By Santhosh V Perumal
Business Reporter
The GCC asset management industry is poised to grow 15% annually to up to $300bn by 2014 and the global Islamic finance industry is slated to grow annually 15%-20% to more than $4tn in invested funds in about 8-10 years, according to Doha Bank CEO R Seetharaman.
However, there are key challenges to Islamic finance, calling for measures, including harmonisation of standards, building adequate infrastructure, allowing greater capital mobility, addressing legal and tax restrictions and relaxing non-supervisory restrictions on access by foreign intermediaries to domestic markets, he said at the fourth World Islamic Infrastructure Finance Conference.
“We expect the asset management industry in the region to grow at a compound annual growth rate of 15% in the next five years from $80bn-$100bn to at least $200bn-$300bn in next five years,” he said.
Retail investors were eager to find alternatives to equity investments after regional stock markets slumped as much as 70% last year, Seetharaman said, adding fixed-income, which contributes less than 2%-3% of regional assets compared with a majority in equity investments, could provide a “tremendous growth” opportunity if regulators and governments focus on creating the domestic demand for new issues.
“If one thing has been confirmed by the financial crisis, it is that Islamic banking provides a more viable alternative to conventional banking and is less cycle-prone. The spread and success of Islamic finance into western markets demonstrate that it is now being treated seriously by regulators and finance ministries,” he said.
Within the GCC sphere, Seetharaman said, Islamic asset management has tremendous scope in individual segment (comprising mass affluent as well as high net worth and ultra high net worth); quasi institutions (awqaf and endowments); and institutions (such as takaful, sovereign wealth funds and pension funds).
Seetharaman said the total value of the projects planned or under development in the Gulf region is more than $tn, which are in the oil and gas, construction, power, petrochemicals, and water and waste sectors. “Of this, about $600bn is planned for until 2010,” he added.
There is a also growing private sector participation in infrastructure spending across the region, with total required investment valued at more than $630bn between 2006 and 2015, he said, adding with a projected spend of whopping a $100bn on investment and infrastructure projects by 2012, Qatar is leading the way in the region’s project finance transactions growth.
Seetharaman said the GCC-wide oil production will increase to 20mn bpd by 2010 and that private sector projects planned and currently underway are valued at about $2tn.
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