functions. the key lies in preserving the benefits of innovative initiatives and activities whilst ensuring that they do not result in negative externalities. this comes in the forms of its strong paradigm in governance, disclosure and transparency, as well as the emphasis that innovations are anchored in the objectives of shariah and thus are for the benefit of the people. importantly, islamic finance has the disposition to facilitate financial deepening without financial excesses through the fundamental shariah requirement for islamic financial transactions to be supported by an underlying economic activity and for socially - responsible financial innovation. moreover, the profit - sharing and risk - sharing characteristics of islamic financial transactions strengthen the incentives for islamic financial institutions to undertake the appropriate due diligence on the islamic financial transactions to ensure that the profits are commensurate with the risks assumed. the shariah board of islamic financial institutions additionally serve as a rigorous process of endorsement of the experts, thus representing a vital institutional safeguard to ensure that the inherent strengths of islamic finance are fully realised. this ensures that the products are offered with the intention to achieve real benefits for the investors. it would therefore reduce the tendency for extreme behaviour in the financial system. more recently, the world ’ s attention had shifted from troubled banks to troubled countries with rising sovereign risks, leading to further rescue packages and increased anxieties over contagion to financial markets in other parts of the world. whilst these challenges continue to be addressed by the developed economies, the emerging economies have emerged from this crisis with stronger growth performance. the asian region in particular, has entered the crisis with solid economic fundamentals and more resilient financial systems and institutions. this has in turn substantially limited the consequences of the contagion. with the internationalisation of islamic finance in this decade, it has further reinforced the trend of greater financial integration in emerging economies. this has reinforced the changing global pattern of financial and economic integration as financial and economic linkages strengthened between the emerging economies. in the more recent period, with the enhanced international dimension of islamic finance, it has become an increasing form of intermediation that has facilitated economic linkages between emerging economies. in addition, it has also drawn the participation by the more established financial centers to forge stronger financial linkages with the dynamic growth regions of asia and the middle east. indeed, this would contribute towards more efficient mobilisation of funds across regions, reinforcing the significance of islamic finance as an increasingly important channel for a globally more inclusive economic development. in the aftermath of

relatively more intrusive supervisory oversight. it also involves having wide - ranging policy tools, including macro - prudential policies, to mitigate and manage the risks emanating from excesses in the financial system. as the experience in the advanced economies has shown, the source of imbalances can arise in a number in segments of the economy, including from the household, the financial and the public sectors. this underscores the importance of prudence ; to ensure that growth is underpinned by sustainability and not excesses. a further lesson is to build buffers during the good times to better position us to withstand future shocks. equally important for policy in the emerging economies is to put in place the necessary foundations for long - term growth. this involves few areas of significance. the first is to create a competitive environment that allows for greater economic flexibility. this includes reforms for a sequenced and gradual removal of distortions prevailing in the economy, lowering the costs of doing business, and to streamline the involvement of the public sector in businesses. the second is to accord importance to investments in modern infrastructure, and to enhance technological readiness that will enable the economy to prepare for the changing economic and financial landscape. another area of significance is to ensure balanced and inclusive development. indeed, in the emerging economies, this is becoming increasingly urgent as the benefits of rapid development have not been evenly distributed, and income inequality has risen further even in the developed economies. going forward, economic empowerment will increasingly bis central bankers ’ speeches depend on access to technology, high quality education, healthcare and social security systems. equally important is greater financial inclusion. without policy intervention, the trend towards greater inequality could potentially intensify. in malaysia, many of the necessary policy strategies for long - term growth in these areas of significance are already at various stages of implementation, with considerable progress being made in certain areas. as the technological gap between the emerging and the advanced economies converges, it will become increasingly critical for an emerging economy such as malaysia to transition from growth based on capital accumulation, to growth based on productivity improvements. in addition, the rising global inter - connectedness characterised by the emergence of highly intricate networks such as the increase of global manufacturing supply chains, increases the susceptibility of industries to both cascading failures, as well as to the rapid re - orientation of business competitiveness through disruptive innovations such as in the mobile computing industry or the possible rise of additive manufacturing. to advance forward in this direction