##ks by corporations, sovereigns and multinational corporations, the demand for sukuks significantly exceeds the supply. today, the global sukuk market, denominated in international currencies, is estimated to exceed usd50 billion. although the size of the market is modest by global standards, the sukuk market is experiencing remarkable growth, increasing at an average rate of growth of forty per cent per annum. the significant demand for sukuks have been spurred by the high levels of surplus savings and reserves in asia and in the middle east. this has been reinforced by increased liquidity in the international financial system in search of higher returns and greater diversification of risk. since the issuance of the first sovereign global islamic sukuk by the government of malaysia in 2002, there has been a series of other issues by the governments of united arab emirates, qatar, bahrain and pakistan. an increased number of multilateral agencies have also issued sukuks to finance development projects. in addition, both government agencies and the corporate sector have considered the sukuk market as an attractive instrument of financing. thirdly, there is a great number of global players such as investment banks, islamic banks and securities firms that are involved in the issuance of sukuk in the international financial markets. a large number of western banks are also providing islamic financial services taking advantage of the opportunities and to provide customised products and services to their customers. fourthly, the established international financial centres have also shown interests to have an active role in promoting the development of the sukuk market including enacting the appropriate legislative provisions. these developments would augur well for the development of the sukuk market. finally, the regulatory and supervisory paradigm continues to evolve. indeed, the recent decade had witnessed significant global shifts in the approach to regulation and supervision across many countries. in addition, the harmonisation of standards and practices is also important. the establishment of the international standard setting organizations such as the islamic financial services board ( ifsb ) and the accounting and auditing organisation for islamic financial institutions ( aaoifi ), to formulate appropriate prudential and accounting standards that would not only facilitate the process of harmonisation but also contribute to the strengthening of the islamic financial system. the ifsb has already formulated the prudential treatment for sukuk investment by the islamic financial institutions as stipulated in the capital adequacy standards. malaysia's strength in the sukuk market let me now turn to

zeti akhtar aziz : malaysia ’ s experience in strengthening its market for global sukuk activities keynote address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the 2nd malaysian islamic finance – issuers and investors forum 2007 " malaysia as global sukuk centre : towards greater vibrancy of malaysian sukuk market ", kuala lumpur, 13 august 2007. the original speech, which contains various links to the documents mentioned, can be found on the central bank of malaysia ’ s website. * * * it gives me great pleasure to speak at the 2nd malaysian islamic finance – issuers and investors forum 2007 that brings together industry practitioners and investors to discuss recent developments and key issues in islamic finance. islamic financial markets in particular, have experienced significant evolution and rapid expansion. we are now seeing the emergence of highly innovative products and services in sukuk market. my remarks today will focus on the vast growth potential of the global sukuk market and malaysia's experience in strengthening our market for global sukuk activities. vast growth potential for sukuk the growing role of islamic finance in mobilising and channelling funds to productive investment activities across borders contributes to more efficient allocation of funds across borders and facilitates international trade and investment. greater diversification of risks also contributes towards promoting international financial stability. the more recent developments in islamic finance is the growing significance of the sukuk market to become an increasingly important component of the islamic financial system. five major trends are having a significant bearing on the future development of the global sukuk market. firstly, the bond market is now becoming key to meeting the funding requirements for both the public and private sectors in emerging market economies. this is particularly the case for the middle east and asia, which are among the fastest growing regions in the global economy. this includes financial needs of the private sector following the privatisation and implementation of infrastructure projects. the development of the islamic bond market, the sukuk market will provide opportunities for the corporate sector, the government agencies, multinational corporations and multinational development institutions to raise funds through the issuance of sukuk to meet their financing requirements. the sukuk market also serves as an important platform, complementing the conventional bond market, in enhancing the effectiveness and efficiency for the mobilisation and allocation of funds within the domestic financial system, as well as in the international financial system. secondly, while there has been growing interest in the issuance of suku