zeti akhtar aziz : growing significance of islamic finance opening remarks by dr zeti akhtar aziz, governor of the central bank of malaysia, at the malaysian islamic finance 2008 issuers and investors forum – issuer's day ( launch of the mifc global communications campaign ), kuala lumpur, 11 august 2008. * * * bismillahir rahmanir rahim it is my pleasure to be here this morning at this third malaysian islamic finance ( mif ) 2008 issuers and investors forum. it was at the first mif forum in august 2006 that the malaysia international islamic financial centre or mifc initiative was launched. this was part of our efforts to strengthen further our economic and financial linkages with the rest of the world. it is our firm conviction that as an international islamic financial hub this will be an important element facilitating the realisation of this aspiration. since our launch, other traditional financial centres such as hong kong, singapore, dubai and london have also intensified their participation in the islamic financial system. as one of the fastest growing segments in the international financial system, there is a growing number of islamic financial institutions and an increasing range of innovative islamic financial products. of importance is that this progress has been supported by a rigorous and well developed legal, regulatory and shariah framework, thereby ensuring its stability and sustainability. the operating environment for islamic finance with the internationalisation of islamic finance and the rapidly changing international islamic financial landscape, islamic finance is becoming increasingly integrated to the international financial system. this development has taken place in all segments of the islamic financial system including the islamic banking and takaful industry, and in the islamic money and capital markets. there are now a large number of diverse players and institutions in the islamic financial system. there has also been a growing range of products and services being offered. the pace of product innovation has intensified with more sophisticated islamic financial products including the structured and investment - linked products. these products have become competitive both in terms of product structure and pricing. there has also been enhanced depth of the islamic financial markets. this has increased the attractiveness of the islamic financial instruments as an asset class for investment. the prudential standards are developed by the islamic financial services board ( ifsb ) to govern the operations of islamic financial institutions. the ifsb has, not only, an important role in the harmonisation of prudential standards, but also contributes towards the consistent development of islamic finance across different jurisdictions. several parts of the world, including

hope that i am able to dispel these misperceptions surrounding malaysia ’ s fea rules specifically on activities that can be undertaken by non - residents for investments in malaysia. it is also my hope that you will make the effort to convey this message to your colleagues, clients and international counterparts. let me now share with you five of the misconceptions myth 1 : fea rules are restrictive we recognized that for an investor, capital mobility is important. malaysia has always ensured that the rules are not restrictive to capital flows or do not penalise investors who contribute to the development of the country. today, non - residents are free to transfer their funds into malaysia for investments in any type of ringgit assets and also remit out of malaysia, all income as well as proceeds from the divestments of these ringgit assets in foreign currency. also, there is no levy imposed. myth 2 : fea rules are restrictive on non - residents to manage risk on investments in malaysia apart from free capital mobility, the ability to manage risks of investments is equally essential for an investor. in recognizing this need, the current fea rules freely allows non - residents to hedge ringgit exposures of their investments in ringgit assets with the onshore banks supported by underlying commitment. such transactions can be settled on gross or net basis and there is also no restriction on the minimum tenure of the hedge. myth 3 : fea rules are restrictive on non - ringgit transactions undertaken onshore by non - residents non - residents are free to undertake any type of non - ringgit transactions with the onshore banks. they are also free to open any number of foreign currency accounts with the onshore banks with no limits imposed on the maintenance of funds in these accounts. funds in these accounts are also free to be remitted abroad. myth 4 : fea rules are restrictive on accessibility to onshore financing by nonresidents there has never been any restrictions on the accessibility to foreign currency financing by non - residents from onshore banks. they are free to borrow any amount in foreign currency from the onshore banks as well as from non - banks residents which do not have any domestic ringgit borrowing. for prudential purposes and for efficient allocation of domestic resources, limits are currently only applicable on foreign currency lending by resident lenders which have domestic ringgit borrowing and are converting ringgit into foreign currency for the lending. with the progressive liberalisation of the fea rules, non - residents are