KUALA LUMPUR, Malaysia March 18 (NNN-Bernama) -- Hong Kong expects to leverage on Malaysia's strong framework and expertise to bring Islamic finance into mainland China.

Hong Kong Secretary of Finance, John C Tsang said Islamic finance was still new for Hong Kong.

"We are at a very preliminary stage in Hong Kong. As you know we don't have a big Muslim population in Hong Kong, but we see that Hong Kong could develop into a platform for Islamic finance in the region," he said at a press conference here Thursday.

Tsang is on a visit to three Southeast Asian cities and Kuala Lumpur is his first stop.

He said Hong Kong had a very strong financial infrastructure for conventional business and that it was currently in the process of developing a strong bond programme in Hong Kong.

Therefore, the development of Sukuk in Hong Kong will be a natural development, he said.

"Right now we are in the process of amending some of the relevant tax laws so that Islamic products could be put on par with the conventional products.

"We are dealing on a case by case basis, but once we have amended the laws it could become an automatic process and that would greatly facilitate further development of Islamic products in Hong Kong," he explained.

A number of Malaysian banks including Hong Leong and CIMB Bank have already set up Islamic windows in Hong Kong.

"We have Islamic indices, different Islamic funds, and also a couple of bonds have been issued in Hong Kong. I think the potential is great particularly Hong Kong as the platform for a lot of (Islamic) products to move into the mainland of China. The potential is huge."

Malaysia has a strong and well-developed infrastructure in terms of Islamic Finance, from the Islamic Council to all the different structures.

"We have actually worked with Malaysia the past two years and they have helped us a lot including sending people from the central bank," he said, adding that they had already signed several memoranda of understanding on joint cooperation.

Touching on his visit to Malaysia, Tsang said the intention of his visit this time around was to see on ways to work closer together with other countries in the region and also learn more from some of the success seen by Malaysia, such as in the area of Islamic finance.

Tsang said he has been talking with different people on the new economic direction that Malaysia would be taking.

"A lot of these are very fundamental ground breaking work and we are extremely interested in that," he said.

On his meeting with Prime Minister Najib Tun Razak yesterday, he said it had been a very useful and constructive meet with discussions covering a wide range of issues.

"We share the view that we should move forward with the implementation of the avoidance of double taxation agreement between Hong Kong and Malaysia.

"That will greatly benefit the businesses in both places. We also talked about strong complementarity between our two economies on how we could work together to sort of promote mutual interest."

On his meeting with Amirsham Abdul Aziz, chairman of the National Economic Advisory Council, Tsang said they had exchanged views on the state of the world economy and shared their experiences in dealing with the global economic crisis.

Commenting on Amirsham's hard work on the upcoming New Economic Model, he said a new economic model would be important for the long and medium term and future of Malaysia.

He said he would be watching its development with tremendous interest.

This morning, Tsang also had a "long" discussion with Bank Negara Malaysia Governor Dr Zeti Akhtar Aziz. This was followed by a roundtable discussion with some of the key players in Islamic finance.

"We discussed the development of the financial infrastructure for the implementation of Islamic finance, enhancement of financial interlinkages between our two systems, cross border business opportunities between Hong Kong and Malaysia as well as human capital."

Tsang also met Securities Commission Chairman Zarinah Anwar, and their discussions covered the latest wave of regulations in the market and its growth since the financial crisis last year.

"I think it is an exciting time for Malaysia and I am glad to have come here," he added.

-- NNN-BERNAMA