Page 252 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

234 Dubai & Co.

The first applies to financial services firms that wish to expand
there: credible Islamic finance expertise has now become essential
for large-scale appeal in the Gulf. A second relates to companies
whose offerings currently or potentially could include consumer
finance elements, such as automobiles, electronics, and other large
purchases for which customers might wish to pay over time. Global
firms should work with their local franchisees or partners to
explore Sharia-compliant consumer finance services (through part-
nerships with financial institutions), which would ensure access to
as wide a customer base as possible. Sharia-minded customers may
not have credit cards, and therefore consumer finance options
become all the more important. Savvy local partners would, of
course, understand the local dynamics.
A third—and increasingly important—implication relates to
raising capital through Sharia-compliant instruments. Many GCC
investors are either completely Sharia-compliant as a matter of pol-
icy or have a preference for Islamic instruments. Caribou Coffee, for
example—America’s second-largest specialty coffee chain—was
acquired by the fully Sharia-compliant, Bahrain-based private-
equity firm Arcapita. Ford’s $848 million sale of Aston Martin to an
LBO consortium involved Sharia-compliant financing because of
the wishes of Kuwaiti investors Investment Dar and Adeem
29
Investment Company. Global firms who are serious about M&A
activity involving GCC investors need to be open to the possibility
of using Sharia-compliant structures and instruments. While these
may, at times, involve unfamiliar procedures, flexibility in accom-
modating Sharia compliance can make a meaningful difference in
widening the potential Gulf investor base and capturing the high-
est possible valuation.
OECD entities, recognizing these benefits, have begun issuing
Shariah-compliant Sukuk (bondlike instruments) and attracting
Islamic investors. The Sukuk market, expected by S&P to reach $100
billion by 2010, 30 has included issuers far afield of the Muslim
world. The German state of Saxony issued the first-ever Western
federal Sukuk in 2004, and Japan’s central bank, with the Japan
Bank for International Cooperation, is planning a $500 million
31
Sukuk issue in 2007. The City of London is positioning itself as a
Sukuk hub of the world, and Britain’s Prime Minister Gordon
Brown’s 2007 budget introduced measures to make Sukuk issues