It also offers enhanced opportunities for raising financing and would also facilitate greater risk diversification. In particular, the strong growth performance in these regions create a significant potential demand for financial instruments that conform to the Islamic injunctions. These dynamic regions can therefore be expected to contribute towards accelerating the expansion of Islamic finance in the international financial system. Indeed, these trends will also contribute towards promoting a more balanced global growth. The participation in the Islamic finance intermediation process would require the development of a comprehensive and well established Islamic financial system, a wide range of products and services; a good legal system, adequate financial infrastructure with competitive tax structures, low cost of doing business, high standards of business ethics, and conducive living conditions and cultural offerings. It would also need to be supported by adequate human talents that would drive the business and spur innovation. In addition, a strong regulatory regime in the Islamic financial system would be another pull factor. More recently, the regulatory regime in Islamic finance has been further reinforced by rapid progress on the issuance of prudential and supervisory standards by the Islamic Financial Services Board (IFSB). Fund raising, investments and risk diversification are essentially complex transactions. These transactions are highly dependent on financial markets that are well regulated and capable of evolving to meet the emerging new challenges and the changing market needs.

Chart: Important considerations for the future The purpose of investment management as defined by the political authorities sets a clear aim for the long-term return. To illustrate this point, I have chosen again to look to Canada, more specifically to the province of Alberta. Alberta has earned considerable oil and gas revenues since the 1970s. In 1976, the provincial government established the Alberta Heritage Savings 5/7  BIS central bankers' speeches  Trust Fund (AHSTF), where these revenues were invested. Chart: Alberta Heritage Savings Trust Fund At the outset, the AHSTF had a number of objectives. In addition to saving for the long term, the AHSTF was also tasked with strengthening and diversifying the economy of Alberta and improving the quality of life of Albertans. Individually, these are admirable aims, but as an overall objective for investment management, they are more demanding. Retrospectively, it is difficult to measure the fund’s contribution to a more diversified economy or to an improved quality of life of residents. Such purposes may also conflict with a desire to save for the future. Alberta has chosen to adjust course along the way. The management objective of the fund is now to maximise long-term returns at a prudent level of risk. Chart: Important considerations for the future The Central Bank Law Commission advises against multiple objectives for the management of the GPFG. The Commission underscores that a change of manager for the GPFG should not occur if this entails that other considerations overshadow the aim of maximising long-term returns.