Malta has now been discussing the introduction of Islamic finance for nearly three years. Nonetheless, Malta has yet to introduce the necessary legislative changes to dealing with discrimination against Islamic finance in a timely manner.

In early 2007, the Malta Institute of Management, the Malta Employers' Association and the Malta Union of Bank Employees all expressed their positive vision of this lucrative and fast growing sector. The main political parties also endorsed this vision. This was before the last general election.

But one still has to see some light at the end of the tunnel. Indeed, one continues to hope that the Prime Minister's political commitment will translate as early as possible into the necessary action to set all essential legislative changes on a fast track. This will ensure that Malta builds a good reputation in good time - and before its competitors.

The government has its own list of legislative priorities but Islamic finance is a race which Malta cannot afford to risk losing. Malta has to ensure that it will not end up being second to any other jurisdiction.

The term "Islamic Capital Market" is perhaps a misnomer to many as technically the majority of the features required by an ICM derive from the conventional market. Islamic shares, for example, can be conventional company shares purchased on the Malta Stock Exchange as long as they are Shariah-compliant. However, there are sufficient components of a capital market unique to Islamic finance. By way of example, a capital market needs agencies to rate the companies whose shares are traded on stock exchanges. Many such agencies exist specifically to address issues of Shariah compliance and to rate shares that are traded as Islamic, such as the Dow Jones Islamic Market.

The Malta Stock Exchange is in an ideal position to engage into facilitating such a market. If Malta provides such an opportunity to the Islamic finance world at an accelerated pace, the country could establish itself as the Mediterranean Centre for Islamic Finance. The Malta Stock Exchange, as a small exchange, needs to find niche growing markets for it to develop at the levels Malta deserves.

With Libya opening up to Islamic finance, with a considerable amount of transactions being carried out in Italy, France, Switzerland, Egypt, Algeria and Tunisia, among others, this is the right time to penetrate the market and to establish the Malta Stock Exchange as The Islamic Mediterranean Stock Exchange.

The proliferation of ICM products has been gathering momentum since 2000 in the Far and Middle East. In the Euro-Med market, it appears that ICM is gaining growth in momentum right now. Indeed, a considerable number of Islamic investment funds have been delivered by conventional institutions such as UBS, Deutsche Bank, ABN Ambro and BNP Paribas. In this growth scenario, with even smaller names investing in the region, Malta needs, and has to take, a concrete, timely decision on whether Malta wants to truly benefit from this proposition.

This will work only if all the tools and instruments are in place. We will again depend on whether the authorities will identify and set up the appropriate resources to act in a timely manner. Besides, it is also a question of marketing and commitment.

Will the government succeed in attracting the necessary attention of the Islamic finance world by being the first in the EU to issue a Sovereign Sukuk at state level? Also in this case, we have an opportunity ahead of us with the various capital projects that government has in the pipeline.

The author is managing director of Erremme Business Advisors.

rmb@erremme.org