Given the government's budget deficits and limited access to funding sources, Islamic financing could fill the gap, said Willie Tham, CEO of HSBC in Thailand.
Tham is very optimistic that investors in the Gulf region would be interested in subscribing to Islamic bonds if the government or private firms started to issue such bonds, known as sukuk.
"The centre of economic gravity has shifted from the West to the East," Tham said on the sidelines of the third Thailand Islamic Finance Conference.
East Asian countries, such as China, India and Thailand, will grow faster than the countries in the West in the next 10 to 15 years, he said.
Though the Thai economy has also been rocked by the global crisis, Tham believes it will gradually improve.
The government is seeking credit facilities from the World Bank, Asian Development Bank, Japan Bank for International Cooperation and ExportImport Bank of China to finance infrastructure projects, but funding from these sources will fall short, he said.
The government this year is expected to run large fiscal deficits while planning to invest a great deal of money - estimated at Bt1.5 trillion - in infrastructure projects in the next few years.
Since crude oil prices are starting to climb back up, now exceeding US$50 (Bt1,768) per barrel, the petrodollar market remains highly liquid, he said.
If Thailand made the right Islamic financial products, they would attract longterm investors from the Middle East, he said.
HSBC Amanah, a member of the HSBC group, has become the leading global provider of Islamic financial services.
It arranged the world's first global sukuk for the government of Malaysia and the first supranational sukuk for International Finance Corp, he said.
An HSBC report estimated the global Islamic banking market at US$650 billion (Bt23 trillion) to $750 billion annually and growing more than 15 per cent per year.
The global Islamic insurance market is also forecast reaching $14.4 billion next year.
There are more than 300 Islamic financial institutions around the world.
Mohammad Faiz Azmi, global Islamic finance leader of PricewaterhouseCoopers, has said that Thai policymakers and authorities are interested in this alternative market, but they are just now making an effort to learn how to enter the Islamic finance market.
"The Islamic Bank of Thailand just told us that it will issue sukuk in the third quarter of this year," he said.
If the government wants to open the market to private companies, tax laws have to be changed to facilitate sukuk issuance, he said.
Existing tax laws do not provide a level playing field for the issuing of sukuk, which will result in a higher cost than for conventional bonds, he said.
Middle East investors are interested in infrastructure projects, healthcare and food production in Thailand, he added.
Thai private firms may also raise funds via other instruments than sukuk, for example via the equity market, if their business is shariahcompliant, he said.
Iza Sheryl Kamaludin, associate director of HSBC Bank Middle East, said initial issuances of sukuk may be timeconsuming and require a lot of documents, but subsequent issuances would be much easier.