The actual build-up of the Fund may span a short generation. The Fund will thereafter enter a new phase. With lower revenues from oil and gas activities, it will no longer receive capital transfers from the government. When oil and gas revenues cease to provide the government with economic rent, only the annual real return on the Fund can be used on a permanent basis. In the mid-1990s, oil prices were around USD 20 per barrel and revenues were set aside. This year the oil price must be over USD 50 per barrel to generate sufficient oil revenues to make transfers to the Fund. We must be prepared for wide variations in oil prices, and the first year without transfers of oil revenues – but rather withdrawals – may be approaching. BIS Review 44/2010  7  Increase in equity share Under the Fund’s investment strategy, more equities are purchased when equity prices fall and fewer when prices rise. Thus, the Fund purchased a large volume of equities in the period from 2001 to 2003 and during 2008 and 2009. As a result the Fund currently holds a little more than 1¾ per cent of listed European equities and roughly 1 per cent of all listed equities. The Fund’s stock holdings are spread across different countries, sectors and regions. In the early days of the Fund, the benchmark portfolio was restricted to investments in Western Europe, North America, Japan, Brazil and a limited number of countries from all over the world.
Now I wish to update on the progress of the MIFC. Malaysia is still the largest sukuk market commanding over 60% of the global sukuk market. For the year ended 2008, new sukuk issuance in Malaysia was the highest globally at over 36 percent. Currently there are 9 Islamic fund management companies that have been approved by SC to set up business. Within the MIFC community, there are also 14 Islamic banks with international currency business units (ICBU) and three international Islamic banks (IIB). To further entrench the Islamic financial market, the government has recently announced a number of liberalisation policies to enhance global linkages and accelerate the realisation of the MIFC agenda. The announcement includes the offering of two mega Islamic banks licences, where they will predominantly be wholesale Islamic banks undertaking to a large extent international Islamic financial business. Furthermore, two family Takaful licences are being offered. For the existing Islamic banks, the government is giving flexibility to increase the foreign equity participation to 70% of shareholding. Furthermore, 5 foreign legal firms will also be allowed to set-up operation in Malaysia. Today, with signing of the memorandum of participation marks the beginning of a new chapter in Islamic finance. I would encourage each stakeholder, particularly Bursa, to exploit the vast potentials of this new entity and take this opportunity to enhance research and product development capacities.