It has facilitated stronger financial and economic ties between Asia and Middle East. The sukuk market in particular, has become an important avenue for international fund raising and investment activities that generate significant crossborder flows. The sukuk market has experienced tremendous growth in the recent few years from an outstanding amount of USD33 billion in 2006 to USD180 billion as at end 2011. Malaysia is now evolving to become a major multi-currency bond and sukuk market. Important in this development are the initiatives that have been taken to strengthen the institutional and international infrastructure of Islamic finance. Most important is the emphasis being given to the development of the international financial infrastructure relating to financial stability. The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) was established in 1990 and in 2002, the Islamic Financial Services Board (IFSB) was established as the international prudential standard setting body for the Islamic finance industry in the areas of risk management, capital adequacy, governance, conduct of business and supervisory process. From ten members at its inception, the IFSB is now a 189 strong member institution comprising mainly regulatory and supervisory authorities. A more recent initiative is the establishment of the Islamic Financial Stability Forum (IFSF) as a platform for greater engagement between the regulatory authorities in the Islamic financial system and promoting more effective cross-border cooperation. Efforts now is focused on putting in place arrangements for enhancing liquidity management in the Islamic financial system.

In moving forward, measures will continue to be introduced to broaden further the participation of regional players in the domestic market through progressive liberalization of the foreign exchange administration rules and also the development of cross-border  2  BIS central bankers’ speeches  settlement infrastructures to enable more efficient and cost effective foreign currency trading and settlements. Arrangements supporting the regional integration process The region has more recently worked collectively towards establishing arrangements to support the economic and financial integration process. In particular, the ASEAN region has already benefited from the implementation of the ASEAN Free Trade Area (FTA), which was established to increase ASEAN’s competitive edge as a production base in the world market through the elimination of trade barriers within ASEAN. This is now further strengthened with the implementation of the ASEAN Investment Area which was adopted to promote greater flows of capital, skilled labour and technology within the region. In the area of financial markets, the ASEAN Capital Markets Forum Blueprint is also working towards achieving significant progress in building a regionally integrated market. This vision encapsulates free movements of capital, freedom for issuers to raise capital anywhere and for investors to have access to investment avenues anywhere within the region. In such a market, investors would be able to trade in ASEAN capital market products freely in any ASEAN market at a competitive fee from a single access point, with capital market intermediaries being able to provide services throughout ASEAN.