Y.Bhg. Dato' Sri Sulaiman Abdul Rahman Taib
Chairman RAHB Group
Y.Bhg Tan Sri Ramon Navaratnam
Board of Director
Monash University Malaysia
Y. Berusaha Encik Kamalul Arifin Yusof
Y. Berusaha Professor Bala Shanmugam
Tan Sri-Tan Sri and Dato'-Dato'
Ladies and Gentlemen
Assalamualaikum warahmatullahi wabarakatu and Good Afternoon
I would like to congratulate the organizers, Monash University Malaysia, RHB Bank and ALDWICH WIPRO for holding this Third Conference on Islamic Banking and Finance with the theme Islamic Finance: The Challenges Ahead, and thank them for inviting me to address the closing session this evening. I trust participants have had an enlightening two days of exchanging and sharing views, especially with the distinguished panel of speakers, who have presented papers during the course of the conference.
2. As this is the third annual conference, I believe it has been another fruitful work-in-progress session as each year when you meet there will be new developments and challenges that will emerge. Therefore, I am confident that these valuable annual sessions will provide a platform for researchers, academia as well as the banking and capital market fraternity to debate on issues and challenges facing the industry.
3. Alhamdulillah, the Islamic financial industry in Malaysia has evolved into an efficient, competitive and dynamic industry that has contributed significantly to the nation's growth process. Our Islamic banking, takaful and capital market has become an integral component of the nation's financial system and operates competitively alongside the conventional financial system. Its market share has expanded markedly, both in terms of size as well as the range of products that have been offered.
4. Our commitment to develop a progressive Islamic financial system has focused on building a strong foundation but putting in places a comprehensive infrastructure and institutional set up. At the same time, we continue to provide an efficient regulatory and supervisory environment to ensure stability and viability of the Islamic financial services industry. In our effort to broaden and deepen our Islamic financial market, we continue to promote greater product differentiation and sophistication to meet the diverse requirements of investors and issuers. Equally important, emphasis has been placed on ensuring that financial instruments and product development are consistent and in compliance with Syariah principles.
5. In the Islamic capital market, Malaysia has made tremendous progress as reflected by the increasing issuance of instruments for purposes of fund raising, such as Islamic bonds and Islamic unit trusts, to meet the demands for greater product sophistication of investors and businesses. This has enhanced Malaysia's position as the pioneer and leader in Islamic capital market development efforts within the international financial community.
6. In line with efforts to facilitate the continuous development of the Islamic capital market, the Securities Commission together with its Syariah Advisory Council continue to conduct research and assessment on new instruments that can be introduced in accordance with the approved Syariah framework. An important step taken has been the issuance of the Guidelines on Islamic Securities in 2004.
7. As a continuation of these efforts, and in line with the Government's objective to promote the development of Real Estate Investment Trust (REITS), the issuance of Islamic REITs will also be promoted. In this regard, the Securities Commission has already formulated a set of guidelines on its issuance. I believe this will be the first Guideline on Islamic REITs in the global Islamic financial sector, and reflects a strategic initiative on the part of Malaysia to further enhance its profile in the international Islamic capital market.
8. The Guidelines essentially provide Syariah guidance on the investment and business activities of Islamic REITs. The introduction of Islamic REITs should create a new syariah-compliant asset class for investors seeking to diversify their portfolios and hedge against institutions in the equities and commodities markets. The conventional REITs structures can easily be tailored to meet Syariah requirements because of its underlying link to tangible assets. We hope the introduction of the Islamic REITs will facilitate foreign investors, particularly Middle Eastern investors, to invest in Malaysia's property market without the hassle and responsibilities associated with direct ownership of property assets.
9. Details of the Guidelines will be issued by the Securities Commission on Monday, 21st November 2005. Given the greater institutionalization and sophistication of investors in the Islamic equity market today, we are confident that there is now a greater appetite for products such as Islamic REITs. With the release of these Guidelines, Government is also confident that industry players will respond by introducing Islamic REITs in the market soon.
10. I understand that Monash Malaysia's School of Business, which conducts research and development (R&D), is actively seeking ways to incorporate core Islamic values into Islamic products and business models. Among the challenges that need to be addressed are standardization, benchmarking, Islamic accounting system and the need to further developing innovative Islamic products. I hope your findings and recommendations will provide further inputs in our efforts to further advance the development of the Islamic financial industry.
11. I must congratulate Monash Malaysia for having built a formidable foundation on its R&D activities, including Islamic financial derivatives, Islamic accounting rules and standards, disclosure and corporate governance. These are areas of research that require immense creativity and innovativeness as well as thorough understanding and knowledge of Syariah principles. In this regard, understanding Syariah principles is not confined only to Islamic practices. A comprehensive understanding of conventional practices is necessary before we can reconcile and harmonize Islamic principles with the modern conventional system in use today.
12. It is my hope that Syariah scholars in Malaysia will work closely with researchers in Monash University as well as other institutes of higher learning towards harmonizing the differences in interpretations. This will be well received by Syariah scholars in the international Islamic financial community. Indeed, the Islamic capital market is increasingly commanding greater global acceptance, as reflected by the establishment of the Dow Jones Islamic Market Index and the FTSE Global Islamic Index Series,
13. As we aspire to become a global player, a key factor that will influence international acceptability is the need for clear standards on accountability and governance that uphold Islamic values and ethics, as well as disclosures and transparency to safeguard the integrity and stability of Islamic financial system. More fundamental, these standards and practices must be internationally benchmarked to ensure universal acceptability not only by Islamic investors but also conventional investors.
14. Before I conclude, let me refer to the dilemma that confronts the Muslim world today. As the world confronts the issues of terrorism, war, violence and natural disasters, we find that there is much that is negative being associated with Islam and the Muslims. In my view, the work being done by participants at conference such as this, by both Muslims and non-Muslims, is of crucial importance. Indeed, the coming together of international experts and their discussions will have far reaching effects. The voice of reason that is provided at conferences such as this will go far in helping nations and societies in turmoil to rebuild their economies, their financial infrastructure and their society.
15. In hope the organizers will continue to hold such annual conferences to continue deliberating on advancing further the development and elevating the performance of Islamic finance. In charting the next stage of its future development, we must work for a common vision that will contribute to the overall growth and wealth creation that can benefit humanity.
16. I understand that the next conference will be held in Istanbul, Turkey. Let me commend the organizers for their relentless efforts and continued contributions to the development and progress of the Islamic financial industry. My best wishes to you and hope it will be another successful conference. For our overseas guests, I would also like to wish you a safe journey home.
17. On that note, I have the pleasure in closing this Third Conference on Islamic Banking and Finance.
Wasalamualaikum Waramatullahi Wabarahkatu.
Ministry of Finance