the financial linkages, in particular, the emerging markets. previously islamic finance was domestic centric. it is now increasingly providing financial solutions for cross border trade and investment. progressive liberalisation has facilitated the internationalisation of islamic finance. this has been reinforced by the dynamic pace of innovation in islamic finance that has widened the range of financial products and services. this internalization process has thus contributed to the more efficient allocation of funds across borders from centres with surplus funds to regions with investment opportunities and to the diversification of risks. the now more developed islamic financial markets have been particularly instrumental in intermediating such funds. sukuk has been a major driving force behind this development since its emergence as an important platform for international fund raising and investment activities that are generating increased cross border flows. the international dimension of the sukuk market has now evolved on many fronts – it has seen the participation of issuers and investors across continents with sukuk origination centres transcending the issuers ’ own home countries. the total global sukuk outstanding now domiciles in 20 countries and more recently, there has also been a growing trend for multi - currency sukuk issuances. the sukuk market continues to solidify its position as a leading segment of growth for islamic finance. its strong performance is driven by its unique value proposition to both issuers and investors. for investors, it has now become a new asset class with orientation towards real underlying assets in which the issuer cannot leverage in excess of the asset value and in which, the financing must be channeled towards productive purposes. for the issuers, sukuk financing provides a competitive avenue for fund raising and access to a wider investor base of both islamic and conventional, including the growing investor base looking for a sociallyresponsible or ethical investment. moving forward, there are three key imperatives that will determine the ability of islamic finance to further enhance its value proposition for the global economy. first, is the evolution of the legal framework that is facilitative to the continuing market evolution and the internationalization of islamic finance. whilst the global financial crisis has provided islamic finance with a unique opportunity in the international financial system, the future success of the industry moving forward, will also depend on its continuing ability to innovate more indigenous shariah - based instruments and evolve business models that strengthen the nexus of islamic finance with the real economy. an essential part of the overall infrastructure therefore is an effective legal framework to provide an

enabling environment that will enforce the legality of contracts according to the shariah and the regulatory treatment of the new and innovative islamic financial solutions. bis central bankers ’ speeches while islamic finance practitioners and scholars continue to draw from the source of fiqh muamalat to create new and innovative instruments, the legal framework needs to be further strengthened to ensure alignment with new market developments. this is to ensure that it continues to lend certainty and predictability to the innovative products and financial transactions. furthermore, as islamic financial activities venture beyond national boundaries, the development of legal frameworks that is facilitative of cross - border transactions is pivotal. there has to be court recognition and acceptance of the islamic contracts within the common and civil law systems, with a common approach of interpreting the rights of the contracting parties based on shariah principles, in particular for cross - border transactions. malaysia has taken the approach to address this imperative via the law harmonisation committee which was established in 2010. as part of its mandate, the committee undertakes an objective review on the legislation and proposes the necessary amendments on existing malaysian laws which are applicable to execute the whole chain of islamic financial practices. since its inception, the law harmonisation committee has reviewed seventeen ( 17 ) laws in malaysia and identified the areas that require legislative amendments so that islamic financial transactions can be conducted in the most legally efficient manner. the work of the committee will continue to remain relevant as the islamic financial markets continue to expand and develop new products and business models. this mandate of the committee will not only ensure that non - shariah compliant elements in the legal provisions are harmonised, it will also ensure that our laws are facilitative to islamic financial transactions. another major milestone in malaysia, is the new legal framework for islamic banking and takaful, which is currently undergoing the legislative process towards its enactment. this new legal framework, will not only streamline the legal requirements across sectors, but will also ensure that the law is reflective of the nature and features of shariah contracts and that the degree of regulation is commensurate with the level of risks that islamic financial institutions, markets and products pose to the overall financial system. the greater clarity on the legal and prudential requirements underpinned by shariah principles will enable participants of the islamic financial system to align to their practices and expectations accordingly when undertaking islamic financial business and transactions. the second imperative relates to the continuous effort to develop the key resources of the industry, by