demand of consumers. iii. mifc initiatives and malaysia as takaful & retakaful hub malaysia is also well - positioned to provide the linkages through islamic finance to support the increasing flow of investment between asia and other parts of the world, particularly the middle east. while world trade has on average expanded by 10 % over the period 20012005, asia's trade with the middle east has increased on average by 24 %. more than half of the exports from the gulf states go to asia and more than one - fifth of its imports are from asia. situated centrally in the asian time zone, malaysia offers to serve as an investment gateway to the region, specializing in islamic fund and wealth management, and providing a platform for the issuance of sukuks. for this, we have put in place a comprehensive islamic financial system that includes islamic banking, takaful and islamic money and capital markets. these activities are adequately supported by the legal, human capital, shariah and regulatory infrastructure, a diversity of players and a wide range of products and services. to further promote the international dimension of islamic finance in malaysia, the malaysian government has also launched an initiative known as the malaysia international islamic financial centre or mifc. the mifc initiative is specifically undertaken by the collective efforts of the country's financial and market regulators, including bank negara malaysia, the securities commission, the labuan offshore financial services authority ( lofsa ) and bursa malaysia, together with the participation of the industry representing the banking, takaful and capital markets. it is aimed towards building greater intermediation linkages between the east asian and middle east regions which will in turn, further expand interregional trade and cross border investment flows. as part of the mifc initiatives, local and foreign financial institutions are allowed to establish international islamic banks ( iibs ), international takaful operator ( itos ), as well as international currency business unit ( icbus ) to undertake international currency business in islamic finance with non - residents through either a locally incorporated entity or a branch. this entity is granted attractive tax packages in terms of a 10 - year tax holiday. the foreign investment committee rules have been further relaxed to allow 100 percent foreign equity ownership in these financial institutions. in continuously creating an enabling environment for the efficient functioning of the mifc, the malaysian commercial banks and investment banks are allowed to establish international currency business units ( icbus ) to carry out islamic banking business under their existing entities.

to consider more broadly the many changes in our markets and practices that are relevant to banks ’ safety and soundness. in recent years, one of the most important reforms that affects not just banking, but in fact nearly all businesses, is the drive toward harmonised accounting standards globally. it is impossible for us to improve transparency and promote stability without examining the changes underway to the mechanics that define how financial data are recorded and reported. i ’ d like to conclude my remarks this morning with some preliminary thoughts on accounting and supervision and on our responsibilities in this field as supervisors. i mentioned earlier that the application of sound accounting and provisioning standards is a key element that we must build into the foundation for basel ii. when accounting rules are weak or poorly enforced, neither bankers, nor supervisors, nor marketplace participants can have much faith in their ability to evaluate the safety and soundness of a bank ’ s operations. no matter how sophisticated a bank ’ s risk management systems may be, they are ultimately worthless if we are unable to determine the worth of the bank ’ s assets and liabilities confidently. even when standards are enforced nationally, substantial differences in accounting standards between jurisdictions can complicate the ability of global markets to exercise discipline effectively and to allocate capital efficiently across borders. in our efforts to strengthen financial stability, central banks and supervisors have a legitimate interest in the quality of accounting standards and their effective implementation. we believe that, in order to contribute to strengthening the banking system, accounting standards should support - or at least be consistent with - sound risk management and control practices in banks. in addition, they should facilitate market discipline by promoting transparent reporting of banks ’ financial position and performance, risk exposures and risk management activities. finally, accounting standards should facilitate the effective supervision of banks. because of this view, the committee has sought to participate actively and constructively in the international debates on accounting. given our interest as well in promoting a more level playing field, ensuring the effectiveness of market discipline, and seeking the efficient allocation of capital across borders, we support the objective towards convergence in accounting guidelines. during tomorrow ’ s discussions, dr. arnold schilder, executive director of the bank of the netherlands and chairman of the committee ’ s accounting task force, will share some of the committee ’ s thinking and most recent work on emerging issues related to accounting, basel ii and supervision. after his remarks, we will have an opportunity to meet in smaller groups to discuss issues and the work ahead for supervisors to help