The trend for greater regional economic and financial integration will also provide substantial opportunities for Islamic financial institutions to facilitate the integration process in the region and with other parts of the world, and thus have a greater role in financing Asia’s future growth. Priorities for strengthening financial stability and growth Let me turn to the priorities for strengthening financial stability and growth. Whilst there needs to be continued efforts at the national level to develop the institutional foundations for Islamic finance that will foster effective and efficient financial flows, and ensure that financial stability is preserved, the new wave of internationalization for Islamic finance requires increased collaboration across jurisdictions to strengthen the international financial infrastructure of Islamic finance. Going forward into the future, this will be particularly important given that the international environment has become more challenging. This is to ensure that the greater internationalization of Islamic finance takes place in an environment of financial stability. At the national level, the first priority relates to trend for the domestic Islamic financial system to become more integrated allowing for risks to be rapidly transmittal across the financial system. This requires the development of enhanced regulatory, supervisory and legal  2  BIS central bankers’ speeches  frameworks that are also adaptive and effective to the innovative dynamics and unique mix of risks in Islamic finance. Fundamental to this is the implementation of the international regulatory and supervisory standards and best practices for Islamic finance.
Investment projects amounting to more than USD160 billion to be financed by the Gulf states in Asia have been announced since 2005 2 . In 2006 alone, mega-deals 3 involving corporate acquisitions and real estate purchases from the Gulf to Asia, are estimated to total more than USD18 billion, including multi-billion dollar IPO purchases in financial institutions in China, large oil refineries and telecom companies. The value of such investments are expected to increase to between USD20-30 billion in 2007. For economic regions with high savings and surpluses such as Asia and the Middle East, the challenge is to recycle part of these surplus funds to productive investments in the region. The supply of savings in Asia and the Middle East is by far higher than in any other part of the world. Savings rates here in Asia are expected to remain in the region of 30-40% of GDP for some years to come. 1  The Gulf Cooperation Council represents Saudi Arabia, UAE, Bahrain, Qatar, Oman and Kuwait  2  "A route to riches on the new Silk Road", Financial Times, 21 Dec 2006  3  Worth more than USD1 billion  BIS Review 31/2007  1  Similarly, savings in the Middle East economies have been rising in the recent decade and is expected to average about 30-35% of GDP in the coming years. In 2006, the current account surpluses as percentage of GDP for Asia and the Middle East were about 5% and 23% respectively 4 .