zeti akhtar aziz : the challenge for a global islamic capital market – strategic developments in malaysia keynote address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the sukuk summit 2007, " the challenge for a global islamic capital market – strategic developments in malaysia ", london, 20 june 2007. * * * ladies and gentlemen, distinguished guests. it gives me great pleasure to be here in london to speak at this landmark sukuk summit. the islamic bond market – the sukuk market – represents a key component of the islamic financial system. this recent decade has seen the accelerated development of this market and its significant role in strengthening the evolution of islamic finance. the global development of this market is particularly important in this more challenging financial and economic environment. it has contributed to enhancing the effectiveness and efficiency of the mobilisation and allocation of funds within national financial systems and in the international financial system. this development is also evidenced by the level of innovation and sophistication of the products and services being offered by the islamic financial institutions. the encouraging development of the islamic bonds market has also had an important role in enhancing the linkages between financial markets as it facilitates cross - border flows in the international financial system. the sukuk market as an important source of financing for large scale investment projects, has a key role in facilitating the economic development process. for investors, it provides greater potential for diversification into new asset classes. my remarks today will focus on the vast potential of the islamic bond market in the economic development process, in its role in ensuring financial stability and its role in promoting greater financial integration in the global financial system. i would also like to take this opportunity to share with you malaysia's experience in the development of this market. the malaysian sukuk market has now evolved into one of the world's largest islamic bond market. immense role of sukuk market in the economic development the financing requirements for economic development are immense. the bond market is key to meeting these funding needs for both the public and private sectors. this is particularly important for emerging market economies. in the middle east and in asia, two of the fastest growing regions in the global economy are taking place following privatisation and implementation of infrastructure projects. asia alone will be spending an estimated usd1 trillion on infrastructure over the next five years, while infrastructure requirements in the middle east are estimated to be usd500 billion over the same period. the challenge is to

includes the banking and takaful industries, and the islamic money and capital markets – a matrix which mutually reinforces the integrity and stability of the islamic financial system. this is supported by the financial infrastructure, the legal and regulatory framework and the expertise to contribute to the growth of islamic finance. malaysia ’ s achievements in developing the sukuk market allow me to share the malaysian experience in developing the sukuk market. the malaysian islamic bond market has made significant progress since the first sukuk issue in 1990 by a multinational corporation operating in malaysia. the development of the market involved initiatives to facilitate an efficient issuance process, the price discovery process, the broadening of the investor base, the establishment of a benchmark yield, the liquidity in the secondary market and the strengthening of the regulatory framework. these initiatives have been reinforced by the legal and shariah framework and the supporting financial infrastructure including the settlement and bond information system. following the development of a robust and vibrant domestic market, initiatives have now been taken to raise the significance of the international dimension of our islamic financial system. this has included wide ranging liberalization measures including bringing in new islamic finance foreign players into our system through the issue of new licences and allowing for greater levels of foreign interest in our domestic financial institutions. the liberalisation has also involved the potential for greater foreign participation in our domestic financial markets. in 2002, malaysia achieved a further significant milestone when the malaysian government issued the first global sovereign sukuk, raising usd600 million. with this issuance, it became an international benchmark for the issuance of global sukuk. the sukuk issue was listed on the luxembourg stock exchange, labuan international financial stock exchange and bahrain stock exchange. there has since been further sovereign issues in the global capital market. in 2006, the malaysian market saw the launch of a sukuk using concepts such as mudha - rabah, mu - sya - rakah and ijarah. the issuers included malaysia's government - linked companies. a landmark example was the usd750 million exchangeable sukuk musyarakah by khazanah, the government's investment corporation for the purpose of selling a stake in telekom malaysia. it marked the world's first issue of its kind, incorporating full convertibility features common to conventional equity - linked transactions. following these developments, the malaysian sukuk market has attracted a wide range of lead arrangers. in