of islamic finance in contributing to global financial stability this current global financial crisis has prompted a search for an enduring solution to ensure the stability of financial systems. the challenge before us is to build a new financial architecture that would allow for the more efficient functioning of not only financial intermediation within national economies but also across borders. islamic finance, with its emphasis on a strong linkage to productive economic activity, its inbuilt check and balances and its high level of disclosure and transparency offers this. indeed, inherent in islamic finance is the explicit elements that address several of the issues that have surfaced in the conventional financial system during the current crisis. at the centre of this recent global financial crisis was the breakdown in governance that led to indiscriminate lending, excessive risk - taking and overzealous financial innovation. this is avoided in islamic finance with the requirement that islamic financial transactions must have an underlying economic activity and that the process of innovation and formulation of islamic financial products and services must be done carefully and in accordance with shariah. the crisis has provided an important lesson that the development of new financial instruments embraces this process while being able to effectively compete in the global arena. strengthening the islamic financial system as islamic finance becomes an integral part of the global financial system, it has become increasingly exposed to the systemic implications of external developments. there is the risk of the contagion effects arising from financial and economic disruptions that emanated from the conventional markets. the correction of asset prices and the economic contraction following this international global financial crisis has been on an unprecedented scale. islamic finance is therefore confronted with the risks associated with these second round effects that need to be managed. this recent financial market turmoil in the advance economies also demonstrated the consequences of liquidity constraints. this has underscored the importance of a strong and well developed liquidity management infrastructure. an important aspect that needs to be urgently addressed in the islamic financial industry is the need to enhance the ability of islamic financial institutions to manage liquidity. this requires the development of shariah compliant financial instruments that facilitate this and a well internationally functioning market infrastructure to facilitate cross border management of liquidity, so that liquidity risks are effectively managed. malaysia has, for more than a decade now, an efficient functioning islamic money market which has accorded greater monetary flexibility in the islamic financial system. while the market is in domestic currency, it has drawn wider participation from the international financial community. as part of the global collaborative efforts to enhance

zamani abdul ghani : malaysia - an investment destination speech by mr zamani abdul ghani, deputy governor of the central bank of malaysia, at the investorsa€™ conference, kuala lumpur, 22 june 2005. * * * bismillahirrahmanirrahim your excellencies, distinguished guests, ladies and gentlemen, assalamualaikum warahmatullah hiwabarakatuh and good morning, first of all, allow me to welcome all of you to this conference on " malaysia : an investment destination " held in conjunction with the 30th idb board of governors'meeting. we are most heartened that there are representatives here this morning from more than one hundred global financial institutions and from over thirty countries. i would like to welcome all of you to malaysia especially those who are here for the first time. i hope you have had a good rest after a journey from your respective countries because we have a very special program waiting for you. indeed it is a great honour to be given the privilege to host this historic conference. the theme for the conference " malaysia : an investment destination " is a fitting choice as we would highlight to you a wide range of investment opportunities available for you in malaysia. this theme is most appropriate given a fast changing global and regional financial landscape, driven by financial liberalization and consolidation, economic transformation and more discerning and demanding investors. ladies and gentlemen, we will do our best to ensure that this conference will be rewarding and useful for you. over this twoday period, we have lined up a panel of distinguished speakers, including the honourable prime minister of malaysia himself as well as governor of bank negara malaysia. the invited speakers are from various prestigious institutions, domestic and international with unique expertise and experiences. you can be rest assured that the speakers we are bringing to you are renowned in their own field and their views are well sought after by global investors and the financial fraternity. the major highlight of this conference is the keynote address by the honourable dato'seri abdullah bin haji ahmad badawi, the prime minister of malaysia who is also the finance minister. his address will offer invaluable insights into malaysia's policy and strategies to sustain its strong growth performance. the next significant highlight of this conference is a speech by tan sri dato'seri dr. zeti akhtar aziz, the governor of bank negara malaysia, who will touch on investment opportunities in malaysia in an evolving global environment. this