financial markets, the increased presence of financial institutions in new jurisdictions and more recently, the increased number of islamic financial institutions which have shareholders from multiple jurisdictions. greater financial integration has essentially been facilitated by the more rapid pace of liberalisation that has been supported by the progress that has been achieved in the development of the international islamic financial infrastructure. this trend has also been prompted by the need for greater diversification of risks in the management of funds. in the current international financial environment, this trend has become more pronounced prompting investors to consider other asset classes and markets that provide stability. thus far, the global financial crisis has had limited direct effects on islamic finance. while islamic finance by its very nature only engages in transactions that have underlying tangible productive activities, the slower overall growth and the increased uncertainties have affected pricing and activity in certain market segments. however, this in part reflects the shift in activity from the financial markets to the islamic financial institutions. the scope of islamic financial business has now expanded to more sophisticated financial products in response to the changing global customer base. such shariah - compliant products include private equity, project finance, the origination and issuance of sukuk, as well as fund, asset and wealth management products. the sukuk market in particular, has become an important avenue for international fund raising and investment activities. this market has expanded by an annual growth rate of 40 %. the year 2007 saw an exceptional growth of the global sukuk market which expanded by more than 70 %. new issues during the year reached a record high to about us $ 47 billion and the outstanding global sukuk market has now surpassed the us $ 100 billion mark. up until august this year, it has held its ground with a total global issuance now exceeding us $ 14 billion, and is expected to exceed usd200 billion in 2010. this growth is spurred in part by the growing funding requirements in emerging market economies, in particular, in asia and the middle east. this is reinforced by the continued confidence of investors in the islamic financial instruments. malaysia's islamic finance journey let me now turn to malaysia's journey in the development in islamic finance. islamic finance in malaysia first started as a strategy for greater financial inclusion, so as to have a greater outreach to the underserved segment of society to basic banking and insurance products that are compatible with shariah principles. after three decades, the islamic financial industry in malaysia has evolved as an integral and competitive component of the overall financial system that

##ra ) was established this year to conduct applied shariah research on the contemporary islamic finance issues. isra also provides a platform that promotes active engagement and dialogue among global shariah scholars that promote mutual respect in shariah and the convergence of views from different jurisdictions in the global islamic financial system. the third strategy is to promote greater financial integration with the global islamic financial system. the malaysian islamic financial system has also been progressively liberalised to allow for increased foreign entry and participation in our financial system, thus facilitating greater cross border flows and thus strengthening the international financial inter - linkages. this has taken the form of issuance of new licences and increasing foreign participation in both islamic banks and takaful companies to 49 %. new licences were also issued to foreign fund managers and foreign stockbrokers. in this new phase of development for islamic finance, malaysia as an international islamic financial hub, has increasingly become a meeting place for businesses from different parts of the world that need to raise funds and for investors that have surplus funds for investment. islamic finance going forward there is now a strong and growing demand for islamic financial products in the global market, far exceeding the current availability of financial products and services being provided by the islamic financial institutions. going forward, there is therefore tremendous upside potential for islamic finance. as the pace of development of the islamic financial services industry accelerates, the increasingly more complex and challenging environment will continue to shape the advancement of the industry. central to this will be the expansion of the business parameters and innovative product offerings. for this, there is increased investment in research and development to yield new instruments and structures to meet the changing requirements of the international community. an area of focus, in particular, is related to the development of mechanisms for risk mitigation and liquidity management. of importance, are the solutions needed to converge the market requirements and the shariah compliance. increased innovation also calls for greater emphasis on the implementation of best practices and higher standard of risk management. vital to this is the implementation of the prudential standards promulgated by the ifsb. there is also a need to leverage more on it applications and the strengthening of management capabilities of the islamic financial institutions. going forward, with the increased awareness and understanding of islamic finance, the role of market discipline will become increasingly important in driving islamic financial institutions towards ensuring shariah compliance in the operations, in improving operational efficiency and in instituting sound and dynamic risk management practices. the forces of innovation also