new asset class in their investment universe. dynamism of the sukuk in the islamic capital market is evident with the large variety of sukuk being structured and issued, including exchangeable, convertible and hybrid sukuk. the sukuk market stands at almost us $ 130 billion today and is growing at a rate of 40 percent annually. new issuance of sukuk in the global sukuk market has remained robust despite the challenging economic environment, with an increase of 43 percent to us $ 20 billion in 2009 while linkages with europe have resulted in a more cautious market in the first half of 2010 which saw decline by about 20 percent in the global sukuk issuance, the trend is expected to reverse with initiatives by the governments in asia and the middle east to raise funds for the implementation of infrastructure development and investment projects. in malaysia, the islamic financial system operates in parallel with the conventional financial system. with a humble beginning of establishing the first islamic bank in 1983, islamic finance in malaysia has evolved to become a comprehensive domestic islamic financial system, comprising the islamic banking institutions, the takaful industry, the islamic money and capital markets. malaysia ’ s islamic banking sector grew 20 % annually since 2001 in terms of assets and as at the end of june 2010, the share of islamic banking assets in the total banking sector has expanded to reach 20. 9 percent as compared to 6. 9 percent a decade ago. malaysia also remains the world ’ s largest sukuk market, accounting for more than 60 percent of global sukuk issuances. islamic finance prospers in malaysia because it is competitive, innovative and in sync with what the market want. recent developments of islamic finance that strengthen its resilience significant milestones achieved in the recent decade in the area of international financial infrastructure provides further support for sustainable and orderly development and continued growth of islamic finance. in 2002, the islamic financial services board or ifsb was established with the role as an international prudential standard setting body for islamic finance. the ifsb has been instrumental in developing and issuing global prudential standards and guiding principles for the industry. further efforts to ensure sustainability of islamic finance in this new and more challenging environment include the formation of a task force on islamic finance and global financial stability by the islamic development bank and ifsb. the report by the task force was completed in april this year and highlights eight building blocks to strengthen the financial infrastructure of islamic finance, drawing also on important lessons

to a marked cyclical shock, some real imbalances in the global division of labour are being corrected through the current global downturn. stabilisation policies should not try to prevent these processes ; returning to a status quo ante is not a sensible option. given the recent encouraging signs from financial markets and a number of leading economic indicators, i believe there are some grounds for being optimistic that the pace of decline in economic activity will decelerate markedly in the months ahead. however, it is certainly not advisable to be overly optimistic that the recovery process is safely on track. this will most likely be a gradual process with growth rates – notwithstanding some volatility in quarterly figures – lying below potential for a considerable period of time. this means that economic slack measured by very low rates of capacity utilisation will not diminish rapidly. and we should take into account that, even if in many countries – including germany – the worst may be over in terms of negative growth rates, the labour market situation will visibly deteriorate in the quarters ahead. the german economy has been hit hard by the global downturn. germany as an open and export - oriented economy has its comparative advantage in investment goods. and it has specialised by increasing its degree of openness markedly over the past decade. by doing so, the german economy has benefited from the dynamic global environment of the past few years. currently, the sharp contraction in the german manufacturing sector makes clear that this kind of specialisation also means a more cyclical overall economy, at least in the face of rare massive common global shocks. an open economy like germany ’ s cannot insure itself against truly global shocks regardless of how diversified its export portfolio is in regional or product terms. with regard to measures stabilising the global economy, one aspect that is too often overlooked is the fact that due to the sharp contraction in net exports since summer 2008 the german economy is de facto stabilising the global economy. a decline in net exports means that less income from global trade flows is absorbed by germany. then, by definition, in some other countries net exports must rise, de facto stabilising production in those economies. 2. 4 longer - term lessons for monetary policy let me turn finally to what are more longer - term lessons for monetary policy to be drawn from the current crisis. in doing so, i shall take a step back from the sort of crisis management i have just described to the more general issue of conducting monetary policy in