beginning to participate in these trends thus strengthening further economic and financial linkages between these two dynamic growth regions. this enhanced inter regional linkages between asian and the middle east has created an environment of activity reminiscent of the old silk road. this suggests that a new silk road has emerged in which financial services providers across continents now operate on this new route. while the new silk road reflects the linkages between asia and the middle east, the silk road has always been extended to the rest of the world. there is thus the potential for greater participation by global investors and the international financial community. islamic finance essentially presents value propositions for both investors and issuers in the respective markets, in particular, the sukuk market. for investors, islamic financial products offer portfolio diversification and new investment opportunities in the form of new asset classes. for issuers, islamic finance allows access to a new source of funds and liquidity besides providing, new risk management options and new mechanisms for price discovery. a number of international financial centres have recognised islamic finance as an integral part of their financial markets in order to complete the suite of financial products and services available, and are therefore actively developing this segment. this trend is envisaged to stretch the new silk road from asia and middle east and extend to the west and to other parts of the world. further opportunities : the sukuk market among the more significant developments in islamic finance in the recent period has been the development of the sukuk market. although the size of the sukuk market is modest by global standards, the sukuk market has experienced remarkable growth, increasing at an average annual rate of growth of 40 percent. this growth is spurred in part by the growing funding requirements in emerging market economies, in particular, in asia and the middle east in which there has been increased investment activity. there has also been significant demand for the sukuk spurred by the high levels of surplus savings and reserves in asia and in the middle east. this strong demand has also has been reinforced by the strong financial flows in the international financial system that is in search of higher returns and greater diversification of risks. it has been estimated however that about 80 percent of the sukuks issued have been subscribed by conventional international investors. besides the intrinsic value of the sukuk which are largely asset - backed, convertible for shares or exchangeable with shares, such issuances are attractive as they have a wider investor base that comprise conventional and islamic investors. with the

investment in research and development and hence promote innovation, the development of the pool of talent, and the greater use of technology in islamic finance. islamic finance as an emerging form of financial intermediation would require tremendous investment in research and development to promote innovation. of importance is to develop a broader range of islamic financial market instruments that include instruments with equity ownership features, islamic asset - backed securities, inclusion of permissible forms of credit enhancements as well as shariah - compliant risk mitigating instruments. the development of an islamic derivatives market for hedging is required for market - making activities to support the development of secondary markets. malaysia has recently established a shariah scholar's fund to fund such research and development efforts. the fund also aims to promote greater engagement among the international shariah scholars and thus provide a platform for deliberation on the shariah compatibility of newly developed islamic financial instruments and markets. as islamic finance continues its robust international expansion, an adequate supply of talent and expertise is vital to support the growth. while shortages in talent are now being felt, this is being addressed on several fronts. to develop the expertise to meet the increasing manpower requirements of islamic finance, malaysia has in 2006 established the international centre for education in islamic finance ( inceif ). it is envisioned that inceif acts as a professional certification body and education institute for post - graduates in islamic finance. reinforcing this is the international centre for leadership in finance ( iclif ) in malaysia that provides for leadership and management programmes for the financial services sector including for islamic finance. as islamic finance forges ahead, successful islamic financial institutions will be those that have the scale and are able to exploit the full potential and opportunities that arise from the advances in information technology ( it ). in embracing new leading edge technology, the potential for the islamic financial industry to provide new products and services will be enhanced. it also represents the potential to increase access through a wider range of new delivery channels, including enhancing efficiency while reducing costs for consumers and businesses. it needs to be leveraged on in making strategic decisions in the alignment of the business, in elevating the institutional capacity and operational efficiency and strengthening risk management capabilities. despite the more challenging and dynamic environment we have seen, islamic finance has continued to emerge as a vibrant and resilient form of financial intermediation that is increasingly being embraced on a global scale to become an integral part of the international financial system. in the process of its