We already have the essential ingredients – the presence of the world’s largest global players in our takaful market, deep Shariah knowledge within our domestic takaful and retakaful companies, and an entire Islamic finance ecosystem that can be tapped into to really push the frontiers in 2/6  BIS central bankers' speeches  building retakaful capacity. We just need companies that are willing to lead the way. Building this will take time, resources and a long term perspective, but this may be a small price to pay to build scale, generate critical mass and position takaful as a credible solution for large and specialised risks. There is also a big opportunity in halal trade facilitation, especially in serving SMEs. The global halal industry is valued at around USD2 trillion. The takaful industry however, has to be more committed and visible in serving local and international halal businesses. After all, takaful has its roots in the Nusantara, when Muslim merchants who plied their trade in the Far East centuries ago were protected by early forms of takaful. This is why the takaful industry must join the banking industry in participating at the upcoming Malaysia International Halal Showcase. Participation will indicate intent, non-participation reflects poorly on the takaful industry, showing the lack of commitment or ability to spot opportunities, or maybe even both. This certainly has to be addressed if the industry is to make any meaningful progress, this sort of things matter.

Financial Globalisation Beyond international trade, financial globalisation has also expanded tremendously. Cumulative global bond and equity market flows are now more than 80 times larger than that in the year 2000 and far exceeded trade flows. There is no doubt that financial integration, if properly managed, can catalyse a more efficient allocation of productive capital and know-how transfers, with the intended benefits. However, financial globalisation has also been accompanied by highly-volatile short term portfolio flows, which frequently led to major disruptions to emerging economies’ financial markets. At the extreme, global financial flows can lead to the build-up of domestic vulnerabilities, such as currency mismatches, external indebtedness and broader financial imbalances. When financial globalisation becomes in itself a source of shock, financial markets can be easily overwhelmed. In Malaysia, two-way capital flows have increased by almost three-fold in the aftermath of the Global Financial Crisis. Similar to other emerging economies, we have also experienced several episodes of sharp capital flow reversals. Supported by firm macroeconomic fundamentals, our deep and broad financial markets were able to intermediate these flows in an orderly manner. The experience of emerging economies in dealing with capital flow volatility underscores the need to always keep our “own house in order”. While this is necessary, it is not sufficient. Often, we have seen how external developments that are beyond our control, such as the Taper Tantrum and trade tensions, could trigger periods of sharp capital flow volatility in emerging economies with severe consequences. There are “innocent bystanders”.