These sukuk issues have attracted foreign investors, thereby strengthening our inter-linkages with other international financial markets. Profits or income received by non-residents for investments in ringgit and non-ringgit Islamic securities issued in Malaysia are also exempted from withholding tax. In addition, the Government has granted tax neutrality measures to accommodate the sukuk issuance. To further enhance Malaysia's international financial linkages with other parts of the world, the domestic Islamic banking sector was liberalised further in 2004 with the issuance of new licenses to foreign Islamic financial institutions. In addition, the allowed foreign shareholding in Islamic financial institutions was raised to 49 percent of the total equity in existing Islamic  4  BIS Review 121/2007  financial institutions. New licenses are also extended to entities to conduct Islamic banking business and takaful and retakaful business in international currencies. These institutions, which may have up to 100% foreign equity ownership, are given operational flexibility to be established as a branch or subsidiary and enjoy a tax holiday for 10 years under the Income Tax Act. Concluding remarks The foundations for the sustainable global development of Islamic finance have now been put in place. Going forward, three key elements will be important in sustaining the current momentum. These include the investment in research and development and hence promote innovation, the development of the pool of talent, and the greater use of technology in Islamic finance. Islamic finance as an emerging form of financial intermediation would require tremendous investment in research and development to promote innovation.

Given increased inflation expectations and supply-side restrictions, these factors may have a longer-lasting effect on prices. The pass-through of last year’s ruble depreciation to prices still continues, although it is waning. Recently, prices could be affected not only by ruble exchange rate fluctuations in 2020 H2, 1/3  BIS central bankers' speeches  but also its weakening in spring, when enterprises were unable to revise their prices immediately due to a slump in demand. Eventually, the combination of the two episodes of the ruble depreciation may be a reason why inflation expectations will stay elevated for a longer period. Upward pressure on domestic prices persists due to the situation in global commodity markets, first and foremost in food markets. Food prices have risen because of reduced inventories and unfavourable weather conditions. Moreover, the growth of prices for cereals increases costs in meat product manufacturing and is not only a proinflationary factor in itself, but it may also entail secondary effects. It is worth noting that the new mechanism of export duties in grain markets will smooth out the influence of global price fluctuations on domestic prices. Finally, inflation is still affected by a group of factors associated with the epidemic situation. It includes staff shortages in a number of industries, increased costs incurred by companies to comply with sanitary and epidemiological rules, and persistent temporary delays in supplies due to disruptions in logistics chains. These are supply-side factors putting upward pressure on inflation.