The Islamic Financial Services Board (IFSB) estimated that assets of the global Islamic financial services industry grew by 20.4% year-on-year to reach an estimated USD1.6 trillion as at end 2012.1 Last year also saw a record volume of sukuk issuances globally, with sukuk issuance from more countries, and of larger size and longer tenor. Key financial centres have continued to facilitate the development of Islamic finance within their jurisdictions. Singapore has made adjustments to our regulatory and tax regime to allow for the growth of Islamic finance since 2004. Hong Kong has recently amended its tax regulations to allow for issuance of sukuk, while the UK recently established an industry task force to facilitate further development of Islamic finance. Going forward, the broadening and deepening of economic and financial ties between Asia and the Middle East, the two major centres for Islamic finance, will also provide further impetus for future growth of Islamic finance globally. Connectivity between Asia and the Middle East There are three important observations to be made on the growing connectivity between Asia and the Middle East. First, the economic relationship between the two regions has expanded beyond the energyrelated sector. Asia’s demand for energy exports from the Middle East will continue to remain robust as the region expands. However, non-energy trade between the two regions is also growing fast. About 40% of GCC’s non-oil exports are to Asia. Saudi Arabia is the leading  1  Islamic Financial Services Industry Stability Report 2013, Islamic Financial Services Board (IFSB).

Efforts by the Accounting & Auditing Organisation for Islamic Financial Institutions (AAOIFI), Islamic  2  “The New Silk Road: Asia and the Middle East rediscover trade and investment opportunities”, Research Department, Kuwait China Investment Company (KCIC), January 2011. 3  Ibid. 4  “Economic growth moderates across Middle East”, IMF Survey, May 21, 2013. 5  “World Economic Outlook”, IMF, April 2013. 2  BIS central bankers’ speeches  Development Bank and Malaysia’s International Shariah Research Academy (ISRA) in research and fostering dialogue between Shariah Scholars from various jurisdictions are also narrowing the differences in views on Shariah issues in finance. As work on all these fronts progress, this will encourage greater interest internationally to participate in cross border financing and investment activities. The prospects for cross-border Islamic finance are already very bright. We are beginning to see cross border sukuk issuance within Asia, as well as between Middle East and Asia. As early as 2010, Malaysia’s Khazanah issued a $ sukuk in Singapore, while Japan-based Nomura issued 2-year $ sukuk in Malaysia. Last year, taking advantage of favorable currency swap rates, Singapore listed companies Natural Resources and Golden Agri tapped the Malaysian Ringgit (MR) sukuk market. In the last two years, two GCC firms, Abu Dhabi National Energy Company and Kuwait-based Gulf Investment Corp issued MR sukuk in Malaysia. There is considerable scope to issue more such cross-border sukuk, especially to finance the large infrastructure needs in both Middle East and Asia.