Reuters | Mar 11,2012 | 22:38 JORDAN TIMES

ISTANBUL — Turkey’s government plans its first-ever issue of Islamic bonds this year, overcoming sensitivities about Islamic finance in the secular republic as it seeks to tap a rich pool of investors flush with oil money.

A sovereign sukuk issue from an economy regarded as one of the most progressive and successful in the Muslim world would signal intent on Turkey’s part to play a bigger role in Islamic finance. The size of the global sukuk market is estimated at more than $100 billion.

“It will be like ringing a bell and attracting all the attention,” said Murat Cetinkaya, deputy chief executive for treasury at Kuveyt Turk, an Islamic bank that has been a trend-setter for corporate sukuk issues in Turkey.

“Other issuances will follow the sovereign and Turkey will be on the agenda in this market constantly…as a frequent issuer,” he added.

Despite espousing Islamic values, Prime Minister Recep Tayyip Erdogan’s government shied away from taking the plunge with a sukuk issue during its first decade in power, out of fear of giving ammunition to critics who accuse the ruling AK Party of seeking to roll back state secularism by stealth.

“For a few billion dollars of funding there could be negative results in domestic politics,” said a deputy chief executive at a leading Turkish bank, who declined to be named because of the political sensitivity of the subject.

In 2008, the Supreme Court came close to shutting down Erdogan’s AK Party after ruling it was a centre of Islamist activity. But since then, the government has won the upper hand over old foes in the military and judiciary.

Few Turks question the AK Party’s economic management, and having overseen a near tripling in per capita income, the party was reelected for a third term in office last June.

Moreover, even borrowers outside the Islamic world have entered the sukuk market in the last few years, giving less reason for Turkey to hold back.

“Now the sukuk has become an instrument that even Germany and France are using,” the banker indicated. “And in domestic politics, Erdogan is much stronger.”

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