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Monday, 9 February 2009

Islamic financial system will ride out economic downturn

Prime Minister Datuk Seri Abdullah Ahmad Badawi is optimistic the Islamic financial system will ride out the global economic downturn.
He said the Islamic financial system had remained unscathed by the severe difficulties affecting the conventional international financial system.

“This is a testament to its integrity and validity,” he said. “I see Islamic finance becoming an increasingly important part of the international financial system.”

“Malaysia hopes to leverage on its experience in the sector to strengthen trade and investment ties across the globe,” Abdullah said in his keynote address at the 50th anniversary of Bank Negara Malaysia yesterday.

Also present was Bank Negara Malaysia Governor Tan Sri Zeti Akhtar Aziz and Hong Kong Monetary Authority chief executive Joseph Yam.

Yam echoed the prime minister’s view on Islamic finance, and said it was increasingly recognised as an important alternative channel of financial intermediation not only within primarily Islamic communities.

“As Governor Zeti has persuasively argued, Islamic finance encourages business activities and generates legitimate profits and rests on principles of fairness, shared risk and ethical practices.

“There is, I think, much for us all to reflect on when considering how badly things have gone wrong recently in what might be called 'traditional' finance,” he said.

Abdullah praised Bank Negara for regulating and evolving an efficient financial sector capable of meeting current economic challenges on a strong footing.

“In particular, the mobilisation of savings to fund economic activities has been a major element in sustaining broad-based economic growth," he said. "In this regard, I hope that banks will not unreasonably curb lending activity and keep liquidity flowing into the economy. The government will continue its efforts to stimulate the economy in these difficult times, but the financial sector must continue to actively play its role.”

The prime minister stressed the need to continuously reinvent oneself in the increasingly competitive global environment.

Economic flexibility was central to the exploitation of new areas of growth, he said.

“In addition to the rapid growth of the traditional services sub-sector, new service industries have also emerged and are growing rapidly, particularly in the areas of finance, ICT, logistics, health, higher education and tourism,” he said.

Abdullah said the sustained progress of a nation could only be secured if there was shared prosperity.

“A crucial thrust of Malaysia’s development strategy is to give equal emphasis to both growth and equity. The public sector undertakes the role of economic recovery and the private sector takes up the role of economic growth,” he said.


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