Malaysia has developed the comparative advantage in the area of Islamic finance. The comprehensiveness of the Islamic financial system in Malaysia has been mutually reinforcing with the key components of the financial system comprising the Islamic banking, takaful, Islamic money and capital markets now being at an advanced stage of development. In addition, the established legal, regulatory and Shariah frameworks in the Islamic financial infrastructure is also a key competitive advantage for Malaysia , placing it ahead of other financial centres offering Islamic financial services. In terms of Shariah governance, it has enabled the development of Islamic finance to be orderly and compliant with the Islamic injunctions, thereby ensuring that customer confidence be maintained. The conducive Shariah environment has also ensured that Malaysia is sustained as a centre of product innovation, producing cutting-edge products for the increasingly sophisticated customers. In respect of Shariah interpretation and practices, the MIFC will adopt a stance of mutual recognition and accommodate the various juristic reasoning that has been approved by recognised Shariah advisers . Next week, Bank Negara Malaysia will again host the 2nd International Shariah Scholars Dialogue, gathering the Shariah scholars from different regions in our endeavour to continuously bridge and  BIS Review 104/2006  1  foster greater interaction and promote understanding on the issues and challenges faced by the Islamic community on the aspect of Shariah. Malaysia also has a strong and advanced regulatory regime and legal structure in the Islamic financial system.

As one of the key intermediation linkages in the global market place, the MIFC can have an important role in accelerating the process of bridging and strengthening the relationship between the international Islamic financial markets and thereby expand the investment and trade relations between the Middle Eastern, West Asia and North Africa regions with East Asia. Situated centrally in the Asian time zone, Malaysia is well positioned to effectively serve the East Asian region. Among the key intermediation role for MIFC is to act as a centre for origination , issuance and trading of Islamic capital market and treasury instruments such as sukuks, and to act as an investment gateway to the region specialising in Islamic fund and wealth management, and as a takaful and retakaful centre. In promoting capital and cross-border trade flows between the financial communities of these regions, it will thereby strengthen the international integration of our domestic Islamic financial system. In addition, this initiative is expected to improve further the performance of the Islamic financial industry and strengthen its competitive edge in this increasingly more challenging global environment. Currently, assets of the Islamic banking and takaful in Malaysia have been increasing at a double digit growth rate of 19 percent and 25 percent respectively in the recent five years. The Islamic banking and takaful markets which amounted to RM122 billion and RM6.6 billion in assets are among the largest in the world. The Islamic sukuk market has now exceeded RM120 billion and represents the largest Islamic bond market in the world.