Zeti Akhtar Aziz: Thoughts and visions on Islamic finance Welcoming remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Malaysia Showcase Dinner, Manama, 3 May 2010. *  *  *  I have the distinct honour today to welcome distinguished guests to the Malaysia Showcase Dinner, organized in conjunction with the 7th Islamic Financial Services Board Summit. Let me first of all express our appreciation to H.E. Tun Dr. Mahathir Mohamad for accepting our invitation to speak at this event, sharing his thoughts and vision on Islamic finance moving forward. Tun Mahathir needs no introduction. During his twenty two years of leadership, Malaysia experienced modernization and economic prosperity. Malaysia is today a forward looking nation that continues to sustain its economic performance. During the recent unprecedented international financial and economic crisis in 2008 and 2009, the Asian region has demonstrated remarkable resilience. The Asian economies have strong fundamentals with low public debt levels, providing flexibility to the governments in the region to implement large fiscal stimulus. In addition, strong and well capitalized financial institutions prevented disruption to credit flows to the private sector. In addition, the household and the corporate sectors in Asia are not over leveraged, thus are in a better position to sustain consumption and business activity. Asia is also not confronted by widespread unemployment. Malaysia is very much part of this strong and vibrant region. For Malaysia, the economic recovery is expected to continue to gain further strength in 2010.

GDP growth rates for most of these economies will likely turn positive in 1999. The outlook for the year 2000 is similarly benign. Indeed, the concern for the Korean economy has even turned into one of over-heating. Asia’s nascent recovery has set it apart from other emerging economies. Discerning international investors are placing much lower risk premiums on Asian economies compared to other emerging economies. For example, the difference between the yields on Latin American and Asian US dollar bonds has risen from less than 100 basis points in August 1998 to around 250 basis points in November 1999.1 The Singapore economy too, has recovered strongly, rising together with the regional economies. GDP grew by an estimated 5.6% last year, compared to 0.3% in 1998. This year, we expect the momentum to be sustained, with GDP growth at around 4.5-6.5%. But we cannot be complacent. To ensure that Singapore continues to prosper, we need to remain competitive, regionally and globally. Global markets have become much more integrated and global competition has intensified. We need to be part of this globalisation process and not close our doors to it. This is why we have been gradually introducing more competition into previously protected sectors of the economy, such as the financial sector and the telecommunications sector. These are challenging times ahead for us. But as economic recovery gathers pace, it is easy for euphoria to overtake the need for improvement and change. It could also tempt us to scale back or postpone painful restructuring initiatives.