of misconduct and negligence. similarly, if the islamic banking institutions were to be more engaged in the profit - sharing arrangement in its balance - sheets, it will require the islamic bank to have a more rigorous risk management assessment and monitoring mechanism. this is an area that is being addressed by the islamic financial services board in the drafting of the standard on the overall risk management framework for the islamic financial community that takes into account this unique requirement of islamic banking. while risk mitigation is desirable in islamic finance, further improvements need to be made to the existing risk management framework. new hedging products which are scarce in the market need to be developed in the quest to seek for compatible risk mitigating products. in accordance with the principles islamic the shariah has allowed the ummah to undertake juristic reasoning based on contemporary analysis and logical inference. indeed, the development of new hedging products is something that the islamic financial community can look forward to. in conventional banking, these instruments are used to mitigate risk. indeed the islamic financial community will soon develop such products for this purpose. fifth, effective and dynamic shariah framework one of the central issues towards developing a dynamic islamic financial industry is the shariah. the shariah should always be viewed as an enabler to innovation and creativity, rather than a constraint. efforts, therefore, need to be enhanced to fully appreciate and maximise the true potential and wisdom of the shariah. the collaboration among the shariah scholars, practitioners, researchers and regulators to undertake in - depth studies and research to create new products will provide the fundamental foundation towards the development of a dynamic islamic financial system. sixth, development of comprehensive legal infrastructure another important pre - condition to sustain the continued growth of islamic banking and finance is a comprehensive legal infrastructure for legal redress arising from islamic financial transactions. the legal infrastructure needs to comprise both effective regulatory and substantive laws as weil as appropriate adjudicative fora for parties to resolve disputes relating to islamic financial transactions. to address this, efforts are needed to develop a sufficient number of competent lawyers and judges that are equipped with sound knowledge and expertise in both shariah and civil laws to deal with such matters. seventh, development of vibrant islamic financial markets in the more developed financial centers, the development of inter - related financial markets has contributed towards the stability in the financial system. this is an area of priority for the islamic financial industry. in this regard, the development of a comprehensive islamic financial system

- affected advanced economies continue to face rising unemployment, weak financial systems, ongoing de - leveraging of households and financial institutions with weak balance sheet. although financial markets have begun to stabilise following extensive policy support, the progress of financial sector resolution and reforms in the advanced economies is far from complete. many of the financial institutions are still being constrained by large nonperforming assets, and despite injection of capital and massive liquidity support, financial intermediation is still not fully functional. on the fiscal front, the continuation of large fiscal deficits and rising public sector debt are increasingly placing a limit on fiscal flexibility while quantitative easing and very low interest rate environment globally are fuelling some asset prices to rise. given these challenges, it will be a mistake to believe that the world is on the mend. in many ways, the global economic structure and the character and governance of the international financial system will be fundamentally different. first, overall global growth will, for a prolonged period, remain below its past trend, with the growth trajectory in advanced economies lower than its average in the decade before the crisis. several structural weaknesses in the advanced economies will require considerable time and resources to be resolved. while the advanced economies address these issues, the global economy will increasingly be driven by the emerging market economies, particularly china, brazil, russia and india. despite asia ’ s large potentials and as a growth leader, it is unlikely that in the immediate term, asia and other emerging economies would be able to lift global growth in the short - term back to the pre - crisis level. in the short to medium term, the emerging economies will take time to fully compensate for the weak growth in the advanced economies. second, major shifts in the management and conduct of financial institutions and financial markets can be expected in order to address the pro - cyclical nature of international financial system and the many weaknesses that have surfaced. tighter regulation and supervision of financial institutions to prevent large financial leverage and accumulation of excessive risks will be in place. the challenge for regulators is to ensure that greater regulatory activism do not curtail the ability of the financial system to innovate and intermediate capital allocation efficiently. third, given greater regulatory guidance and less leverage, global financial markets pricing of capital can be expected to be higher. similarly, as corporations restructure their operations to adapt to slower growth in global demand, foreign direct investment ( fdi ) is likely to be lower, while competition for fdi will become more intense. on the other