Can the 2020 World Expo boost UAE's sukuk issuance?
The World Expo 2020 is expected to leave a positive impact on sukuk issuance in the UAE and particularly in Dubai, according to an industry specialist.
The UAE maintained a spot among world’s top issuers despite the credit crunch and global financial crisis. Private sector credit growth in the country is expected to accelerate between 2014 to 2020, Zawya’s Adnan Halawi said in his address to the Sukuk Congress Mena in Dubai.
Historically, the UAE is still the largest issuer in Mena with 76 issues worth $49.46 billion followed by Saudi Arabia totalling 70 sukuks of $46.5 billion while Qatar ranked third with 24 issues of $23.79 billion. Mena accounts for 30 per cent of outstanding global sukuk market with $80 billion compared to $270 billion globally. During the last five years, sukuk value and volume witnessed upward trend but plunged in 2013.
The reason for decline was mostly driven by US Fed idea of tapering its stimulus package in May 2013 sending bonds yields up around the world, and making it less attractive to issue debt. Halawi mentioned the region used to be more than 50 per cent of global sukuk issuance in 2006, but came down to 23 per cent in 2013. “There are reasons and region needs to address those reasons,” he added. Sukuk issuance grew from $22 billion in 2006 to $133 billion in 2012.
Saudi Arabia managed to become the world’s second largest issuer of sukuk. In the region the Saudi Arabia leads with $37.65 billion followed by UAE $24.20 billion and Qatar at third position with $13.56 billion.
In 2013, only Mena’s GCC states sold sukuk. Saudi Arabia led with 20 issuance worth $15.215 billion followed by UAE’s 13 sukuks of $7.12 billion and Qatar’s nine of $2.35 billion. In Mena region, government institutions ranked top in sector followed by financial services, real estate, transport, power and utilities, and oil and gas. Halawi said oil and gas sector has big potential.
By Abdul Basit
- Deflation shocks in emerging markets and the GCC currency peg
- Crashing oil: has the time come for GCC countries to tax their citizens?
- Moody indeed: how did Moody's rate the ME's banks for 2015?
- The Middle East's Switzerland? Lebanon's banking secrecy is here to stay
- Precious retirement: why UAE expats are moving their pensions out of the UK