In this area, Islamic finance instruments will have to comply with conventional or general financial regulation, while maintaining their specificities. In particular, the contractbased nature of Islamic finance normally linked to an underlying asset poses challenges in areas such as risk weight analysis and the fiscal treatment of Islamic-type instruments. BIS central bankers’ speeches  1  Financial instruments have to be carefully calibrated to take due account of the risks linked to the underlying asset and its liquidity. In taxation, there are problems of double or multiple taxation and equality of treatment with interest-based instruments that also need to be addressed. Several European countries are adapting their legislation in this respect. In addressing these regulatory challenges, the IFSB is playing a very important role by providing a forum for coordination and dissemination of better international practices. It is also contributing to the integration of Islamic finance into the general framework of conventional finance regulation, as established by international bodies, such as the FSB itself and the Basel Committee on Banking Supervision. In parallel, other institutions such as the G20, the IMF and the World Bank are stepping up their efforts to further the analysis of Islamic finance and to identify the necessary reforms to its insertion in the international financial system. Many of these issues will be dealt with in the different sessions of today´s Forum. The agenda includes four technical sessions on regulatory aspects and the specific challenges regarding Sukuk markets, equity-based financing and financial inclusion.

In the early phases of the upturn, output growth primarily reflected a strong increase in the number of person-hours worked partly owing to the marked increase in average working hours when sickness absence fell in 2004. A high level of inward labour migration after EU enlargement in 2004 also contributed to increasing economic capacity. Historically, there has been a close relationship between the change in prices for domestically produced goods and services and the level of capacity utilisation, here measured by the output gap. This relationship broke down in 2006. Surprisingly low inflation through 2006, despite appreciably stronger output and employment growth, may indicate that developments have been influenced by conditions on the production and supply side of the economy. The present economic expansion differs from previous upturns in that inflation has remained low so far despite strong growth and increasing capacity utilisation. There are probably several reasons for this. First, low import prices and high prices for our commodity exports have improved Norway’s terms of trade considerably. Prices for oil and gas, shipping, fish, industrial commodities and engineering products have increased considerably. Moreover, Norwegian importers have gained access to new markets in central Europe and Asia which offer considerably cheaper consumer goods. The terms of trade have improved by about 40 per cent since 2002. A similar situation has not been seen since World War I when earnings in the shipping industry and other export industries were exceptionally high for a period. Second, an ample supply of labour has boosted output growth.