* Islamic finance hopes to get slice of project funding
* Regulation mostly in place, but retail market small
By Frederik Richter
BANGKOK, June 29 The Islamic finance industry is
interested in tapping Middle Eastern oil money to help fund Thai
infrastructure projects, which could help it gain a foothold in
a market with only a small Muslim population, bankers said on
The fledgling Islamic finance industry was propelled into
the global spotlight in the aftermath of the financial crisis as
it was seen as a more ethical, less leveraged way of banking.
But the Gulf's real estate crash, a series of defaults on
Islamic bonds, or sukuk, and its own corporate scandals have
taken the shine off the industry and it needs to find new growth
markets outside its traditional centres, Malaysia and the Gulf
"A lot of money has been received by the rise in petrol and
that needs to be reinvested. Not many sukuk have been recently
issued so it's an opportunity to grab that liquid market,"
Dheerasak Suwannayos, president of the state-owned Islamic Bank
of Thailand, told an industry event in Bangkok.
On Wednesday, Malaysia issued a $2 billion sukuk, almost 30
percent of which was mopped up by Middle Eastern investors.
Infrastructure investment is expected to jump in Thailand as
well as other Southeast Asian countries.
Dheerasak cited plans to expand Bangkok's public transport
and the city's main airport as projects the industry could help
by finding finance abroad.
So far Thailand has been able to use the abundant liquidity
in local markets to finance infrastructure projects.
Dheerasak said companies such as Thailand's top energy firm,
PTT , were increasingly diversifying from their home
market and needed to raise finance in dollar markets.
A PTT unit issued a local-currency Islamic bond in Malaysia
last year, seen as the first time a Thai company had tapped
Islamic capital markets abroad.
Dheerasak also said Thai Airways was considering
offers from Middle Eastern providers of airplane lease
Islamic finance needs to underpin its transactions with
physical assets, from which returns to investors are derived to
account for Islam's prohibition of interest.
LACK OF AWARENESS
Thailand has been planning for some time to issue a 5
billion baht ($161 million) sovereign sukuk to help the sector
get off the ground and Dheerasak said the issue could come to
the market this year after necessary tax legislation was passed
Thailand has a Muslim population of about 9.5 million, many
of whom live in rural areas not well served with banking
"Islamic Bank of Thailand is pushing a lot of products into
the retail market. The Muslims in the past did not have any
alternatives," Konthee Prasertwongse, senior vice president at
CIMB Thai Bank, told Reuters.
Islamic Bank of Thailand, set up in 2003, has turned buses
into mobile branches to reach communities.
But bankers caution that more local banks need to offer
Islamic products to raise awareness of the industry.
"We need more marketing here in Thailand, we need to clarify
what a sukuk is and that it is comparable to a conventional
bond," said Konthee.
($1 = 30.975 Thai Baht)
(Reporting by Frederik Richter; Editing by Alan Raybould)