largely driven by increased domestic demand, and further spending on infrastructure to address present shortfalls and facilitate economic expansion. imf has projected asia to grow by 5. 7 % in 2013, and 6. 0 % the following year, exceeding the outlook for the global economy. 5 growth in asia over the medium term will be supported by continued urbanisation, favourable demographics and increased intra - asian trade and investment. second, multilateral islamic finance agencies are making steady headway in addressing issues that contribute to some fragmentation of the islamic finance industry. work by the ifsb in setting international standards and best practices for the industry is providing greater uniformity of regulatory environment for islamic financial players globally. the international islamic financial markets ( iifm ) is collaborating with isda and industry players to develop standardisation of islamic financial products, documentation and related processes that will facilitate cross - border islamic hedging, risk management and money market activities. efforts by the accounting & auditing organisation for islamic financial institutions ( aaoifi ), islamic “ the new silk road : asia and the middle east rediscover trade and investment opportunities ”, research department, kuwait china investment company ( kcic ), january 2011. ibid. “ economic growth moderates across middle east ”, imf survey, may 21, 2013. “ world economic outlook ”, imf, april 2013. bis central bankers ’ speeches development bank and malaysia ’ s international shariah research academy ( isra ) in research and fostering dialogue between shariah scholars from various jurisdictions are also narrowing the differences in views on shariah issues in finance. as work on all these fronts progress, this will encourage greater interest internationally to participate in cross border financing and investment activities. the prospects for cross - border islamic finance are already very bright. we are beginning to see cross border sukuk issuance within asia, as well as between middle east and asia. as early as 2010, malaysia ’ s khazanah issued a s $ 1. 5b sukuk in singapore, while japan - based nomura issued 2 - year $ 100m sukuk in malaysia. last year, taking advantage of favorable currency swap rates, singapore listed companies natural resources and golden agri tapped the malaysian ringgit ( mr ) sukuk market. in the last two years, two gcc firms, abu dhabi national energy company and kuwait - based gulf investment corp issued mr sukuk in malaysia. there is considerable scope to issue more

the growing size of these institutions, their spread across geographic boundaries, and their diversity of products and customers, have made it necessary for decision - making to be decentralized, at least to some extent, in order to be responsive to the needs of customers. but with more autonomous units, an internationally - active and complex bank has to expend more effort to identify, measure, and control the risks arising from its diverse and far - flung activities. traditional rules of thumb used by management and supervisors to assess risks and to ensure the adequacy of capital to buffer risks are no longer adequate. and continuing financial success depends critically on how a bank responds to the risk management challenges. in response to these challenges, the successful banks have developed enhanced tools for measuring risks. these can be grouped into two broad categories. the first category of tools are those that give a bank the ability to discriminate among risks by differentiating the riskiness of customers, and of various banking facilities and products. the second category of tools includes those that give a bank an enhanced capability to quantify risks. the end of the road for basel i in and of itself, the enhanced capability of institutions to differentiate and measure risks has been a welcome development. but, the increasing sophistication of institutions in risk management meant that the crude system of risk weights under basel i became less meaningful in ensuring the adequate capitalisation of large, complex banking institutions. by the mid - 1990s, less than five years from the official implementation of basel i, 1 it was apparent that basel i was becoming less relevant for some banking institutions. a widening gap was opening up between the requirements of basel i and the way in which banks, particularly the large, internationally active banks, and some of their unregulated competitors, were thinking about risks. this placed banks at a competitive disadvantage vis - a - vis some of those unregulated competitors, and was leading to extensive capital arbitrage by banks. the sophisticated approaches under basel ii were devised as a solution to this problem. the underlying philosophy of basel ii was simple and sensible : ( i ) where possible, rely on the risk management practices of banks as the basis for setting more risk sensitive capital requirements. ( ii ) provide incentives to banks to continuously improve their risk management practices. as this idea began to take shape, and the basel committee began to fall in love with it, we persuaded ourselves that it would lead to a supervisory nirvana, at least for the well