The second imperative relates to the continuous effort to develop the key resources of the industry, by expanding and building new capabilities needed to support its growth and development. There is a critical need to upskill the leadership and technical competency of talents given the increasing complexity of the industry. With broader scope, scale and internationalization, the demands on the capability of talents in Islamic finance industry can only increase. It will require more internationally oriented management teams that have the necessary international exposure and orientation. In addition to education and research to build the expertise in Islamic finance, a more structured framework for capacity-building that includes other key resources including the investment in technology for industry development is also needed. Such a coordinated effort in capacity-building has been initiated by the Islamic Development Bank (IDB) in support of its member countries in the development of Islamic finance. This is being undertaken through the IDB’s Member Country Partnership Strategy (MCPS) programme. Indeed, in a world of increasing interconnectedness, there is a need for such a strategic approach to capacity-building through cross-border cooperation for the mutual benefit of the members so that growth and development of the industry can be collectively strengthened. Finally, the third imperative is to accord importance to mutual recognition of Shariah interpretations across jurisdictions and thus contribute towards greater international financial integration. A critical factor that will support this process pertains to the need to enhance awareness in respect of the justifications underlying the Shariah resolutions in the industry.

We presume that oil prices will tend to go down. Consequently, inflationary pressure will subside somewhat, particularly towards the end of 2005. With an unchanged monetary policy, we are likely to see an inflation rate of 0.9% in the first quarter of 2006. 2. Continued recovery  In order to assess inflation in the medium term, economic prospects are paramount. During a phase of economic recovery, as we are currently experiencing, how rapidly the capacity utilisation rate increases is important from a monetary policy perspective. Even though GDP growth in the fourth quarter of 2004 is likely to be lower than we projected in the September assessment, we expect the Swiss economy to expand by close to 2% this year. The upswing will continue next year. We anticipate a growth rate of 1.5% to 2% for the whole of 2005. The fact that the economy braved the oil price hike and the stronger franc is testimony to a robust recovery. There is less uncertainty now as to the inflation prospects for next year. Utilisation of economic resources, which is slowly increasing, will not lead to any additional pressure on prices in 2005. As can be gleaned from the new inflation forecast, improved capacity utilisation is likely to have an impact on price development only in the course of 2006. 1/3  The current inflation forecast for the medium term, ie for the coming two years, is characterised by a similar course to the one charted in September.