Global sales of Islamic bonds could top $100 billion within two years as non-Muslims seek more funds from the oil-producing Gulf, and the industry develops in Malaysia and the Arab world, Standard & Poor’s said.

“There is a huge pipeline of sukuk issues to come to the market either in the second half of this year or early 2009,” Jan Plantangie, managing director, Middle East, at Standard & Poor’s told reporters at the opening of its office at the Dubai International Financial Centre (DIFC).

Plantangie said that the issuance could cross $100 billion by the end of the decade.

Net borrowing by Middle East and African governments with debt ratings may triple this year to $23.4 billion from $7 billion in 2008, taking total medium and long-term borrowing in 2008 to $77.6 billion, S&P said in a statement.

“The increase from 2007 reflects both a reduction in the repayment of debt and the rise in Middle East and African sovereigns’ borrowing requirements, which are partly due to a reduction in many sovereigns’ prospects for privatization receipts,” S&P said.

“Saudi Arabia, in particular, is expected to slow down its repayments of domestic debt substantially, accounting for almost $20 billion of the net increase in borrowing alone.”

Of the $23.4 billion of new sovereign debt, Gulf Arab nations were still likely to only contribute a small portion in 2008, with the bulk being issued from large African Nations, Farouk Soussa told Reuters on Monday.

“There has traditionally been very little from the GCC governments, and we don’t expect it to increase this year,” he said. Qatar and the United Arab Emirates have both said they plan to sell bonds this year to absorb liquidity and curb record inflation.

“We need sovereign issues to finance infrastructure projects and extend yield curves with longer tenors,” said Nasser Saidi, chief economist at the DIFC.-Reuters