I first made reference to the New Silk Road at the 2nd World Islamic Economic Forum (WIEF) on "Unleashing the Potential of Emerging Markets" in Islamabad, Pakistan in November 2006. It is my pleasure today to share some thoughts on the potential role of Islamic finance in strengthening the New Silk Road. My remarks will focus on four areas that is the emergence of the New Silk Road; how the linkages on the New Silk Road have built on the comparative advantages of Asia and the Middle East; how Islamic finance is able to foster the linkages along the New Silk Road; and finally, how we can extend the New Silk Road to the rest of the world to advance global economic stability and prosperity. The emergence of a New Silk Road Today, signs that a New Silk Road is flourishing are abundant. The economic and financial linkages between Asia and the Middle East are growing. While the world trade has on the average expanded by 10% over the period 2001-2005, Asia's trade with the Middle East has increased on the average by 24%. More than half of the exports from the Gulf states 1 goes to Asia and more than one-fifth of its imports are from Asia. The Gulf is the major supplier of fuel to Asia, while Asia in turn supplies manufactured goods and food to the Gulf. Recent trends in investment activities have been equally significant.
This mechanism which uses crude palm oil as the underlying commodity will facilitate Islamic financing applying the concept of murabahah or tawarruq. BNM commodity murabahah acceptance As part of these efforts to promote development of products to meet the diversified requirements of investors, Bank Negara Malaysia is pleased to announce the introduction of a new Islamic monetary instrument, Commodity Murabahah Programme (CMP) as part of its diverse range of policy instruments in managing the short-term liquidity in the Malaysian Islamic inter-bank money market. Unique to Malaysia is that the CMP is designed to be the first ever commodity-based transaction that utilises the Crude Palm Oil based contracts as its underlying asset. The Bank has executed CMP master agreements with the eight Islamic banking institutions including the three foreign owned banking institutions to promote the use of the instrument for liquidity management. Several CMP transactions have now been conducted between the Central Bank and the respective Islamic Banks. As commodity murabahah is widely used in other Islamic centres, it is envisaged that this CMP will promote increased linkages between Malaysia and these centres. BNM Sukuk Murabahah/tawaruq short-term securities The Central Bank also intends to diversify the issuance concept of the existing Islamic monetary notes from being based on Bai Inah and Ijarah into murabahah. Currently, the outstanding amount of the respective notes is RM 8 billion. This initiative is the continuation from the commodity murabahah acceptance initiative as the issuance involves the securitisation of the acceptance facility.