Chairman and ardent football fan Dato’ Dr Nik Norzrul Thani likens Zaid Ibrahim & Co to a famous English team. The former lecturer tells MIF
Monthly how the company is charting its course with regards to Islamic finance, and why it is akin to a training ground for promising young legal eagles.
There are those who possess class, and then there are those who out-class. There are natural winners and those who try. And Zaid Ibrahim & Co certainly does not have to try.
The air on the 19th floor of Menara Millenium in Damansara Heights, is redolent with a certain sort of swankiness one would expect of an international legal house, or any established institution for that matter.
The white façade of this legal office is anything but dull, with Bloomberg playing on the wide-screen televisions across the reception, and art pieces and caricatures hinting at playfulness mingled with the more “serious” stuff in the library, which is packed wall-to-wall with, well… serious stuff.
Dr Nik Norzrul Thani, newly elected chairman of Zaid Ibrahim & Co, better known as ZICO, likens his firm to Manchester United (a humble admission considering that he’s an Arsenal fan). So all you Liverpool, Chelsea or Leeds fans might want to pay attention now… Why Manchester United? Because just like the resident premier league club, he sees his firm as a training ground for the industry’s finest. And like the Red Devils, you either love ’em or hate ’em.
Dr Nik himself is a sprightly and down-to-earth character, with a genuine interest in those around him. He brings an immediate ease into the room. His background as a lecturer at the International Islamic University Malaysia (IIUM) becomes more evident throughout the interview as he picks up the marker pen and literally illustrates his point on the whiteboard behind him. However, not all lecturers would tell us about stress management and extramarital affairs!
There is more to the calm and straight-forward Dr Nik than meets the eye, and in his interview with MIF
Monthly, he reveals his aspirations for the firm, and more importantly, the global Islamic finance landscape as a whole.
What plans do you have for the firm in your new role as chairman and head of Islamic finance?
As the chairman, I am directly involved in Islamic finance, although the head of Islamic finance is Megat Hizaini (Hassan). For the firm, we hope to carry on with the plans and strategies that were developed and formulated by (Senator and former chairman Datuk) Zaid (Ibrahim) and the management team, and our main interest is to go global and expand our international outreach; firstly, on a regional basis — we are opening up in Vietnam, and we just did that in Jakarta, Bangkok, Singapore and Labuan.
What we hope to do is to basically be on par with other international law firms and we aim to capitalize on our strategic alliance with Allen & Gledhill LLP. We may also enhance such alliances in the future. In the meantime, we hope to maintain and reassert our brand name internationally.
We are lucky that we have already established our market with the brand name — such as other law firms like Shearn Delamore, Shook Lin & Bok, and it is indeed a legacy we intend to carry on — to be the first Malaysian international law firm.
In terms of Islamic finance, we plan to grow internationally, because we do know that Islamic finance is an international phenomenon. We have the Islamic finance expertise and we can compete. Our lawyers are proficient in both the Islamic and legal side, as they come from a Shariah and legal background. We’re proud of that fact, and we thrive on that.
We are also possibly the first law firm in the world — and definitely the first in Malaysia — to set up an associate company owned by the partners, called ZI Shariah. We have a panel of Shariah advisers who work with our lawyers, and are licensed by the Securities Commission (SC) to advise on Sukuk.
Of course, on the one hand, people have raised the issue of conflict that we are lawyers, and, therefore, cannot possess such a license. But in foreign countries, where you cannot be a lawyer per se in the local council, this is a value-added service. With ZI Shariah, we help them develop the Shariah framework, and aid in the signing off on Shariah. We’ve done that for clients in the Middle East as well as regionally. And I hate to say this, but it puts us on a totally different platform from other law firms.
What challenges do you face in your new role?
It’s not easy to maintain human capital. We attract good lawyers, and because of that, our lawyers leave when they receive better offers. We have lawyers who are now working in London, some in Dubai, some with the Islamic Financial Services Board (IFSB) and also for the SC. I can’t stop them from going, but they keep in touch. And I still carry with me my mentoring aspects that I had as a lecturer with my lawyers.
I also push them to write, and they are now co-authoring a book on The Laws of Islamic and Conventional Corporate Finance. Everybody writes a chapter — some are also on the verge of tears! But at least now they can all say that they’ve co-authored a book — although it’s just one tiny chapter! We try to maintain that sort of camaraderie, and despite that, people still do leave.
Also, we need lawyers who are willing to go international. All my lawyers have their bags packed and ready, as every week we travel to Bangkok, Vietnam, Jakarta, etc. It’s a plus for some, and a negative for others.
ZICO has abundant experience in the field of Islamic banking and finance (IBF). Which would you consider a landmark deal for your firm?
I don’t think there is a specific landmark deal, as all the transactions that we have advised on are all important and unique in their own way. But I think, at the moment, it would be setting up the Shariah advisory firm — ZI Shariah.
When we spoke to the SC, one of the things they highlighted was that we lack Shariah advisers. So, it would be a waste if our lawyers who are proficient in Arabic and can advise on the Shariah did not possess this license.
We are also pretty much a knowledge-based institution, hence the insistence that all the lawyers write, and I suppose this is our way of giving back to society. Basically, it’s all about charity.
We’ve also been appointed by the Labuan Offshore Financial Services Authority to review the current law, and part of it encompasses Islamic banking and finance in Labuan. We have a vested interest because we have an office in Labuan.
What is the latest development at ZICO in IBF both locally and outside Malaysia?
Locally will be ZI Shariah, and we also have Arab-speaking lawyers to handle clients from the Middle East coming into Malaysia.
We provide Arabic classes to our lawyers and staff, as we feel that it is important that they learn Arabic. I mean, to be fair, work-wise, some clients even request for the text to be in Arabic! We’re also looking to open up in the Middle East, particularly in Dubai.
You mentioned ZICO opening up in Vietnam. Why there? Will ZICO focus on IBF there as well?
Vietnam is a logical extension from Thailand. And we are following in the footsteps of the Malaysian government. Companies such as Khazanah Nasional are going to Vietnam a lot, and it definitely is an area with high growth potential, especially for investments and Sukuk.
We’re also currently involved in cross-border activities, mostly in Brunei, Indonesia, the Middle East, Vietnam and Thailand.
What is your view on the legal framework in Malaysia with respect to Islamic banking and the Islamic capital market? Do we need to improve anything?
I think we have one of the most envied legal frameworks in the world. We also have very proactive regulators, and without the leadership of Bank Negara Malaysia and the SC, we wouldn’t be where we are now. That’s the good part of it. However, with due respect the problem is that sometimes, the industry lags behind the regulators.
The regulators can only do so much, but we the industry players need to provide the impetus. To make Malaysia a real hub, we need to liberalize the market in terms of legal expertise. We can’t have all this ‘hardware’ without the software, or expertise, and this is not the regulators’ fault. It’s the industry. There should be fluid movement of international and local lawyers.
I would go further by saying that the Malaysian government has pushed the last budget, allowing the liberalization of Islamic finance in terms of Shariah advisers, accountants and banks. Take Melaka, for example. It was a melting pot of merchants and traders from all over the world and provided fluid movement of information. It’s the same with the MIFC (Malaysia International Islamic Financial Centre), but unfortunately, not all players and stakeholders understand and appreciate that.
It’s not a zero-sum game. We are players in a global market, and the future is the global market as, to some extent, the market in Malaysia is saturated. We need to explore new markets, but unfortunately, we are scared to do so.
But the people who should be scared are people like me, who are doing the high net worth work, but I’m not scared. I welcome the competition, and welcome the excitement that comes with it. Again, the hardware is very good, but there’s no use in having the best computer in the world if you don’t have Intel inside! (laughs)
Did the western credit crunch affect our local Sukuk market? Have any Sukuk deals been put off in Malaysia due to this?
I can’t say for a fact, as some banks see it as the opposite instead of a threat. Sukuk hasn’t been put off because it affects the Sukuk market per se, but because the bankers themselves have become perhaps a bit more hesitant to go all out since the crisis.
The converse is, however, that we should see it as an opportunity, as the crisis has opened other banks up to Islamic finance as it utilizes underlying assets, and therefore, there is value to the transaction, as opposed to the subprime market, where you just mark up the interest rates. To say that we’ll never be affected may not be 100% correct either.
Therefore, I believe that it is more of a contagious effect on investor confidence, rather than something tangible. Take a look at Japan. Some banks are already looking into Islamic finance as an alternative, and do not take it as a religious issue. They feel that ‘Well, if it makes our portfolio safer, then why not?’
I don’t think we are the cure to all the ills of conventional banking, but we are an alternative, and different banks will definitely have different needs for an alternative.
However, in Japan, I don’t think you can expect them to go retail, but instead can expect perhaps innovative forms of syndicated finance to materialize. In Thailand, however, the retail market in the south is something to look at. However, the current laws do not support it.
The key is that Shariah and Islamic practitioners need to be aware of conventional risk management techniques as a tool to monitor the market and make sure we don’t go overboard. I believe that Islam is not a restrictive religion. It is up to us how we want to innovate it. Of course, we have to accept the scholars’ perspective, but I always try to converge and evolve.
And, again, I wish to reiterate that it is not a religious issue, and is in fact an alternative. For instance, I went to La Salle, a Catholic school, but that doesn’t make me less of a Muslim.
And if you are a Catholic subscribing to Islamic finance, that doesn’t make you less of a Christian. And I think that’s a nice phenomenon that’s happening in Malaysia. For instance, for Takaful, I was told that most of the clients are non-Muslims, so they do it at the bottom line and get the rebate. You shouldn’t exclude this huge percentage of consumers.
However, Islam is a religion that allows freedom of thought and innovation, and as long as one can justify one’s actions, and the market accepts it, I believe this will bring forth more innovation.
I understand their concerns, but not everybody agrees with what they say. Also, other concepts — well, except for riba, of course — are slowly being accepted.
Some would argue that currently, Islamic products only comply with the form of Shariah but neglect the substance (i.e. maqasid or objective). What is your opinion regarding this debate?
As you are aware, Islam has a lot of sects and interpretations. And as long as its core values are not undermined, I think people can innovate and come up with hybrid structures, similar to how conventional banking grew, but of course you have to be cautious.
Conventional finance grew so much, thus leading to the subprime markets coming into play. Therefore, you can never run from good banking practices and good governance.
Where do you see the firm five years from now?
I hope by then we will have structured our international presence in the global market and established a name among the top 10 international law firms in the world. As a firm, Malaysia is our HQ – our origin, but we will become a global brand. As it is, we have offices in Jakarta with Indonesian lawyers, and in Thailand, with Thai lawyers, etc.
How would you describe your team?
(Smiles) Yes, yes, some people get upset with ZICO lawyers and say that we are cocky and confident, but that’s the kind of people we take in. Those who are willing to take risks, are ambitious and young. They look good, and they sound good, and we are the envy of the industry… it’s like how people resent Manchester United, lah. They always win, they’re good… perhaps a bit cocky, but they’re winners.
I also hope to have a more humane approach to ZICO, I mean, I’m known to be a lecturer who likes to grow talent, and we’re now doing a lot of pro bono cases for orphanages and old folks’ homes, and I believe we always have to give back to society.
We’re also looking at stress management for our lawyers. About 70% of our lawyers are young ladies, and are faced with the pressure of work and having families to attend to. So we’re looking to identify the source of their stress, and hopefully help them out at work.