Singapore wants to market itself as a centre for Islamic finance, which bans interest and shuns investments in industries like gambling, brewing and tobacco -- a strategy that could put it in competition with financial centres in the Muslim world.

Singapore is also placing a major bet on the gambling industry to support its tourism sector. It has dropped a ban on casinos and has unveiled $5 billion plans to build two casinos that would rival those in gambling havens Las Vegas and Macau.

"Investors will basically look at the (Islamic finance) products and at who will approve those products," Ng Nam Sin, the authority's head of financial-centre development, told Reuters when asked if Singapore's plan for the casinos could harm its push to become an Islamic-finance hub.

"It's up to the investors to decide," he said at a conference on Singapore's Islamic-finance ambitions.

Islamic investors would focus on merits of the investments themselves, he added, regardless of the new casino policy.

Some big US casino operators are among bidders for the right to develop the first of the two casinos, both of which are scheduled to open in 2009.

Delegates at Tuesday's conference agreed Islamic investors would disregard Singapore's push into gambling, noting that mainly Muslim neighbour Malaysia had Southeast Asia's biggest Islamic banking industry despite having its own small gambling industry.

"People can have the perception issue, but from a Shariah perspective there is no relevance," Badlisyah Abdul Ghani, head of Islamic banking for Malaysia's second-largest lender, CIMB Bank told Reuters on the conference sidelines.

Islamic finance operates under Shariah or Koranic law and is one of banking's fastest-growing sectors. Global Islamic financial assets total about $560 billion and are growing at 15-20 percent a year, according to estimates cited by HSBC Bank.

Singapore has been slower than Malaysia, Indonesia and Brunei to move into Islamic finance and lacks a big Muslim population but, according to the monetary authority's Ng, it has advantages with its deep capital markets and large managed funds.

"That's why the focus is on the wholesale market," he said. "Already we are a very large trading centre for this part of the world, and trade finance and project finance can be based on Shariah constructions."

Singapore-based institutions are estimated by CIMB to manage around US$338 billion in assets. Almost all of them are in non-Islamic investments but amount to a huge pool of savings from which money can be channeled into Shariah-compliant funds.

Ng said the size of the funds under management in Singapore gave it a strong position, especially considering that many customers for Islamic finance were actually non-Muslims.

Singapore also hopes its growing trade and investment ties with the Middle East, flush with oil dollars, and with other countries with large Muslim populations like India and China will help it to develop an Islamic finance industry.

Ng said Singapore felt it was possible to build an Islamic financial industry within its existing broad framework for conventional finance, though local regulations might still need to be fine-tuned to encourage the growth of Islamic securities.

Singapore has already waived double stamp duties in Islamic transactions involving real estate and agreed to give concessionary tax treatment on income from Islamic bonds, making them comparable with conventional bonds.

"We will not be making any fundamental changes to our framework but will review the rules along the way to facilitate the development of Islamic finance," Ng told the conference.


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