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Thursday, 20 March 2008

Malaysia counts on sharia experts for the development of Islamic capital market

By Rita Raagas De Ramos
AI 18 March 2008

The market claims a critical mass of sharia experts and scholars who can advise on sharia compliance, and a pool of investment management professionals to manage Islamic investments. Part two of a four-part interview with Nik Ramlah Mahmood of Malaysia’s Securities Commission.

Nik Ramlah Mahmood is managing director at Malaysia’s Securities Commission, which has been actively working to transform the market into a global hub for Islamic investments. She explains the government’s recent initiatives and the role of the Securities Commission in achieving this goal. This is the second of a four-part Q&A with Mahmood. For an in-depth look at Malaysia’s capital markets and fund management industry, see the March 2008 edition of AsianInvestor magazine.

Why is Malaysia a suitable global hub for Islamic investments?

Nik Ramlah: Malaysia is regarded as one of the leading centres for Islamic capital market, given its comprehensive Islamic regulatory framework and strength in product innovation and investor protection based on in-depth sharia research. Our regulatory approach ensures that the Islamic financial system co-exists with the conventional financial system, one that provides all participants with the same degree of clarity, certainty and protection.

We have adopted an open architecture for the Islamic capital market that allows domestic and international conventional players to participate actively. Investors seeking exposure to the region have access to skills and expertise within Malaysia to structure Islamic products, a critical mass of sharia experts and scholars who can advise on sharia compliance, and a pool of investment management professionals to help manage Islamic investments in the region. In addition they have access to a large and growing pool of Islamic savings.

What role will Malaysia play in the international Islamic finance community?

Located in the fastest growing region in the world, Malaysia is therefore well-positioned as a regional gateway for Islamic investments into the Asia-Pacific nations. With strong linkages to the Middle East and other Asian markets, Malaysia is also well placed to support trade flows between Asia and the Gulf States and to intermediate intra-regional capital flows and investment opportunities. To reinforce our openness, we launched the Malaysia International Finance Centre initiatives with the intention of attracting global and regional players to participate in and benefit from the opportunities offered in the Malaysian capital market.Other markets such as Bahrain, Dubai, Singapore and even Hong Kong are pushing to become an Islamic capital market hub.

What is Malaysia’s distinct advantage over those markets?

We recognise that other countries share aspirations similar to ours to build thriving Islamic capital markets and strong domestic intermediaries. The development of a global Islamic capital market will be dependent on the ability to grow sufficient active centres for intermediation of Islamic capital across borders. Overall, Malaysia has strengths in regulation, our positioning as a gateway to the Far East, our track record in pioneering and commercialising new products and the depth and breadth of our market and therefore offers many advantages.

How does Malaysia compare with other markets in terms of the history of its Islamic capital markets?

Malaysia has had a head start with the Islamic capital market. And today it is an integral and well-developed component of the Malaysian capital market, underpinned by a comprehensive regulatory and sharia-compliant framework. We have a comprehensive Islamic financial system comprising Islamic banking, Islamic insurance or Takaful, and the Islamic capital market, which includes equity, bonds or sukuks, unit trust funds, real estate investment trusts (Reits), ETF and structured product. In addition to the choice of Islamic products, Malaysia offers investors good infrastructure, institutions and intermediaries. The government and regulatory authorities – the Securities Commission and the central bank of Malaysia – are committed to working together with international investors and other players in achieving our common aspiration of building a thriving Islamic capital market. The Malaysia International Finance Centre initiatives offer global and regional players even more opportunities to participate in the Malaysian market through various liberalisation measures and tax incentives.

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