Reinforcements of the Shariah compliance functions include the requirements for internal Shariah review and audit, supported by an appropriate risk management process and research capability. It is envisaged that with a more robust and sound Shariah governance framework, with end-toend Shariah compliant control mechanism within Islamic financial institutions would promote greater Shariah observance throughout an organisation and minimise possibilities of the products to be nullified on Shariah grounds. Effective implementation of the Shariah  2  BIS central bankers’ speeches  governance framework will indeed further promote stakeholders confidence and enhance the integrity of the Islamic financial industry. It is also important to note that successful attempts in innovation are very much dependent on the availability of talents who have the ability and creative inclination to develop new ideas and the capacity to turn such ideas into achievable results. A talented workforce is the engine to spur innovation and achieve breakthrough inventions. For the Islamic financial industry, it is recognised that human capital development initiatives form the vital groundwork that we need to build and strengthen to ensure that the industry remains competitive and innovative. Given that the Islamic finance industry is in its nascent development phase, more importance is thus placed on human capital development. The establishment of various institutional platforms such as the INCEIF and ISRA, as well as offerings of specialised Islamic finance courses by tertiary institutions have been instrumental in contributing to the nurturing and development of professional talent and expertise in Islamic finance.

In subsequent years, costs have varied around this level. After a period, we will be able to cover a smaller share of our imports using current petroleum revenues and drawings on the Petroleum Fund. Competitiveness must then have to be improved. It may have to be brought back to around the level prevailing at the end of the 1960s prior to Norway’s emergence as an oil nation.4  The labour market In the long run, wage growth must be consistent with labour productivity. When real wage growth is higher than productivity growth, profitability in the business sector deteriorates and the business sector will then recruit fewer employees and reduce their workforces. Likewise, employment in public entities  3  See Kydland, F.E. and E.C. Prescott (1977):”Rules rather than discretion: The inconsistency of optimal plan”, Journal of Political Economy85, pages 473-490. 4  See Akram, Farooq Q. (2003): “Reell likevektsvalutakurs for Norge” (Real equilibrium exchange rate for Norway), Norsk Økonomisk Tidskrift 118, pages 89-112. BIS Review 10/2005  7  will decline if labour costs rise more than revenues. When the social partners engage in centralised and local negotiations, they will therefore weigh employment against the usefulness of taking out higher pay. Compared with other European countries, income formation in Norway has been fairly flexible. Wage growth has rapidly declined when unemployment has risen. This is why unemployment has not taken hold at a high level. The favourable results partly reflect the considerations underlying the wage settlements at a centralised level.