Foreigners investing in Malaysia are also free to hedge with onshore banks their committed flow of funds such as the repatriation of investment proceeds, dividends and profits from Malaysia as well as the purchase of ringgit assets in Malaysia. There is free mobility of inward and outward movement of funds relating to both foreign direct investment and portfolio capital investments. The second key area that Malaysia can play a major role is sukuk issuance, origination and trading. The sukuk market serves as an important platform, complementing conventional bonds in enhancing the effectiveness and efficiency for the mobilization and allocation of funds within national financial systems and in the international financial system. Significant economic growth is taking place in Asia and the Middle East following privatization and implementation of infrastructure projects. This opens up tremendous opportunities for government entities, multinational corporations and multinational development institutions to raise funds through the issuance of sukuks to meet their financing needs. The phenomenal demand for sukuks has been spurred by the high levels of surplus savings and reserves in Asia and Gulf regions coupled with a rising demand for Islamic banking instruments from a growing Muslim population in Europe. Apart from the issuance of a sovereign Islamic sukuk by the Government of Malaysia, and the governments of Dubai (UAE), Qatar, Bahrain and Pakistan, an increase in number of multilateral agencies are also issuing sukuks to finance development projects. These developments signify the key role of the sukuk market in facilitating the economic development process.
For this, we have put in place a comprehensive Islamic financial system that includes Islamic banking, takaful and Islamic money and capital markets. These activities are adequately supported by the legal, human capital, Shariah and regulatory infrastructure, a diversity of players and a wide range of products and services. To further promote the international dimension of Islamic finance in Malaysia, the Malaysian Government has also launched an initiative known as the Malaysia International Islamic Financial Centre or MIFC. The MIFC initiative is specifically undertaken by the collective efforts of the country's financial and market regulators, including Bank Negara Malaysia, the Securities Commission, the Labuan Offshore Financial Services Authority (LOFSA) and Bursa Malaysia, together with the participation of the industry representing the banking, takaful and capital markets. It is aimed towards building greater intermediation linkages between the East Asian and Middle East regions which will in turn, further expand interregional trade and cross border investment flows. As part of the MIFC initiatives, local and foreign financial institutions are allowed to establish International Islamic Banks (IIBs), International Takaful Operator (ITOs), as well as International Currency Business Unit (ICBUs) to undertake international currency business in Islamic finance with non-residents through either a locally incorporated entity or a branch. This entity is granted attractive tax packages in terms of a 10-year tax holiday. The Foreign Investment Committee rules have been further relaxed to allow 100 percent foreign equity ownership in these financial institutions.