Brunei Darussalam is rapidly gaining an international profile as a major Islamic financial services centre, with foreign partners showing an interest in joining forces with the Sultanate in order to tap into the increasingly lucrative sector.
In late March, Japanese financial services firm SBI Holdings (SBIH) announced it was entering into a partnership with Brunei Darussalam's Ministry of Finance to set up a fund management company expected to handle private equity funds, including sharia-compliant vehicles.
According to a statement issued by SBIH on March 25, Brunei Darussalam is the centre and gateway to the Islamic world in South-east Asia, and is surrounded by various opportunities to expand and diversify the economy.
The company will manage private equity funds, and look to make sharia-compliant investments into various companies mainly in Asia, which have sound financials, clear potential for growth and are led by capable management, said SBIH.
The new firm, which will be incorporated in Brunei Darussalam, would enable SBIH to build broader, stronger networks with promising partners and investment pipelines into the Islamic world, the company statement read.
It is not just Japan that is looking to ally itself with Brunei Darussalam to gain greater access to the Islamic finance sector. In late March, John Tsang Chun-Wah, the financial secretary of Hong Kong Special Administrative Region of the People's Republic of China, was in Brunei Darussalam for talks with senior officials, with much of the focus of these discussions on establishing a linkage with the Sultanate's Islamic finance industry.
While Hong Kong has a well-established financial infrastructure, the emphasis has been on conventional finance, whereas Brunei Darussalam's expertise is on the understanding of sharia compliance, Tsang told local media on March 21.
"We have a good network and relevant professionals in Hong Kong, so I see great potential in working together," he said. "Professionals from both sides can work for mutual benefit in Islamic finance."
Though Brunei Darussalam has made good progress towards reaping the harvest of these mutual benefits, still more work has to be done to achieve the goals set by the government, according to Dr Mohamed Sharif Bashir, the dean of the faculty of business and management science at Brunei's Sultan Sharif Ali Islamic University.
In particular, there is the need to bolster the financial infrastructure, develop a clear strategy over future directions and strengthen their capital and human resources base, he said in early March.
"Domestic Islamic banks and takaful companies need to enhance their capacity and capability in order to be able to compete with global players in the Islamic finance industry in terms of product offerings and innovations, corporate governance and human capital," said Dr Mohamed. "Any proposed strategy in this regard will bolster financial, trade and investment ties and linkages between Brunei Darussalam and other countries."
Brunei and its Islamic financial institutions also had to keep pace with the latest developments in the international markets, Dr Mohamed added.
"All south-eastern economies, including Brunei Darussalam, are experiencing a rapid change in economic environment due to globalisation. The changes in business landscape and market expectations, as well as demand, create a new challenge in Islamic financial institutions in this country," he said.
One of the main challenges for Brunei Darussalam, according to Dr Zohra Jabeen, assistant professor from the Institute of Management Studies in Pakistan, is creating a competitive environment in order to attract the right talent.
"If Brunei Darussalam wants to develop the Islamic finance sector, they have to have the talent. Human resources are very important," she told delegates attending an international conference on Islamic finance held by the Sultan Sharif Ali Islamic University in early March.
Here too the answer could be international cooperation, said Dr Zohra, while also taking advantage of the Brunei Darussalam government's policy of developing the Islamic finance sector.
"Brunei and Pakistan could work together and collaborate on many things, we have a population of about 16m people and we have a very competitive environment for Islamic finance, and the Islamic banks in Pakistan could work with Brunei Darussalam on a bank-to-bank basis to come up with some collaborative programmes," she said.
With an increasing tide of investors beating a path to Brunei Darussalam's door, growth for the country's Islamic finance sector seems assured, as long as the pace of expansion is measured and the required groundwork is done to give the industry a solid base from which to develop.