Pragmatic and debt-free HK's US$1 billion triple-A rated Islamic bond has shown up the lack of vision underlying Australia's reigning "pay down all debt at any cost" ideology. Hong Kong's shariah-complaint bond was also the first by a AAA-rated government, attracting an order book that ran to US$5 billion and in the process giving Australia a lesson in why issuing debt makes business sense even if there is no government deficit to pay off.The heavy demand allowed Hong Kong to price its five-year sukuk at a margin of just 23 basis points over US Treasuries - the skinniest margin for USD-denominated paper anywhere in Asia outside of Japan, according to the Financial Times.The bonds were taken up mainly by Middle East and regional insto investors, allowing Hong Kong to claim bragging rights as the new centre for what is fast becoming a well-established form of capital finance. Australia is now further exposed as a laggard in its aspirations to become a regional financial hub, as our capital gains tax rules work heavily against Islamic finance instruments. Successive governments have shown no real appetite to move the debate forward. The Labor government commissioned the Board of Taxation to review the situation in 2010, to report back in 2011 on what it would take for sukuks to be harmonised with other financial instruments. However, a Federal election intervened, the report was dropped, and it has remained in the too-hard basket.  However, Australian banks have not stood still. Westpac, for instance, developed several wholesale Shariah compliant products of its own several years ago.