The Middle East especially Arabia which reminds people of the ancient caravans of camels winding through the never-ending desert sands the legendary sagas of the Arabian Nights the wizardry of Aladdin and the adventurous tales of "Ali Baba and the 40 Thieves" have so far been regarded only as a fabled trade entrepot between Europe and Asia. However of late things have changed a lot as a modern form of Islamic trade finance blossoms. And as world trade is accelerating in the region where oil exporting countries are enjoying strong economic growth and importing more goods and services the region is gradually transforming into a financial hotspot. And sukuk the Shari'ah-compliant Islamic bond is leading the show with its new-found global appeal. Surely Islamic finance has come a long way since its active re-introduction about three decades ago. According to some estimates more than 100 financial institutions in over 45 countries practice some form of Islamic finance. Islamic banks and financial institutions manage about $300 bn in banking assets while another $400 bn are in capital market assets all of which are Shari'ah-compliant. Though this figure may appear small vis-à-vis $40 tn global equity market alone its growth is no less impressive by any standards. The market compared with a mere $5 bn in 1985 is projected to hit the $100 bn mark by the turn of the century. Welcome to the world of Islamic finance.

We can now envisage the new Silk Route which financially flows across borders between the East and the West thereby promoting international financial integration. In this context the Islamic capital market in particular the sukuk market has a major role in strengthening this interlinkage. In June last year when Texasbased energy firm East Cameron Partners (ECP) raised $165.7 mn from Islamic bond markets it clearly signaled that the global perception on Islamic bond market is fast changing. It was the first bond backed by the hard-nosed US government's assets that stick to Islamic laws against paying or charging interest.

In fact it is not only the corporate entities that are lining up to tap the fast growing Islamic finance market but even governments such as the UK are looking to tap markets for Shari'ah-compliant Islamic bonds also popularly known as sukuk. Japan the world's second largest economy after the US is also seriously looking to become the first Asia-Pacific non-Muslim industrialized nation to issue Islamic bonds in the hope of tapping capital from oil-rich Muslim countries. If it actually materializes then Japan will be the first G7 nation to issue the Islamic bond on a national basis. The so-called sukuk which would be placed in Malaysia and valued at $300-$500 mn will be launched by the Japan Bank for International Cooperation (JBIC) a sovereign trade promotion and international development institution.

Next year China the world's fastest growing nation is also expected to issue its first sukuk when Kuwait Finance House targets the Persian Gulf with a $200 mn deal for a Chinese government-linked power company. Even Indonesia the most populous Muslim-majority nation although officially not an Islamic state is in the midst of revising fiscal systems and other regulations to support both sovereign and corporate Islamic-bond issuance. One of the first sukuk which is in the pipeline could be the $650 mn deal from Jakarta Monorail aimed at easing the Indonesian capital's gridlocked transport network.

The Analyst Magazine, Islamic Finance, Global Equity Market, Islamic Capital Market, Islamic Finance Market, Japan Bank for International Cooperation, JBIC, Islamic Financial System, Islamic Finance Information Service, IFIS, Global Bond Market, International Financial System, Islamic Financial Services Board, IFSB, Islamic Insurance Companies.