Islamic Bonds to Get Boost From Singapore, India, Moody's Says
By Shanthy Nambiar

Aug. 30 (Bloomberg) -- Islamic bond sales from Asia will increase as newer entrants such as Singapore and India join Muslim-majority nations in issuing more of the securities, Moody's Investors Service said.

``Interest is growing in the rest of Asia, obviously in jurisdictions such as Indonesia and Pakistan, but also, for example, in Singapore,'' analyst Dominique Gribot-Carroz said in an e-mailed report.

The combined value of Islamic bonds, or sukuk, outstanding was $82.4 billion at the end of July, with 61.6 percent of it denominated in Malaysian ringgit and 34.5 percent in U.S. dollars, the ratings firm said. India's SREI Infrastructure Finance Ltd., which invests in power, road and port projects, plans to sell $50 million of Islamic bonds this year, the first such sale from the South Asian nation.

The Islamic bond market in India is ``now likely to receive a boost from the current fast pace of India's economic development and the associated need to fund new infrastructure,'' the report said.

Policies to promote assets that follow Muslim law are spreading as far as Europe. The U.K. may sell its first-ever Islamic bonds to woo oil funds from the Middle East and the Japan Bank for International Cooperation, the government's main overseas lender, is mulling a sale of as much as $300 million of the securities in Malaysia.

Islamic bond issues will also increase in the next few years as companies tap new investors and governments' give tax breaks and support the development of a bond market, Moody's said.

Malaysia, Indonesia

Malaysia, where about 60 percent of the population is Muslim, offers tax breaks for overseas banks to set up Islamic finance operations. In November, it allowed the sale of foreign- currency denominated Islamic bonds for the first time.

Demand for Islamic bonds has also risen as petrodollars flood the six oil-producing Arab monarchies of the Persian Gulf. A record $20 billion of the securities were sold worldwide this year, led by borrowers from the Middle East, according to data compiled by Bloomberg.

``High levels of surplus savings and reserves in Asia and the Gulf have spurred development,'' Moody's said.

Indonesian companies have sold about 2 trillion rupiah ($213 million) of Islamic bonds since 2002, according to the Jakarta-based Capital Market Supervisory Agency. Sukuks represent only 3.9 percent of total corporate bond sales, Moody's said.

Indonesia needs ``to boost understanding of securitization, be it conventional or Islamic, as well as improve accounting and tax treatments,'' the Moody's report said.

The Islamic finance industry worldwide may grow to $2.8 trillion by 2015 from as much as $1 trillion now, the Malaysia- based Islamic Financial Services Board estimates.

Sukuk is an Islamic investment certificate representing the underlying value of a group of assets. Islamic law bans the payment of interest and investment in the alcohol, tobacco and gaming industries.

To contact the reporter on this story: Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net .

Last Updated: August 30, 2007 02:20 EDT

The Iranian Revolution went nowhere since 1979, including its failure in Iran. Tehran's reach for the bomb, quite frankly, makes a ton of strategic sense given: 1) our recent wars on its right and left and our avowed talk of regime change and 2) Schelling's historical point that the bomb ends your vulnerability to U.S. invasion (in fact, invasion or attack from anyone--in short, deterrence works, whether you're Tehran or Tel Aviv).

As for Tehran's support to fellow Shia radicals in the region,that's also expected given its new-found influence thanks to America's toppling of two nasty Sunni regimes (Taliban and Saddam) and the enabling of the region's first Arab Shia state (Iraq). That Iran fights us and Israel assymmetrically may distress us, but that's just how weaker powers fight (terror and insurgency and proxies). Over-emotionalizing--with strategic hyperbole--such tactics in the region helps no one.

Meanwhile, America has to grow up a bit and realize that the Big Bang leads to the Shia revivial and that it's only through that path that we'll foster genuine pluralism and less religious extremism in politics. Sure, it'd be cool to jump right to the Tom Jeffersons, but let's be real about what comes next.

Can't have pluralism with the continuation of Sunni authoritarianism and suppression of Shia minorities (the Saudi path that brought us the Taliban and al-Qaida and 9/11), and when it comes to mixing religious fundamentalism with political authoritarianism, it's the Sunnis with their Wahabbism and Salafism and accompanying al-Qaida network that's the bigger problem today, not Iran's exhausted revolution (a failed mixing of Shiism and politics that's historically quite abnormal--unlike in the Sunni world) nor Sistani's "quietism" (that says Shia must rescue faith from politics--the opposite of Khomeinism). [Me, I give Sistani the Nobel for peace every year starting in 2003. His influence and importance remain vastly unappreciated.]

The realistic grand strategist sees more allies than enemies in Shia and puts aside the traumatic memories of 1979. If our new anti-Shia strategy takes hold, we'll be back in the business of bolstering Sunni dictators and mass repression and killing of Shia.

Then again, it's what we know and what we're comfortable with throughout history.

September 2, 2007
Op-Ed Columnist
The Kurdish Secret

By THOMAS L. FRIEDMAN
Erbil, Iraq

Iraq today is a land of contrasts — mostly black and blacker. Traveling around the central Baghdad area the past few days, I saw little that really gave me hope that the different Iraqi sects can forge a social contract to live together. The only sliver of optimism I find here is in the one region where Iraqis don’t live together: Kurdistan.

Imagine for a moment if one outcome of the U.S. invasion of Iraq had been the creation of an American University of Iraq. Imagine if we had triggered a flood of new investment into Iraq that had gone into new hotels, a big new convention center, office buildings, Internet cafes, two new international airports and Iraqi malls. Imagine if we had paved the way for an explosion of newspapers, even a local Human Rights Watch chapter, and new schools. Imagine if we had created an island of decency in Iraq, with public parks, where women could walk unveiled and not a single American soldier was ever killed — where Americans in fact were popular — and where Islam was practiced in its most tolerant and open manner. Imagine ...

Well, stop imagining. It’s all happening in Kurdistan, the northern Iraqi region, home to four million Kurds. I saw all of the above in Kurdistan’s two biggest towns, Erbil and Sulaimaniya. The Bush team just never told anybody.

No, Kurdistan is not a democracy. It has real Parliamentary elections, but the region’s executive branch is still more “Sopranos” than “West Wing,” more Singapore than Switzerland — dominated by two rival clans, the Talibanis and the Barzanis. It has a vibrant free press, as long as you don’t insult the leadership, and way too much crony-corruption. But it is democratizing, gradually nurturing the civil society and middle class needed for a real democracy.

On Oct. 17, the new American University of Iraq will open classes in Sulaimaniya. “The board wanted three campuses, one in Kurdistan, one in Baghdad and one in Basra, but this is the only part of the country where an American University can open and function safely,” said Owen Cargol, the school’s chancellor.

Iraq is a disaster in so many ways, but at least America’s invasion midwifed something really impressive in Kurdistan. And in the best way: we created the opening and the Kurds did the rest. But while the Kurds liberated their region from Saddam’s army in the 1990s — with U.S. air cover — their current renaissance was only possible, they say, thanks to the overthrow of Saddam, their mortal enemy.

“Saddam’s eyes were always on this region,” said Nechirvan Barzani, prime minister of the Kurdistan regional government. Once he was toppled, “it gave us psychological hope for the future. Those who had even a limited amount of money started to invest, start small businesses or buy a car, because they thought they could see the future. The uncertainty was removed. ... We have to thank the American people and government. But we are a lover from only one side. We love America, but nothing in response. They don’t want to give the perception that they are helping us.”

Added Hoshyar Omar, a 23-year-old student-translator: “My father was buried alive [by Saddam’s men] when I was 3. I want to thank Mr. George Bush personally. ... He may have made some bad decisions, but freeing Iraq was the best decision he has ever made. ... We had nothing and we built this Kurdistan that you see.”

Why is Kurdistan America’s best-kept secret success? Because the Bush team is afraid the Kurds will break away. But the Kurds have no interest in splitting from Iraq now. Iraq’s borders protect them from Turkey, Iran and Syria.

The Kurdish autonomous zone should be our model for Iraq. Does George Bush or Condi Rice have a better idea? Do they have any idea? Right now, we’re surging aimlessly. Iraq’s only hope is radical federalism — with Sunnis, Shiites and Kurds each running their own affairs, and Baghdad serving as an A.T.M., dispensing cash for all three. Let’s get that on the table — now.

Months after Saddam’s capture, a story made the rounds that he was asked, “If you were set free, could you stabilize Iraq again?” He supposedly said it would take him only “one hour and 10 minutes — one hour to go home and shower and 10 minutes to reunify Iraq.” Maybe an iron-fisted dictator could do that. America can’t.

“No one here accepts to be ruled ever again by the other,” Kosrat Ali, Kurdistan’s vice president, told me. “If you get all the American forces to occupy all of the towns and the cities of Iraq, you might be able to centralize Iraq again. That is the only way.” Otherwise, “centralized rule is finished in Iraq.”