diversity of our financial market and consolidating our role as an international financial centre. platform building for sukuk issuance 9. with this in mind, we have taken concrete steps over the past few years to build a conducive platform for sukuk issuance. just last july, we have put in place a tax framework for common types of sukuk to level the playing field between sukuk and conventional bonds. 10. generally speaking, sukuk are no different from conventional bonds in terms of economic substance, enabling issuers to raise funds while giving investors interestlike return. however, the more complicated structure of sukuk, which involves the setting up of a special purpose vehicle and multiple transfers of underlying assets, had led to additional tax liability for sukuk issuers. the tax law amendments have overcome this obstacle by removing the additional profits tax and stamp duty charges incurred in issuing sukuk as compared with conventional bonds. 11. with the tax framework in place, hong kong ’ s financial platform is ready for sukuk issuance. we highly welcome local and overseas entities to make use of hong kong ’ s platform to issue sukuk. 12. to play a lead - off role for this market, we took another important step recently by putting in place a legal framework for the government to issue sukuk under the government bond programme. we are very pleased to see that the relevant bill was passed by the legislative council a few weeks ago, paving the way for the launch of the inaugural government sukuk. source : institute for international finance source : swf institute bis central bankers ’ speeches inaugural hksar government sukuk 13. the government sukuk is intended to meet two important objectives. 14. first, it aims to demonstrate to the global financial markets that the legal, regulatory and taxation frameworks in hong kong can well accommodate sukuk issuance. leveraging on the hksar government ’ s triple - a credit rating, the expected low funding cost of government sukuk will provide a useful benchmark for other potential sukuk issuers in hong kong. hopefully, this will in turn encourage more sukuk issuers to participate in our market, providing impetus to the sustainable development of the sukuk market here. 15. second, we hope to attract more international investors to our financial market. given the shortage of high - quality sukuk in the global market, the strong credit rating of the

hksar government is well - positioned to fill the gap by providing high - quality sukuk to meet the strong demand from investors. the global roadshows of the government sukuk will also provide an ideal opportunity for us to reach out to global investors and showcase our credit strengths and islamic finance capability. 16. as the government ’ s representative under the government bond programme, the hkma is now working closely with the government to prepare for the inaugural issuance of government sukuk. a detailed issuance plan is being devised with reference to international practices and market conditions. according to our current plan, the inaugural government sukuk would be based on the ijarah structure and target institutional investors globally. what ’ s in it for fund raisers to issue sukuk? 17. as i have mentioned earlier, the key objective of the government sukuk is to play a catalytic role, paving the way for local and international fund - raisers, no matter from the public or private sector, to follow suit. 18. for the potential sukuk issuers sitting here today, you may wonder what benefits you will get by issuing sukuk. well, let me highlight two key benefits here. 19. first, you would be able to broaden your investor base. by issuing conventional bonds, you will only be able to tap conventional investors. but by issuing sukuk, you will be able to get both conventional and islamic investors to participate. in particular, issuing sukuk will help you to gain access to the large pool of liquidity in the middle east and other islamic countries, where investors are progressively looking for shariah - compliant assets in this part of the world. at the same time, more and more conventional investors are also looking to diversify their portfolios into sukuk as a new asset class. so, issuing sukuk would enable fund - raisers to enjoy a wider and more diverse investor base. 20. second, you would be able to diversify your funding sources. with the additional option of sukuk in your arsenal, you can choose to issue either conventional bonds or sukuk, depending on the pricing and liquidity in the market at the time of issuance. this would provide more flexibility and a more stable source of funding to fund - raisers, particularly at a time when the funding cost of sukuk is more attractive than that of conventional bonds or when there is difficulty in obtaining liquidity in