RAS AL-KHAIMAH: The UAE emirate of Ras al-Khaimah said it planned to sell about $400 million of Islamic bonds by July to finance the construction of a group of man-made islands off its coast.
The Ras al-Khaimah Investment Authority also plans to borrow, along with partners, $1.4 billion in a syndicated bank loan this year to build a $2 billion aluminium smelter and refinery in India, Chief Executive Khater Massaad told Reuters.
One of seven emirates in the United Arab Emirates, Ras al-Khaimah, like Dubai, has little oil, and has said it plans to lure investment worth 50 billion dirhams ($13.6 billion) by 2009 to develop its tourism and industrial sectors.
“Ras al-Khaimah is investing in various projects in the emirate and overseas where we see opportunities for growth,” Massaad said in an interview in the Gulf Arab desert emirate.
The authority has invested about 500 million dirhams so far reclaiming land to build Al-Marjan Island, a group of five man-made islands over four square kilometres in the Arabian Gulf, Massaad said.
It will spend about 600 million dirhams this year to complete the island which, mirroring the three palm-frond shaped islands being built in Dubai, will include hotels, residential developments and leisure projects, including a theme park.
“We are looking at raising $400 million in a sukuk before July to complete the construction of the island and pay for infrastructure,” Massaad said.
The emirate is in talks with Credit Suisse to arrange the bonds, called sukuk, to tap growing demand among the region’s Muslims for bonds that comply with their religious beliefs, Massaad said.
Barclays Capital said in January, global sukuk sales could grow as much as 30 % to $22 billion this year. Sukuk pay a dividend or rent to bondholders rather than interest, which Islam equates with usury.
“A lot of regional investors are interested in investing in real estate projects. That’s what the sukuk will look at,” he said.
Ras al-Khaimah plans to quadruple the number of tourists it attracts by 2010 to about 100,000.
The emirate may also use Islamic finance for the loan to build an aluminium smelter and alumina refinery in the Indian state of Andhra Pradesh, Massaad said.
Ras al-Khaimah and the AP government signed an agreement in February to build the plant, which Massaad said would produce 1.5 million tonnes a year of alumina and 300,000 tonnes of aluminium in the first stage.
The authority, which will have a majority stake in the project, is in talks with Indian aluminium companies about taking stakes in the venture.
It will choose three partners by April and start construction within three months, Massaad said, declining to give more details.
“We are considering Islamic loans. We will finance 70%, $1.4 billion of the project with a syndicated loan by the end of the year,” Massaad said.
The authority could also borrow money as it boosts investments in Africa, where it is in talks to take stakes in industrial projects in Tanzania, Congo and Sudan, he said.
In its first investment in Africa, the emirate is in talks to take a stake in a copper mining project in Congo, Massaad said, declining to give details.
“It is an existing project with European partners and they need investment,” he said.