This market not only comprises the 217 million Muslim population but extends to the non-Muslim community and the foreign national community that operates in the region. The region is increasingly becoming an investment destination, including from the Middle Eastern investors. In 2006, Asia Pacific region has surpassed Europe as second largest region for investment from GCC with USD460 billion investment. The recent specific initiative to enhance the securitisation market by Cagamas Berhad, the Malaysian Mortgage Corporation and Hong Kong Mortgage Corporation by establishing a joint venture company to provide a mortgage guarantee programme for both Islamic and conventional mortgages in Malaysia is an example of a collaboration. This could be a catalyst for more similar initiatives in the future. Conventional financial institutions may also enter into alliances with Islamic financial institutions to be co-arrangers, to structure sukuk or other Islamic products based on Shariah compliant assets in this region. The wide ranging availability of such assets and the massive financing needs of the new growth areas in the region such as in China, Indonesia and Vietnam will be attracting funds from surplus economies such as from the Gulf economies. Efforts can also focus on facilitating cross listing of sukuk in multiple jurisdictions. Additionally, the viability of setting up of Asian Sukuk Fund as an extension of Asian Bond Fund can also be explored. Potential issuers may leverage on Malaysia's sukuk platform and the strengths as the world's largest sukuk issuance centre with over $ or 62% of world's sukuk issues.

Following these developments we are now entering a new phase in the development of Islamic financial system in Malaysia with the new initiatives to promote Malaysia as an International Islamic Financial Centre. This aims at strengthening our economic and financial inter-linkages and thus promoting greater trade and investment across borders. We are therefore entering a new phase of development for Islamic finance in Malaysia as it becomes more integrated with the international financial system. Given the surge in demand for Islamic financial products and services, several countries and financial centres are increasingly participating in the industry. The global front-runners will be those with combined strengths of having the capabilities and resources, as well as the ability to secure the confidence of the international Islamic financial community. It is against this backdrop of rising competitive environment that the potential of cumulative bilateral and multilateral strengths will become important in managing the complexities and constraints found in the Islamic financial services industry. This increasing interest by several financial centres together with their international linkages will contribute towards creating a more integrated international Islamic financial system. Such centres, such as Hong Kong, have the potential infrastructure and the ability to facilitate product offerings that will bridge the regional and international financial linkages. Strategic alliances among Islamic finance players would be a catalyst unleashing the regional and global potential of Islamic finance. BIS Review 6/2008  3  In South East Asia alone there is an immense potential market to be tapped.