Significant progress has in fact been achieved in the development of the Malaysian sukuk market, underpinned by strong collaboration among the Government, regulatory agencies, players and investors. By early 2007, Malaysia accounted for 67 per cent, or about twothirds, of the global outstanding sukuk amounting to about USD47 billion. Malaysia is important for the global sukuk market, not only because it represents the largest sukuk market in terms of outstanding size, but also in terms of number of issuance which signifies a strong edge in market vibrancy. Malaysia's strong performance in sukuk activities can be attributed to several key factors that may be similarly leveraged by other issuers and players participating in the Malaysian Islamic capital market. These are: (i)  Firstly, Malaysia has the strong edge by having an efficient platform for sukuk issuance and trading activities covering the infrastructure and facilitative rules that contribute towards efficient price discovery and shorter time to market. The established legal, regulatory and Shariah frameworks in the Islamic financial infrastructure are key competitive advantage for Malaysia. These initiatives have been reinforced by the supporting financial infrastructure including the settlement and bond information systems. There is no restriction on the use of proceeds, ability to use international rating services, ability to hedge positions and ability to swap issuance proceeds into foreign currencies. Submission for foreign currency sukuks from qualified issuers with at least a single “A-” credit rating would be deemed approved upon proper filing of documents with the Securities Commission.

These measures are key MIFC measures and incentives and these include: (i)  Profits and dividends received by non-resident investors from holding of RM and non RM Islamic instruments issued in Malaysia are exempted from withholding tax;  (ii)  A special purpose vehicle (SPV) for Islamic financing purposes via the Islamic capital market is not required to comply with the administrative procedures under the Income Tax Act 1967;  (iii)  A company that establishes a SPV is given a tax deduction on the issuance cost of the Islamic securities incurred by the SPV;  (iv)  Tax deduction on issuance cost for all Islamic securities approved by the Securities Commission; and  (v)  Stamp duty exemption for 10 years on instruments relating to Islamic securities under the MIFC. Third area is outsourcing, insourcing and white labeling activities. Malaysia's more than two decades of experience in takaful operation and product design can be systematically structured as a complete solution to be offered to new takaful operators. Takaful operators in other jurisdictions may leverage on the services and experience of the Malaysian Islamic finance and takaful industry by outsourcing certain operational functions, such as product design and investment activities, thereby allowing them to focus their currently limited resources to important tasks of expanding the business. Strategic alliance by Malaysians can also be forged with takaful operators in other jurisdictions to provide total product solution in the form of white labeling arrangement.