DUBAI (REUTERS) - Hong Kong may present a bill to lawmakers in the first quarter of next year to allow the government to raise funds via Islamic bonds, according to a discussion paper from the territory's Legislative Council.
The plans come at a time of increasing competition among financial centres for a slice of Islamic finance business, which is centred in Southeast Asia and the Middle East.
Hong Kong's schedule could see it leap-frog Britain in issuing a debut sukuk; Prime Minister David Cameron said last month that the first British sovereign sukuk was expected "as early as next year".
The discussion paper will be reviewed by the Legislative Council next Monday, a Hong Kong Treasury spokeswoman said, without giving details of the potential size or timing of a government sukuk.
The bill would allow the AAA-rated government to issue sukuk under its existing government bond programme, which has so far issued HK$107.5 billion (S$17.4 billion), of which HK$90 billion was outstanding as of Nov 15.
The paper calls for legislative amendments to allow the use of special purpose vehicles; such vehicles are often required for sukuk, which are investment certificates that follow religious guidelines such as bans on interest and gambling.
In July, Hong Kong regulators passed a bill to facilitate issuance of sukuk in the local market, helping clarify their tax status. Sukuk can face heavy taxation because they involve multiple transfers of the assets backing them.
The idea of a Hong Kong sukuk was raised as far back as 2008, when the territory's airport authority considered selling a sukuk of up to US$1 billion (S$1.25 billion), but no sale has taken place so far.