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Malaysian company wants to expand Halal food services to Russia

salama — Mon, 03 Oct 2011 17:31:14 +0000

LSG Skychef-Brahim to expand globally

KUALA LUMPUR (Oct 2, 2011): LSG Skychef-Brahim’s Sdn Bhd, formerly known as MAS Catering Sdn Bhd and the world’s biggest halal flight kitchen caterer, is embarking on expanding its services to new markets such as China, Eastern Europe as well as scouting for opportunities in the former Soviet states and the Middle East.
Datuk Ibrahim Ahmad Badawi, Executive Chairman of Brahim’s Holding Bhd — the parent company of LSG Skychef–Brahim’s Sdn Bhd, said there were numerous enquiries for the company to supply halal food not only for the Muslim market, but for non-Muslims as well globally given the wide range of cuisine offered under its menu.
A potential market was the republic of Tatarstan in Russia which is the gateway to the whole of the former Soviet Union states for halal food, he told Bernama in an interview today.
Similarly, he said, the company was also in Ningxia, China’s second Muslim autonomous province, through a joint venture company — Ningxia-Fahim International Halal Industries Corporation.
Ibrahim, who is also the Chief Executive Officer and founder of Dewina Holdings (the manufacturer of famous household brand, Brahims) said that another subsidiary company was operating military cook houses in Malaysia under a government privatisation exercise in 1998.
“We have invested more than RM65 million to revamp the catering operations in 63 military camps.”
The company has already formed a 50:50 joint venture company with King Abdullah Design and Development Bureau from Jordan, which is expected to be launched in the first quarter of next year, a move which offers lucrative expansion opportunities.
“The joint venture is worth about RM50 million including factory construction and machinery excluding land,” he said, citing how the Jordanian monarch was taken up by the company’s ability to provide halal food in such an efficient manner.
The oldest subsidiary of the group, Dewina Food, had also supplied halal food to the United Nations, in view that its multinational peace keeping forces comprised army personnel from many Islamic countries including Malaysia.
LSG Skychef-Brahim’s Sdn Bhd was established in 2003 through a joint venture between Brahim’s International Franchises and LSG Sky Chefs, following which the JV acquired 70% of loss-making MAS Catering Sdn Bhd’s share.
The other 30% is held by MAS.
“The government (at that time) under Tun Dr Mahathir Mohamad had proposed that Malaysia Airlines privatise its catering business, considering that the airlines incurred huge losses to the tune of about RM200 million through MAS Catering with negative shareholders’ funds of about RM80 million.
“So, I ventured with LSG, which is Lufthansa’s catering arm, the biggest flight kitchen operator in the world and formed a joint venture company. After we came in around November 2003, we started to make changes to the business,” Ibrahim said.
He said that negotiations for the acquisition lasted for more than a year before they sealed the deal worth about RM250 million, which was much higher than the RM50 million estimated by analysts at that time.
“MAS, at that time, wanted to get as much as money they could get to cover the losses. So, we were awarded a 25-year contract for catering for MAS to justify the amount of money they wanted,” he said, dismissing internet reports that the company made a windfall from the deal when in fact, it had to pay quite a premium for the acquisition for a loss-making company.
He said that the company would only be able to cover its accumulated losses next year.
He said that some of the internet reports painted a negative perception about the company as information about it having to acquire a company which had RM200 million in accumulated losses were not shared with the public.
Ibrahim clarified that despite the acquisition of MAS catering, the buildings and all the facilities belonged to Malaysia Airports Holdings Bhd (MAHB) and that LSG Skychef-Brahim’s Sdn Bhd was only given the rights to operate the business.
Since the takeover, LSG Skychefs – Brahim Sdn Bhd had brought about tremendous improvements which increased business’ efficiency, productivity and profits by controlling costs and purchasing in order to cover the losses, Ibrahim said.
“When we took over, we have 1,800 workers, producing about 26,000 meals per day and now, we have 1,200 workers, but we managed to doubled our capacity to an average of 40,000 meals per day,” he said.
Besides MAS, the company also catered for 35 other airlines, representing about 90% of the airlines which land in Kuala Lumpur. Their Penang operations cater to 10 airlines.
The Mahathir administration at that time felt that MAS should stick to its core business of running an airline and therefore should hive off the loss-making catering unit to someone who knew how to run the business.
“That’s how we got it. That was a correct move and the exercise (acquisition) was more like a rescue operation.” he said.
Ibrahim said that it was also wrong to imply that losses incurred by MAS now were due to its catering services as catering only accounted for 1.7 percent of its operating costs, but the way the reports painted it was as if catering was the main contributor to its losses. — Bernama

http://www.thesundaily.my/news/162624

Republic of Tatarstan capitalizes on its Muslim heritage

salama — Wed, 14 Sep 2011 16:02:36 +0000

The Republic of Tatarstan, a Muslim-majority region, has proved to be an interesting investment destination for funds with Muslim shareholders or that are based in Muslim countries.

By Nick Watson: Russia Beyond the Headlines

Although there has been much speculation about Muslim investors moving into Russia, the situation has been one of all talk and no action — until now.

Two Islamic funds have recently launched operations in the ?Muslim-majority Republic of? Tatarstan. The first is the ?Malaysian private equity firm Amanah Raya Capital Group, which has launched several? projects the republic. In the 1990s, most foreign investors headed straight for Moscow. The game changed after 2000, however, and Russia’s regions have become the new frontier; Kazan caters to the 80 million Russians that live in the cities lining the Volga River.

“We bypassed Moscow and came to Kazan, as it offers the most attractive investment ?climate,” said Dato Ahmad Rodzi Pawanteh, Amanah Raya’s managing director.

The fund’s first project was the Kazan Halal hub, which imports Halal meat and other products for the region’s Muslim majority. Once established, the fund financed the construction of a Halal meat processing plant in Baltash, 62 miles from Kazan, where local producers can also bring their meat to be processed according to Islamic rules. The latest phase of the project set up an Islamic fund management company that will invest in Halal-related ?projects. The management company will also hold a pilgrimage fund to finance a Hajj for local residents.

“We have been very successful with this sort of fund in Malysia, and it was an obvious product to bring to Tatarstan,” said Pawanteh. “But we are also working with the local government to raise funds on a private equity basis to bring in foreign investment to the region.”

According to Pawanteh, the local government has been very active in promoting foreign investment in the region, and has taken a stake in these funds as a way of reassuring foreign investors that it is willing to share the risks with investors.

The second fund that recently established itself in Tatarstan is the Foras International Investment Company, which represents Saudi money and has launched a classic investment vehicle together with the newly established Tatarstan International Investment Company, or TIIC. The $50 million fund will focus on the ?region’s strengths in bio-technology, nanotechnology and I.T. The company was inaugurated in June ; the founding investors have already contributed $10 million and are in the process of raising the balance.

“We are focused on the Volga region and the attractive investment climate the government has created here with tax breaks and incubators,” said Amizan bin Mohd Nor of Foras. “One of the most attractive elements in this region is the high level of science and engineering, especially in things like civil aviation.”

Kazan was known in the Soviet era as a center of learning, and its universities still churn out many of Russia’s best engineers. It is also home to a flourishing aviation industry as well as a burgeoning automotive sector.

“We have 20 projects in the pipeline, and 80 percent of them are brownfield that we will develop over the next three years,” said Nor. “But probably the most prospective are in the technical aviation sector.” Nor said he can’t reveal the details of the projects yet as they are still in negotiations, but that he is particularly excited by a project to make aviation rescue vehicles.

“The companies here are advanced, and the level of technology is as good as anything I have seen in Europe,” said Nor. “And the trouble with Europe is it is a highly saturated market. In Russia, we can easily find companies where we can really increase the value, with willing buyers in the Middle East and beyond.”

lori-mechet:Legion Media - Mosque in Kazan, Tatarstan

Halal food market is estimated at US$500 billion per year

salama — Tue, 09 Aug 2011 15:41:20 +0000

By Omer Ibrahim
Islamonline.net_ Doha

Halal meat is meat that has been slaughtered according to Islamic law, in which the animal is killed by a transverse cut to the throat, rather than by the usual European method of rendering the animal unconscious by stunning and then killing it by bleeding.

With the Muslim Holy month of Ramadan underway, the French food industry is paying special attention to the growing market of products known as “halal,” a designation for food produced according to the rules of Islamic law.
Halal retailers earn about one third of their annual revenue during the month of Ramadan. Overall, the quickly expanding industry pulls in an estimated 5 billion Euros worldwide, according to Solis, an ethnic studies consultancy firm. In France, supermarkets sold roughly 130 million worth of halal products last year. That number is expected to reach 140 million Euros in 2011, according to the consultancy firm Nielsen.

Halal products only began appearing in French supermarkets a few years ago. Specialized brands like Isla Délice and Reghalal were later joined by large French food industry players like Fleury Michon and Panzani. The supermarket chain Casino launched its own range of halal products under the umbrella brand Wassila. And Carrefour, France’s top food retailer sells approximately 50 of its own halal products as well. Carrefour’s halal foods have been approved by the Grande Mosquée de Paris (the Great Mosque of Paris). But for many consumers, questions remain about halal certification.

Concerns were heightened recently by a documentary aired by the television network Canal +, which described “some practices that could be described as fraudulent. With Ramadan now into its second week there has been much debate this month in France about the growth of halal food consumption. According to Iremam (the French Institute of Research on Arab and Muslim civilizations) there are over 5 million Muslims in France and the halal market is four times more valuable than the market for organic food.

Halal products in Russia

Halal products volume in Russia is also growing 30-40 percent annually, the Halal Standard Committee at the Tatarstan Islamic High Council said based on research outcomes. Head of the Russian Consumer Rights Protection Union Mikhail Anshakov believes most Halal products are consumed by Moscow residents who have no relation to Islam, Fakty weekly reports recently.

“The demand for food products manufactured under control of any religious community is on the rise because consumers become more careful in selecting their food. Halal products are well-known as high quality food. For instance, they use minimum chemical additives or by-products and, thus, consumers have more trust in them,” he believes

According to the newspaper report, the current food trends in Europe also show that Europeans increasingly trade off traditional food for Halal products.

Halal products in USA

Faisal Masood, founder of the American Muslim Consumer Conference, relates American Muslims hold 170 billion dollars in spending power. It is an amount that is expected to grow exponentially as indigenous Muslims grow and immigrant Muslims raise their second and third generations in America.

As numbers grow, Muslims continue to maintain purchasing habits that align with their Islamic faith. Muslims want to be able to look at a product and see a recognizable halal logo. There is an increasing demand for products that are inclusive.

The Pure Halal Center based in Philadelphia, – a halal certification company, is answering those needs by specializing in training, product development and community outreach. The Pure Halal Center (PHC) examines the needs of the American Muslim consumer and then works with manufacturers, universities, hospitals and other institutions to offer halal products. PHC recognizes that the supply for halal is not meeting the demand.
For Muslims living in Philadelphia, shopping halal is indeed getting easier. The Brown Family chain of Shoprite supermarkets currently offers a number of halal products and is working aggressively to increase shelf space for more certified halal products.

Customers can find brands such as NAC Foods’ Mimi brand spices, Club America’s Halal gummy bears and Tayy-ib brand lunch meat. Retailers are also offering IFANCA certified Halal brands such Crescent Foods, Saffron Road, and Toms’ of Maine products in many cities.

New Trends

Historically, halal certified products have been hard to come by in the US from mainstream brands, but times are changing. The Pure Halal Center is in talks to certify products from Herr’s – the third largest snack food brand in America.

There is crossover appeal for halal products. Many non-Muslim consumers already choose to buy halal products, especially meat offerings. One reason is because halal is widely known to be held to higher standards of quality. This is particularly important at a time when more Americans are looking to adopt healthier eating habits.
Muslim Americans want to purchase the same products as every other American – they just want them to be unquestionably halal. The number of American Muslims is slated to reach 16 million by 2014 and American Muslim consumers are looking ahead. They are no longer satisfied with purchasing products after having no choice but to read a lengthy list of ingredients and spending way too much time in the supermarket.

Mainstream manufacturers and retailers have been slow to take notice. Studies show that while the opportunity for market share among other segments is dwindling, the American Muslim market remains virtually untapped.

The Mail newspaper recently revealed how most British supermarkets were secretly selling halal meat – especially lamb. The investigation found that most New Zealand lamb sold in major British supermarkets was halal, meaning that the prayer ‘In the name of Allah, who is the greatest’ is said at the time of slaughter. Stores selling lamb slaughtered according to Islamic law included Waitrose, Marks & Spencer, Asda, Morrison, Tesco and Sainsbury’s.

Counter trends

Last month, The Dutch Animal Rights Party pushed a bill through the lower house of the Dutch Parliament that would outlaw the slaughter of animals without stunning. The law, if ratified by the upper house of parliament, will in essence make locally raised and slaughtered kosher (and halal) meat illegal. A similar law was passed in New Zealand last year, and kosher slaughter is already outlawed in Iceland, Norway and Sweden.

The battle over the ethicality of kosher slaughter came to the United States recently, though fortunately with a better outcome. A Washington state appellate unanimously rejected a suit that would have made a law protecting religious slaughter unconstitutional, says the JTA.

Jewish groups in Europe are strategizing ways to combat the Dutch bill. In June, United Kingdom Chief Rabbi Jonathan Sacks told British paper The Telegraph: “We are worried that [this type of bill] could spread. There has been a non-stop campaign by animal welfare activists to have all forms of ritual slaughter banned. It has to be fought everywhere because if it’s lost anywhere it has a potential domino effect.

Russia: Most consumers of Halal products in Moscow have no relation to Islam

salama — Fri, 05 Aug 2011 09:13:00 +0000

Moscow, August 4, Interfax – Halal products volume in Russia is growing 30-40 percent annually, the Halal Standard Committee at the Tatarstan Islamic High Council said based on research outcomes.

Head of the Russian Consumer Rights Protection Union Mikhail Anshakov believes most Halal products are consumed by Moscow residents who have no relation to Islam, Argumenty i Fakty weekly reports Thursday.

According to the newspaper report, the current food trends in Europe also show that Europeans increasingly trade off traditional food for Halal products.

The global halal food market is currently estimated at US$500 billion per year.

Russia: Going Islamic

salama — Tue, 28 Jun 2011 13:45:59 +0000

by Oleg Nikishenkov at The Moscow News

KAZAN – The stricter, more ethical rules of Islamic finance helped many countries avoid the worst of the 2008 economic meltdown. Now officials in the Russian republic of Tatarstan are hoping that Islamic finance can help them attract direct investment from Muslim nations around the world.

Last week a summit on Islamic finance in Kazan, the capital of Tatarstan, welcomed delegates from as far afield as Malaysia, Saudi Arabia, Turkey, Azerbaijan and the United Arab Emirates.

Avoiding U.S. debt

Since the crisis, Muslim countries have accumulated “substantial liquidity” which needs to find investment opportunities in new markets, said Anatoly Aksakov, a State Duma deputy who also heads the Russian Association of Regional Banks.

“We are talking about tens of billions of dollars – assets that Islamic investors are seeking to diversify to escape dependence on U.S. dollar denominated instruments, which have become risky due to the high level of U.S. debt,” Aksakov told The Moscow News on the sidelines of the conference.

Local hero

Linar Yakupov, CEO of the Tatarstan Investment Development Agency, told The Moscow News that he was hired by the republic’s government to attract Islamic capital. In 2001, Yakupov returned to his hometown, Kazan, from Kuala Lumpur, where he studied Islamic finance at the International Islamic University of Malaysia.

“I was probably the very first certified specialist in Russia on the issue,” Yakupov said. His starting project in Tatarstan was a halal farm, set up to produce food in conformity with Islamic customs.

“We were pioneers in this. When the Tatarstan government took a decision to turn the republic into a gateway for Islamic financial resources into Russia,” he said. Yakupov’s halal farm attracted investment from Saudi Arabia and Malaysia, he said.

Dynamic local economy

Tatarstan has one of the more dynamic economies of the Volga Federal District. According to a KPMG survey, the republic’s GDP has been growing at a rate of 6.5 per cent annually, and has accumulated $7.4 billion of direct foreign investment. The Expert RA rating agency ranks Tatarstan 11th of Russia’s 83 regions.

Unlike many other regions of the country, Tatarstan has managed to maintain many of its Soviet-era industries – such as large farms, machinery and aviation factories – over the last 20 years.

The republic also has large oil reserves. Since the 1940s, Tatarstan has produced more than 3 billion tons of oil, according to official figures, and has retained control of the oil firm Tatneft, plus two key refineries, Kazanorgsintez and Nizhnekamsneftehim.

Tatarstan’s links with the Islamic world could now help it weather global economic headwinds, says Rustam Minnikhanov, the republic’s president.

“We are proud that we have historical and spiritual interaction with the Islamic world,” Minnikhanov told last week’s conference.

Some adjustments required

Aksakov said that Islamic finance would be a good fit with most Russian legislation. “Perhaps we will need to adjust the law in some specific cases,” Aksakov said.

For example, the Riba principle prohibits acceptance of interest for loans of money, and this could cause a conf lict with Russian laws.

“If you take a car loan, you don’t pay interest on money, you just repay your car to the bank in installments,” Aksakov said. But if you pay for goods by installments, you’d have to pay the VAT, which you aren’t supposed to pay in a traditional loan repayment situation.

This was one of the issues that delayed a $200 million Islamic bond, or “sukuk,” project.

But given that the world hasn’t fully recovered from the financial crisis, Islamic finance has quite an appeal here – especially if you consider the dangers of irresponsible, Western-style lending.

“Look what can happen if you ignore the Sharia principles in banking,” a Saudi Arabian delegate, Abdurrahman Atran, who heads the World Assembly of Islamic Youth, told the conference.

Russia: Russian Muslims keen on penetrating Global Halal Market

salama — Thu, 09 Jun 2011 08:18:15 +0000

The 2nd Moscow Halal Expo provided an ideal platform not just for Muslims in Russia to penetrate the lucrative global Halal market, it also sends out a clear signal to global Halal players that this is indeed a thriving market worth exploring.

As the country’s capital played host to leading Halal industry players at the Crocus Expo in Moscow from 26 – 28 May 2011, feedback from over 500 participants was that this year’s Moscow Halal Expo was a huge success in showcasing the diversity of local Halal products and services, as well as highlighting the potentials of 27 million-plus Muslims in Russia.

Organised by the Russia Muftis Council, the event’s significance were rightly expressed by the Mufti Sheikh Ravil Gaynutdin, Chairman of the Russia Muftis Council in his opening remarks.

“We are gathered here to be reminded that Islam is not merely a set of certain rituals but a complete spiritual, moral and legal system that can bring us to the benefits both in this transient life and in the eternity, if we follow it.”

More proof of the organiser’s comprehension of the global industry was prevalent from the line up of both the exhibitors and speakers. A total of 80 companies took part in the expo, from meat and livestock and processed food producers to fashion and media operators.

The predominantly Russian-based exhibitors also provided a clear indication of the growing demand for Halal in Russia. Rushan-Hazrat Abbayasov, Deputy Mufti and Chairman of the Organising Committee commented, “It is gratifying to note that the number of companies representing Russian Islamic business is growing from year to year, thus increasing the diversity in the range of Halal products and services offered to the public.”

Read more at http://halalmedia.my/russian-muslims-keen-penetrating-lucrative-halal-market-vice-versa

Russia: Sheikh Saleh Kamel announces plan to invest $2m in Tatarstan

salama — Tue, 31 May 2011 07:36:31 +0000

The President of Tatarstan Rustam N. Minnikhanov hosted the delegation from the Chamber of Commerce of Jeddah, headed by the chairman of the Council of Chambers of Commerce of the Kingdom of Saudi Arabia, chairman of the Islamic Chamber of Commerce of Jeddah, Sheikh Saleh Abdullah Kamel.

During the meeting, the President of Tatarstan noted that the Republic of Tatarstan is actively engaged in cooperation with the Arab countries and believes that the visit of the business delegation will give a major boost to our future bilateral relations.

Then the foreign delegation visited Small and Medium-size Enterprises Development Committee of the Republic of Tatarstan.

During the meeting with Linar Yakupov, the Chairman of Small and Medium-size Enterprises Development Committee of the Republic of Tatarstan Russian side presented a number of investment agriculture, construction and Halal industry development projects.

The latest project on the establishment a Technology Investment Fund in our Republic caused the greatest interest. Sheikh Saleh Kamel announced that he will invest $2m in the authorized capital stock. The initial capital of the Technology Investment Fund will be $10m, then the amount will be increased to $100m. Officially, the establishment of the Fund is expected to be announced at Kazasummit 2011.

During the meeting they discussed the prospects of the Republic to become a major center of Islamic Finance in Russia. Earlier, Sheikh Saleh Abdullah Kamel proposed that the Republic government consider the possibility of opening a bank in Tatarstan, which would work within the Islamic tradition. The global financial crisis has shown everyone that such banks are less exposed to the risks, he said.

Russia: Halal Expo Moscow-2011 exhibition to be held in Moscow

salama — Wed, 18 May 2011 11:36:10 +0000

On May 26-28, 2011 the largest International Exhibition Centre of Russia “Crocus Expo” in Moscow will host the International Halal Exhibition “Moscow Halal Expo 2011”.

Among those who are invited to the event as exhibitors are Russian and foreign producers of food products (meat and poultry, diary products, confectionaries, bakery, ingredients, dried fruit, fast food etc.), medical supplies, clothes, perfume and cosmetics, equipment for production, company producing services in the spheres of tourism, finance, banking, investments, publishing and other spheres that do not contradict the norms of Islam. The products and services are admitted to the Exhibition subject to their halal certification or declaration on “halal” completed in a proper way.

Moscow Halal Expo 2011 is the opportunity for the Russian and foreign producers and businessmen to present themselves on an international level, to share experience and to establish useful business contacts.

Along with the exhibition process itself the Program of the event includes conferences, presentations, discussions and cultural part. The enterprise of the food processing industry of Dagestan has also been invited to participate in the exhibition.

Russia: Market Emerging for Islamic Finance

salama — Fri, 15 Apr 2011 04:34:45 +0000

By Khristina Narizhnaya – The Moscow Times

Gazprombank has been researching and developing Islamic finance tools for several years, director of the bank’s structured and syndicated finance department Alexander Kazakov said.

Islamic finance may debut this year in the Tatarstan republic in the form of sukuk, or bonds that, in accordance with Islamic law, do not charge interest, experts said at a World Islamic Economic Forum round-table discussion Wednesday.

“Russia is ready for sukuk,” director of the Gazprombank structured and syndicated finance department Alexander Kazakov said. “They can make Russia a lot of money. A trillion dollars.”

Gazprombank has been researching and developing Islamic finance tools for several years, Kazakov said. Structures for deals using sukuk are in place, but at this point more needs to be done to popularize the instrument.

Islamic finance is based on sharia law, which prohibits collecting interest on loans and investing in projects that violate principles of Islam — anything related alcohol, for example. Sukuk are one of the tools, others include musawamah, or negotiation, musharakah, or joint venture, and wadiah, which is essentially the equivalent of deposit insurance.

Russia is the most attractive of the four BRIC countries for Islamic investment because it’s relatively stable, close to the Middle East and has an established legal system and infrastructure, said Abas Jalil, executive director of AmanahRaya Capital Group in Malaysia.

Islamic finance will bring Russia an ”influx” of investment, a more inclusive economy and will facilitate trade with the Middle East, Jalil said.

Luxembourg, with a population of 280,000, is the richest country in Europe. It has been hosting Islamic financial instruments for about 30 years and in 2009 became the first European country to join the Islamic Financial Services Board as an associate member.

The country’s environment is becoming more conducive to Islamic finance, said independent finance adviser Alberto Brugnoni. He cited Russia’s increasing engagement with the Middle East, its repositioning as a world financial center and its Muslim population of about 20 million.

“Russia has the potential to be the largest Islamic financial market in Europe,” Brugnoni said.

Many challenges need to be overcome, however, before that happens.

Russia’s legal system needs to be amended for some of the instruments to be legal, and that might take a long time, Al Shams Capital founder Adalet Djabiev said.

Another issue is misconceptions about Islamic finance and the halal industry. Halal is anything that is allowed under Muslim law.

But educational forums held throughout Russia and increased discussion of the subject seem to be solving that problem.

“People are less afraid of ’halal,’” Kazakov said. “Now you can walk into Auchan and buy a halal chicken.”

Several round tables on Islamic finance have been held throughout the world since the beginning of this year in preparation for the seventh World Islamic Economic Forum, to be held in Astana.

Kazakhstan was the first CIS country to allow Islamic finance. It has brought the country a lot of money, Zautbek Turisbekov, Kazakhstan ambassador to Russia, said. But he prefers not to make a distinction between Islamic and conventional financing.

“It’s money, and we all need it,” Turisbekov said.

Amanah Raya to help set up Islamic bank in Kazakhstan

salama — Tue, 25 Jan 2011 11:36:01 +0000

By MUSHTAK PARKER | ARAB NEWS

Malaysian trustee company Amanah Raya Berhad is joining forces with Fattah Finance, a local Kazakh brokerage company, and the state-owned Development Bank of Kazakhstan to conduct a feasibility study to establish the second Islamic bank in the CIS country. The aim is to submit an application for an Islamic-banking license later this year under new legislation introduced by Kazakhstan in 2009 to facilitate the establishment of Islamic banks and the introduction of Islamic financial products in the country.

Last year the three sides signed a strategic partnership agreement to launch a second Islamic bank in Kazakhstan. At a recent meeting the three parties finalized a short-list of possible technical partners to conduct the feasibility study. The aim is to set up a joint-venture company with Amanah Raya owning 55 percent of the equity, DBK 40 percent and Fattah Finance the remaining 5 percent, which would then apply for the banking license.

Kazakhstan has one other Islamic bank, Al-Hilal Bank, which was established in 2009 by investors from Abu Dhabi. It started operations in March 2010. Prior to that Albaraka launched the first Islamic financial institution in Almaty almost a decade ago, which was eventually taken over by Lariba from the US and which was eventually closed down.

It is revealing that it is an institution such as Amanah Raya, instead of an established commercial or investment bank or even Lembaga Tabung Haji (the Malaysian Pilgrims Management Fund) that is leading the initiative. This especially given the fact the agreement also calls for cooperation between the parties to launch a Haj Fund for Kazakhstan.

Amanah Raya Berhad is Malaysia’s premier trustee company, which provides both conventional and Islamic trust, legacy management and will services. It was established as the Department of Public Trustee and Official Administrator on May 1, 1921 and incorporated as a trustee company on May 29, 1995 under the name Amanah Raya Berhad. It is wholly state-owned with 99.99 percent held by the Minister of Finance Inc. and 0.01 percent by the Federal Commissioner of Lands. As such its main objective is to provide the above services to Malaysians from all backgrounds and economic classes at affordable fees and preempt problems related to inheritance and probate.

Investing in the CIS countries can be very risky. Malaysian corporates have in the past lost huge investments in countries such as Uzbekistan, Kazakhstan and Turkmenistan partly due to the lack of proper due diligence, or entering into politically-driven investments especially for government-linked companies (GLCs) the lack of a developed financial services regulatory and legal framework.

With the help of the Islamic Development Bank (IDB) and its affiliates, including the Islamic Corporation for the Development of the Private Sector (ICD) and other industry professional bodies, the enabling regulatory and legal environment in the CIS and many other developing member countries of the IDB is slowly changing albeit there is still much work to be done. Some countries, such as Kazakhstan and Azerbaijan, have been more proactive than others in this regard.

It is no secret that as part of Malaysia’s overall Islamic finance policy framework the government of Prime Minister Mohd Najib Tun Abdul Razak is encouraging local financial institutions and GLCs to widen their investment strategies to include cross-border investments for portfolio diversification purposes and to achieve better returns.

Perhaps the most wide-ranging of the government measures relating to Islamic finance came in Prime Minister Najib’s Budget 2011 Speech. The budget, said Najib, emphasizes the transformation of Malaysia into a developed and high-income economy with inclusive and sustainable development spearheaded by the private sector. A number of strategic high-impact projects are expected to involve both conventional and Islamic financing and investment.

To this end, GLICs will be allowed to increase investment in overseas markets to explore opportunities for better returns. For example, the Employees Provident Fund’s (EPF) will increase its investment overseas from the current 7 percent to 20 percent of the total assets managed, including in Islamic instruments such as sukuk.

Indeed, the increased cooperation between Malaysian Islamic financial institutions, GLCs and SWFs with partners from abroad is a priority for the Malaysian government. Malaysian Finance Minister II, Ahmad Husni Hanadzlah last year urged Malaysian Islamic financial institutions to widen their reach to leverage opportunities both at home and abroad to take the sector to the next level.

He urged institutions including banks, asset management companies and non-banking financial institutions such as Lembaga Tabung Haji (the Malaysian Pilgrims’ Management Fund) to expand by cooperating with partners abroad.

“The financial services industry,” explained Minister Husni, “is one of our 12 national key economic areas and is a critical pillar in our thrust forward. Yes, we have done very well in the sukuk market but we now have to seriously develop our capacity in other products and services that would command greater premiums not only within the domestic market but also across the seas. In this context, the expansion of a Shariah-compliant asset management industry would give impact and add value across the financial services sector. The asset management industry can directly support as well as complement a number of sectors, including the Takaful industry, private equity, mutual funds, private wealth management, trust and Wakaf.”

Amanah Raya is also active in Tatarstan, Russia, and in December 2010 signed an agreement with the Tatarstan government, the local IFC Linova and Kuwait Finance House Malaysia (KFH Malaysia) whereby the parties would cooperate in facilitating the issuance of the debut sovereign sukuk of Tatarstan, work on the feasibility study on the sukuk origination.

The study, which will be conducted by Amanah Raya Investment Bank, a subsidiary of Amanah Raya Berhad Group (the Malaysian government owned trust administration and inheritance legacy company), KFH Malaysia and IFC Linova, will consider a range of issues including potential asset pools to be securitized in Tatarstan; the type of sukuk structure to be used; the possibility of a sukuk program as opposed to a single transaction; tax neutrality and enabling legislation on trusts and special purpose vehicles, etc.

Amanah Raya is also a promoter and investor in the the first Halal industrial park in Russia, called Baltach, which was launched in Kazan the capital of Tatarstan in November 2010 and which forms part of the larger Kazan Halal Hub. The park will house small and medium-sized enterprises involved in the halal business industry.