The strong cross-border linkages of an integrated ASEAN capital market provide vast business opportunities for countries to capitalize on the diverse comparative advantages in this region. As an access point, Malaysia is well positioned to be one of the gateways for non-ASEAN countries, institutions and investors to participate in these markets. Malaysia has a facilitative environment with a strong regulatory and supervision to support business activities while safeguarding financial stability. In addition, there has also been the strengthening of bilateral economic and financial ties, which has become a prevalent theme across Asia. Supplementary to these affiliations, is also a strong trend to increase participation in Asia’s enormous growth potential through affiliations in regional bodies. Within the ASEAN grouping, among the areas of priority is the deepening of cooperation to accelerate the role of the financial sector in supporting the realization of the ASEAN Economic Community by 2015. Risk mitigation as Asia strives for regional integration The events surrounding the recent European sovereign debt crisis provide us with many important lessons. While exposures to numerous financial markets bring about tremendous economical and financial benefits, it is not without risks. Financial integration between markets, if not well designed, can lead to costly financial implications. Hence, the path to integration can expect its associated challenges that will need to be addressed. In implementing institutional arrangements across the region, it can be expected that individual countries will have to balance national priorities while seeking to strengthen their place in the global market.
Currently, Malaysia’s exports to India has amounted close to USD9 billion in 2011, equivalent to 4.1 percent of Malaysia’s total exports, while the outstanding direct investments from India is now close to half a billion USD. The financial sector has an important role to be a catalyst to facilitate growth in such trade and investment activities between India and Malaysia. The establishment of our relationship has already begun with the issuance of a full commercial banking license to an Indian bank to operate here in Malaysia in 2010. A licence has also been granted to an Indian fund manager. Rise of islamic finance in the new global economy Another development in several emerging economies in Asia and the Middle East is the rapid growth of Islamic finance. An important development in this decade has been the growing significance of the international dimension of Islamic finance and its increased role in mobilising and channeling funds to productive investment activities across borders. Expanding steadily at a double digit pace of growth, total Islamic financial assets currently is estimated to be more than $ trillion. With more than 600 Islamic financial institutions now operating in more than 75 countries, countries from Asia, Middle East and Africa are increasingly participating in cross-border financial markets. In financing trade and investment activities, Islamic finance has influenced a new global pattern of trade and financial flows. Islamic finance serves as an important channel for more efficient allocation of funds across borders and diversification of risks.