The Republic of Indonesia has launched the country's first ever Sharia-compliant mandatory exchangeable Sukuk, priced at US$650m in a fiver-year deal.

It is the largest Islamic bond since Dubai Ports in June 2007 and the first from a country outside the Gulf Cooperation Council since Pakistan in 2005.

The Bank of New York (BNY) Mellon will act as delegate trustee, principal paying agent, transfer agent and registrar.

Gary Lew, head of Asia Pacific, corporate trust at BNY Mellon, said: "The Sukuk comes as Indonesian markets are enjoying one of their rosiest periods in months, thanks to market relief at the legislative election passing off smoothly, the strong prospect of President Susilo Bambang Yudhoyono being re-elected in July and positive regional sentiment.

"Indonesia is in better economic shape than most places in the region and while its economy is slowing, prices of its key soft commodities like palm oil are rising sharply."