Markets Philippines reveals plan to issue first sovereign sukuk By Gavin Gibbon September 12, 2023 Reuters Minister of finance Benjamin Diokno said an issuance of retail bonds aimed at expats could raise funds for infrastructure projects Issuance planned before year end Five- or 10-year maturity Philippines ready for more Islamic banking The Philippines government intends to issue its first sovereign sukuk before the end of the year, as it ramps up investment and trade opportunities in the Gulf. Discussions are ongoing about the sukuk’s potential structure, Rosalia de Leon, national treasurer, told reporters during the 2023 Philippine Economic Briefing in Dubai on Tuesday. She said it could carry a five-year or 10-year maturity. Sukuk are sharia-compliant bonds that were developed as an alternative to conventional bonds, which are not considered permissible by many Muslims as they pay interest. They may also finance businesses involved in activities not allowed under sharia. DP World to hire banks for 10-year debut green sukuk Islamic finance tops $3.3trn but growth challenges remain Cop28 tipped to feed appetite for green sukuk The sukuk will be targeted at a range of investors, from small through to institutional. “Hopefully we can do this before the end of the year or even earlier,” de Leon said. Earlier this year the central bank – the Bangko Sentral ng Pilipinas (BSP) – adapted the requirements on minimum capitalisation for Islamic banking to encourage conventional banks into the sector. The Southeast Asian country’s monetary board last month approved the inaugural Islamic banking unit licence for a traditional bank, a market that was previously limited to the state-owned Al Amanah Islamic Investment Bank of the Philippines. Arifa A Ala, assistant governor of the BSP, said the sukuk “will send a strong signal that the Philippines is now ready to accept new players in the Islamic banking system”. S&P Global in July forecast that total global sukuk issuances in 2023 would rise to between $160 billion and $170 billion, up from its initial estimate of $150 billion. Expat opportunities The Philippines government will also issue dollar-denominated retail bonds by the end of September, aimed at the millions of Filipino expats around the world. The UAE alone has a Filipino expat population of around 1 million, according to Alfonso Ferdinand A Ver, ambassador of the Philippines to the UAE. The Gulf state is the second-largest employer of Philippine expats. “The tax will be assumed by the government,” explained de Leon, who said the bonds will be sold in a minimum denomination of $200. “That means the full coupon will be going to our overseas Filipino investors.” “The money we can use for infrastructure,” said minister of finance Benjamin Diokno. “They will be helping themselves and helping the country in building the infrastructure.” The Philippines in January raised $3 billion from the international debt market through the issuance of triple-tranche global bonds. The government has earmarked 197 infrastructure projects worth approximately $155 billion, 39 of which will be completed through public-private-partnerships. The economic briefing formed part of a charm offensive by Philippine economic officials, who discussed the country’s investment climate with business leaders and investors in the UAE. The UAE in 2022 ranked as the Philippines’ 17th-largest major trading partner, 21st export market and 16th import supplier. Non-oil trade between the UAE and the Philippines in the first half of 2023 reached $506.1 million, an increase of 19.4 percent on the same period in 2022. For the whole of 2022, non-oil trade was more than $1.85 billion, up from $830.3 million and $715.6 million in 2021 and 2020, respectively. The two countries are currently negotiating a comprehensive economic partnership agreement (Cepa), which began in February 2022. Ambassador Ver said he hoped the deal could be signed ahead of the UAE’s hosting of the Cop28 climate summit in November.