zeti akhtar aziz : building a progressive islamic banking sector - charting the way forward speech by dr zeti akhtar aziz, governor of the central bank of malaysia, at the seminar on 10 - year master plan for islamic financial services industry, “ building a progressive islamic banking sector charting the way forward ”, putrajaya, 22 june 2005. * * * " the islamic financial services industry is now at the threshold of its next stage of development. this decade has seen significant progress being achieved. islamic finance has now gained wide acceptance as a form of financial intermediation. the sustainability of this progress, however, demands due attention to the future - to look beyond the near term, and to take a longer - term perspective into the needs of the future and to evolve an islamic financial system that will best serve these needs. an essential part of this process is the clarity of the vision and the objectives that are to be achieved. this provides the starting point for the formulation of a master plan which defines the blueprint for the future development of islamic finance. while envisioning the future will provide the strategic focus and the common goal to be achieved, of greater importance will be the actions that need to be taken to make it happen. " your excellencies distinguished guests, ladies & gentlemen, i am most honoured to be invited to speak at this seminar on the ten - year master plan for the islamic financial services industry organized by the islamic development bank and the islamic financial services board to discuss the key issues and considerations in the formulation of a master plan for the development of islamic banking and finance. our goals are to develop an efficient, progressive and comprehensive islamic financial system that is able to contribute to the overall growth process and development. in this first session on the banking sector, the focus of my address will be on the blueprint for building a progressive islamic banking sector. this will include a discussion of the building blocks that are necessary to provide the foundations on which subsequent enhancements can be built. i will also take this opportunity to share with you malaysia's experience in formulating a ten - year financial sector master plan which was launched in 2001, and our experience in the implementation of the plan, in particular, for the development of the islamic banking sector. the need for a master plan islamic finance is now taking on a new dimension to meet the changing requirements of consumers and businesses ; to participate in a more liberalized and globalised environment and to become increasingly more internationally integrated. the

the regional central banks. to maintain effective surveillance, importance is also placed on regular engagement with the financial market participants, the industry and the public. an emerging dimension in the changing environment is to strengthen central bank communications. the aim is to enhance market understanding and awareness of the benefits as well as the potential risks and the policy initiatives in a network economy. the regular publication of the bank's monetary policy statement is to appraise markets of the direction of monetary policy. other measures include outreach programmes on investor and consumer education to enhance financial literacy. finally, bank negara malaysia has also put in place business continuity plans as part of its contingency programme to deal with all eventualities and threats to financial stability, in particular, those emanating from a more networked financial system. similar contingency plans have also been introduced in the domestic financial industry, where regular test - runs are conducted to ensure the integrity of all the back - up systems. going forward, central bank cooperation continues to be enhanced to strengthen risk management capabilities in the asian network economy. measures to enhance national surveillance is complemented by cooperation on regional surveillance mechanisms to provide comprehensive oversight over the entire regional network. closer cooperation with the respective regulators is also important to promote greater understanding of the nature of the risks involved and to facilitate the development of appropriate circuit breakers and mechanisms to contain the risks in the network. in addition to the establishment of business continuity plans to help to mitigate risks arising from outside the financial network, the harmonisation of regulatory and financial standards would facilitate the containment process. these cooperative efforts to harmonise standards are to support financial infrastructure development in facilitating the flow of funds and settlement requirements across borders. conclusion datuk seri panglima andrew sheng's lecture today will explore the behaviour of markets as networks, and the implications of such network behavior on monetary and financial stability in the asian network economy. going forward, it can be expected that the asian networked economy will become increasingly more entrenched. while this will open up new opportunities for enhanced efficiency and productivity gains in asia, a better understanding of the risks inherent in networks will better prepare the regional economies to address these risks. this will be a shared responsibility within and among the regional economies. closer regional cooperation, strategic alliances and smart partnerships will be important key responses for enhancing the prospects for higher growth and development in asia. thank you.