Islamic Nations to Boost Investment, Trade for Growth

May 28 (Bloomberg) -- Muslim countries will this week call for greater foreign investment and trade between Asia-Pacific and the Middle East to help safeguard economic growth and jobs.

Malaysian Prime Minister Abdullah Ahmad Badawi and his counterpart from Kuwait, Sheikh Nasser Al-Mohammad Al-Ahmad Al- Sabah, will join investors from companies including United Arab Emirates-based Abraaj Capital Ltd. and Kuwait & Gulf Link Transport Co. at the World Islamic Economic Forum in Kuala Lumpur to discuss projects and investments to facilitate that.

``There's a surplus of liquidity in the Gulf which is looking for investment avenues,'' said Salman Younis, head of Kuwait Finance House, the Persian Gulf's largest Islamic investment bank, in Malaysia. ``So it's a very important time for the Middle East to form a bridge with Asia.''

As easing growth in the U.S. damps demand for exports, Asia's developing economies such as Indonesia and Pakistan may need to turn to oil-rich nations in the Persian Gulf. Emerging Asia will expand 8.4 percent this year, easing from 8.9 percent in 2006, and further slow to 8 percent next year, the International Monetary Fund said in April.

Business opportunities in the emerging markets of Asia have lured international corporations to invest in the region. Some of the biggest Persian Gulf investors, including property developer Emaar Properties PJSC and Saudi Prince Alwaleed bin Talal, are investing in Asian companies and real estate from Pakistan to China.

Golf Courses

Malaysia Prime Minister Abdullah Ahmad Badawi today called for greater innovation and collaboration among Islamic economies to boost growth.

``We need to pool our resources to jumpstart innovation,'' Abdullah said in a speech to mark the opening of the three-day forum. ``Nations who don't have the ability to innovate risk being left behind. The world is becoming more globalized.''

Emaar Properties, the largest Middle East property developer, last September said it will invest $43 billion in Pakistan to develop the Bundal and Buddo islands over 13 years. It comes after an $18 billion deal to build homes and golf courses in Karachi.

The 57-member Organization of the Islamic Conference, or OIC, the world's biggest grouping of Muslim-majority countries, last November sought to speed up the establishment of an Islamic free-trade area and an economic union.

Exports Double

The OIC, which includes Saudi Arabia, Egypt and Malaysia, aims to increase its share of global gross domestic product to 20 percent from 6 percent. The group accounts for 19 percent of the world's population, 6 percent of its income and 7 percent of global trade, Pakistan's Prime Minister Shaukat Aziz said last November.

``The economic and financial linkages between Asia and the Middle East are growing,'' Malaysian central bank deputy governor Mohd. Razif Abdul Kadir said May 14. Trade between the regions grew an average 24 percent between 2001 and 2005, and Asia has ``surpassed the Euro region'' as the second most popular investment destination after the U.S., he said.

Middle East exports to Asia hit $281 billion in 2005, more than doubling from 2002, said the World Trade Organization. Imports into the Gulf states will grow 18 percent this year to $376.1 billion from $317.9 billion in 2006, the IMF said May 13.

Gulf states, including Saudi Arabia, which control 40 percent of the world's oil, may earn $24 trillion from crude exports over the next 20 years, Samba Financial Group said on May 3. Growth in the 19 economies in the Middle East and North Africa accelerated to 6.2 percent in 2006 from 5.9 percent in 2005, the World Bank said last month.

High-Worth Individuals

``Asia is the fastest growing region,'' said Deepak Sharma, the Singapore-based chief executive officer of Global Wealth Management International at Citigroup Inc. ``Middle East investors are proactively building business ties and networks in many parts of Asia. Private equity and real estate feature prominently in the investment behaviors,'' of the wealthy in the region, he said.

Personal wealth in the Middle East is expected to increase to $1.8 trillion by 2010 from $1.2 trillion in 2005, according to a June report by Merrill Lynch & Co. and Capgemini Group. The region's high-net-worth individuals increased to 300,000, a 9.8 percent rise between 2004 and 2005, the report said.

Islamic nations such as Malaysia, Sudan and Lebanon are seeking to tap this wealth. Investible wealth in the Muslim world is ``estimated at $1.5 to $1.7 trillion worldwide, the majority of it in the Gulf and also in Switzerland,'' said Baljeet Grewal, chief economist and head of research at Kuwait Finance House (Malaysia) Bhd.

Wealth Management

Malaysia's government is giving tax breaks and incentives for Islamic financial products to lure investors such as Kuwait Finance House and Dubai Holding LLC. About three-fifths of Malaysia's 27 million people are Muslim, the second-largest in Southeast Asia after Indonesia.

Prime Minister Abdullah in March said the government will allow overseas investors to own 100 percent of Islamic financial institutions conducting foreign currency business. Singapore's central bank prefers the island's private lenders and wealth- management companies to create products that comply with Islamic principles, Teo Swee Lian, deputy managing director of the Monetary Authority of Singapore, said on May 15.

Turkey's $400 billion economy benefited from a record $19.8 billion of foreign capital inflows in 2006. The secular state attracted $11 billion in the first three months of 2007, a tenfold increase from a year earlier, Finance Minister Kemal Unakitan, who will be attending the conference in Malaysia, said April 25. Economic growth averaged 7.2 percent a year since 2002.

Real Estate

The 1,000 delegates at the conference, including HSBC Holdings Plc., Singapore's DBS Group Holdings Ltd. and Telekom Malaysia Bhd. will be discussing ways to facilitate banking, energy, infrastructure and telecom investment.

As much as $100 billion from the Gulf have found its way for investment in Asia over the past year, compared with about $200 billion over the five years before that, according to Professor Rodney Wilson of the Institute of Middle Eastern and Islamic Studies at the U.K.'s University of Durham.

Istithmar PJSC, a Dubai government-owned investment company, will spend $250 million buying real estate in the Asia-Pacific region, Richard Johnson, managing director for real estate, said in an interview May 17.

``We like the growth stories we see in India and China,'' he said. ``The two countries in the long-term offer fantastic prospects for investors.''

China, the world's fastest growing major economy, imports crude oil from Saudi Arabia, Oman and Kuwait. Its GDP expanded 11.1 percent in the first quarter, from 10.4 percent in the previous three months.

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