duties because foreigners are dumping below cost! put differently, businesspeople complain about low output price inflation, but the inflation that matters to them is the inflation in their profits, which is higher. for instance, analyzing 2nd quarter results for non - financial non - government corporations, we find that while revenues have fallen by 8. 8 % year on year, input costs have fallen by an even higher 12. 4 %, so that gross value added has gone up by 10. 8 %. bis central bankers ’ speeches clearly, there are industries in trouble. we should, however, be particularly careful about raising tariffs at a time when costs are falling everywhere – aside from the inflationary impact, for every happy domestic businessman whose prices are raised by the imposition of tariffs on imports, we have an unhappy domestic businessman whose costs are raised by the very same tariffs, as well as unhappy consumers. cleaning up the banks one very important contributor to macroeconomic stability is healthy banks. banks in india have a number of stressed loans on their balance sheet. in some cases, the reality is that existing loans will have to be written down significantly because of the changed circumstances since they were sanctioned ( which includes extensive project delays, cost overruns, global overcapacity, and overoptimistic demand projections ). if loans are written down, the promoter brings in more equity, and other stakeholders like the tariff authorities or the local government chip in, the project may have a strong chance of revival, and the promoter will be incentivized to try his utmost to put it back on track. but to do all this deep surgery, the bank has to classify the asset as a non performing asset ( npa ), a label banks are eager to avoid. alternatively, instead of deep surgery, the banks could apply band aids, they could “ extend and pretend ”, lending the promoter the money he needs to make loan payments. the project ’ s debt obligations grow, the promoter loses further interest, and the project goes into further losses. a number of good banks in our system have taken the necessary action to recognize and resolve stressed loans in a timely fashion. but some others need to take more proactive action. over the last few quarters, the reserve bank has expanded the tools banks have to recognize and deal with stressed loans. it is now working with the government and banks to ensure that the stressed assets are dealt with on a proactive basis, and that bank balance sheets both reflect a true and fair

zeti akhtar aziz : towards gaining global growth potential of islamic finance speech by dr zeti akhtar aziz, governor of the central bank of malaysia, at the seminar on islamic finance " towards gaining global growth potential of islamic finance ", hong kong monetary authority, hong kong, 15 january 2008. * * * it is my honour and great pleasure to be in hong kong today to speak at this seminar on islamic finance jointly organised by the hong kong monetary authority and the islamic financial services board. islamic finance is now at the threshold of a new dimension in which, it has now an increased potential to strengthen international financial linkages between nations. and in so doing, it would contribute towards a more optimum allocation of financial resources across borders. hong kong, with its sophisticated financial infrastructure and high level of expertise in the financial sector, has strong potential to be an important linkage and an engaging partner in the international islamic financial activity. it is exactly six years ago that we were here in hong kong as our first destination, to promote the world's first sovereign sukuk issuance. the overwhelming response we received in hong kong provided the momentum effect that resulted in the successful issuance of the pioneering usd600 million malaysian sovereign sukuk. it was more than two times over subscribed with one - third of the investors from this region. six years hence, the islamic financial landscape has been dramatically transformed into a vibrant, dynamic and competitive global intermediation mechanism that is supported by more than 300 islamic financial institutions in more than 75 countries. it also has become among the fastest growing segments in the financial services industry. in the early phase of its development, islamic finance was essentially domestic centric, focussing on retail financing, trade financing and the financing of other commercial business activities. two recent developments have however, influenced the subsequent direction of the development of islamic finance. firstly, the drive to diversify the domestic financial infrastructure so as to avoid the over dependence on the banking sector and secondly, the trend towards greater liberalisation of the financial system. these two trends have spurred the development of the islamic financial markets and its greater integration into the international financial system, thereby raising the international dimension of islamic finance. this more dynamic environment, has fostered the generation of a wide spectrum of islamic financial instruments that has ranged from instruments to manage liquidity to structures for the financing of that for financing mega investments. these developments have led to the emergence of a new asset class. it has also