Dr Zeid Ayer

Bandar Seri Begawan - Brunei should sell sukuk overseas to widen the Islamic bonds' investor base, an Islamic finance expert said.

Limiting the sale of sukuk would make Brunei too dependent on the local market, said Dr Zeid Ayer, chief investment officer of CIMB-Principal Islamic Asset Management, at the recently-held Islamic Finance News Roadshow on Tuesday.

"I think that it is a disadvantage because (Brunei) should really open up globally, not just to diversify their investor base to global investors, but to also get a different investor base so that you are nor solely dependent on the local market," he said.

He said there would be issues that need to be addressed, such as the denomination of the currency rate and allowing for the sukuk to be rated by independent ratings agencies (to indicate creditworthiness).

Ensuring the rating of Brunei sukuk by an external rating agency would create liquidity, Ayer said.

"If you have a different set of eyes, there would be different scrutiny, and someone who has looked at it would have a great track record for the company," he said.

He said that if a country also gets more issuers from other markets, then a market would be diversifying its own risks which would be a huge advantage to the global market.
Ayer said while Brunei already has a strong Islamic reputation, it could learn a lot from Malaysia and the Islamic capital markets to expedite know-how.

"Malaysia is one of the most developed capital markets in the world, and I think that the regulatory aspect and all the elements that you need to have a well-functioning market exists in Malaysia today," he said, noting how Brunei could benefit by working closely with Malaysia to help build both countries as an Islamic financial hub.

"In terms of acceptance, and in terms of products, and even the way things trade ... I think the key lesson here is that Brunei can surely learn from all these areas," he said.
He added Brunei should also learn from Malaysia's mistakes.

"Personally, I think that you learn more from your mistakes than you learn from your successes, and that is something Brunei could really do and see what's happening now, not just in Malaysia but globally. Brunei is in a unique position to team from these mistakes and build a system that is even more robust and that can withstand what the other systems had to go through painfully," he said.

Given that Malaysia has a developed Islamic finance industry, he said, the entire financial system has become "pretty parallel to the conventional system" and that is what Brunei can learn from.

"If you have got examples in front of you then it's much easier to do things, once you have seen something. There is much precedence set to build your own market or to go and start from scratch.

"You learn from people's mistakes, that is the key thing," he said. -- Courtesy of The Brunei Times

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