heng swee keat : singapore ’ s commitment to the development of islamic finance opening remarks by mr heng swee keat, managing director of the monetary authority of singapore, at the singapore sukuk signing ceremony, singapore, 19 january 2009. * * * your excellency abdulla hasan saif, chairman, the islamic bank of asia, mr viswanathan shankar, group management committee member, standard chartered bank, mr lucien wong, managing partner of allen and gledhill, ladies and gentlemen, it is my pleasure to welcome you this afternoon to the mas and to our overseas guests, a warm welcome to singapore. singapore is committed to the development of islamic finance. the financial industry has encouraged us to develop shariah compliant financial services, by building on our existing strengths in banking, trade finance, capital markets and asset management. mas is an integrated regulator – we oversee all forms of financial services. in performing this role, we adopt a basic principle that financial products and activities with similar underlying risks are given similar regulatory treatment. however, there are distinctive features of islamic finance that put it at a disadvantage, if we were to just apply the conventional regulatory framework. we are committed to a level playing field, by ensuring that islamic financial activities with the same underlying economic essence are accorded the same regulatory treatment as those in conventional finance. in this regard, we have already implemented several measures, including removing the double - imposition of stamp duty for shariah - compliant financing structures, and refining our rules to allow banks to offer murabaha financing and deposits. as a further step, i am happy to announce that with effect from today, singapore - based banks may enter into murabaha interbank placements and offer ijara wa igtina financing. these changes will enable the financial institutions offering islamic finance a wider range of instruments in their management of liquidity and in their matching of assets and liabilities. these changes have been made after detailed consultation with the industry. mas will continue to work closely with the industry to ensure that our regulatory and tax framework, and other necessary infrastructure and conditions are in place to foster good risk management and the further growth of islamic finance in singapore. i announced at the world islamic banking conference in bahrain two months ago that we were in the final stages of setting up a facility to issue sukuk. today ’ s signing ceremony marks a further milestone in our developmental efforts. with the help of our financial and legal advisers

, a successful market - based, case - by - case approach also needs to be principled. i would suggest that the essence of an effective case - by - case approach is the development of viable plans that link broad, generally acceptable principles to the particulars of a given situation. g to achieve this, a clearer and more transparent articulation of the public sector ’ s objectives is necessary. greater emphasis and clarity are needed as to the purposes and limits of public intervention, and the extent to which those interests warrant different degrees, modes, and timing of public and private sector involvement, depending on the particular country and circumstances. in this way all parties will be better placed to understand current developments and how the international community might react to future strains. • there are, of course, other points of view. in particular, it has been suggested that an early recourse to broad suspensions of debt service, perhaps amplified or reinforced by capital controls, would increase the manageability of crises and enhance predictability. • my reading of the record convinces me that trying to preemptively override market processes would do the opposite. let me share a few thoughts with you on this point. g the desire for certainty and control which seems to underlie such proposals is understandable, as it appears to offer the promise of using less public money, and seemingly entails less risk that creditors will be bailed out for poor credit decisions. but the control and manageability that might result may be more seeming than real. g for one, a perceived disposition to preemptively lock the door seems likely to send investors heading for the exits all that much sooner. as a result, many avoidable crises soon may become inevitable. and the problem of contagion, whereby difficulties in one case spread to many, would seem likely to worsen. g moreover, a perceived weakening of the international community ’ s commitment to voluntary, market - oriented approaches and its support for honoring contractual commitments would likely create deep distrust, making it harder to encourage cooperation between debtors and creditors in ultimately resolving the crisis. g an overly quick recourse to payment suspensions also risks discouraging precisely the types of flows that we should wish to encourage, that is, longer maturities with better risk - sharing characteristics, such as long - term bonds and equities. in a crisis, the hottest money leaves first - - by definition. it seems counterproductive to seek to penalize those who stay.