assets expected to reach us $ 6. 5 trillion by 2020. 2 5. a major growth area for islamic finance is the sukuk market. ten years ago, new sukuk issuance was only a modest us $ 5 billion. in just ten years ’ time, annual sukuk issuance has already surpassed us $ 100 billion, amounting to us $ 117 billion in 2013 which was more than 20 times higher than the figure in 2003. 3 6. the strong momentum of the sukuk market is underpinned by the increasing demand for sukuk, especially sukuk of high credit ratings, from islamic investors. over the years, the gulf region has accumulated a huge amount of oil revenue. the source : kfh research source : kfh research source : zawya bis central bankers ’ speeches current account surpluses in the gulf cooperation council ( gcc ) countries last year were estimated to be more than us $ 300 billion, 4 while assets under management by sovereign wealth funds in those countries amounted to as much as us $ 2 trillion at the end of last year. 5 islamic investors in the middle east and other islamic countries generally have a preference for investing in shariah - compliant assets. with the expanding liquidity pool in the islamic world, naturally, there is a commensurate increase in the demand for islamic investment instruments globally. 7. as an international financial centre and given our unique role as a gateway to china, hong kong is well - positioned to provide an effective platform to channel the surplus funds from the islamic world to this part of the world where there is a huge financing need to sustain the high growth of the asian economies. our platform will enable islamic investors to access investment opportunities in asia, particularly china, while at the same time allowing fund raisers to tap into the liquidity pool in the islamic world. 8. what ’ s more, sukuk are becoming a mainstream asset class in the global financial system. financial innovation and tax reform in major international financial centres have made sukuk largely comparable to conventional bonds. apart from islamic investors, sukuk are increasingly appealing to conventional investors as a way to diversify their investment portfolios. with such promising growth potential, developing islamic finance would open up vast business opportunities and bring tremendous benefits to the financial services industry in hong kong. it would also help widen the range of financial products and broaden the types of market players here, adding to the breadth, depth and

engaging in risky or unproductive investments. to make things worse, both the banks and the corporates were taking excessive currency risks by borrowing in foreign currencies to fund projects that could only generate income in domestic currencies. poor risk management on the part of banks, ineffective banking supervision, political interference, and a critical lack of transparency prevented disciplinary mechanisms from functioning properly. the result is a staggering bank restructuring cost of an estimated 25 % of gdp for the crisis - hit economies in asia. the manila framework group is a forum comprising senior finance and central bank officials from 14 economies, namely, australia, brunei darussalam, canada, china, hong kong sar, indonesia, japan, korea, malaysia, new zealand, the philippines, singapore, thailand, the united states of america. senior representatives of the international monetary fund, the world bank, the bank for international settlements and the asian development bank also attend the meeting. the group meets twice a year. since the outbreak of the asian financial crisis, economies all over the region have taken important strategic steps to promote conditions that foster a full and speedy recovery. but recovery cannot be sustained unless it is accompanied by thorough structural reforms. it is encouraging to see that notable initiatives are taking place in asia where extensive programmes are in progress to restructure and recapitalise banks. there are also efforts to tackle the problems posed by over - stretched and highly indebted corporations. but there is a risk that the problems that were so evident then will be swept under the carpet in the face of rapid growth. it is crucial that the reform momentum should not be allowed to falter, as it could undermine the fledgling recovery. challenges of monitoring and surveillance of capital flows the second challenge i see is to understand better the risks posed by volatile capital flows and how to capture data to facilitate our understanding of such flows. for a long time it has been taken for granted that capital flows are analogous to trade flows : that, wherever they occur, and in whatever form, they invariably benefit long - term economic development, and that therefore the more liberal the flows, the greater the benefit. but between the processes of trade liberalisation and financial liberalisation there lies a great difference. in the case of trade liberalisation, there are well - established statistical systems to capture data on international trade, and hence their impact on the real economy. in addition, there has been parallel development of institutional framework and rules to deal with trade measures like tariffs, quotas,