss!es(rebo!ning(following(last($ears(stoc#mar#et(correction.cfm

16. ,hariE /isar 200 Islamic Investments

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