The key measures and incentives include: i.  Firstly, the Malaysian Islamic banks and takaful operators that are offering Islamic financial services in international currencies will be granted approval under the existing licence to set up an International Currency Business Units within the institutions. These new divisions will have their own accounts separate from the ringgit transactions of the head offices, while at the same time sharing the same infrastructure with the head offices. This division may benefit from tax and other incentives that may be introduced. This measure will apply to the Islamic banks and takaful operators licensed under the Islamic Banking Act and Takaful Act respectively to operate in the Islamic financial system as well as to the existing financial institutions which are eligible to participate in the Islamic financial services. This is also expected to enhance the capability of the foreign players that have identified Malaysia as their centre to serve the regional markets. International entities will also be able to participate via foreign interest of up to 49 percent in Islamic banks and takaful companies. Investment funds set up in Malaysia will be able to enjoy the Double Tax Agreements that Malaysia has entered into with over 60 treaty partner countries. ii. Second, Bank Negara Malaysia will issue new conditional licences under the Islamic Banking Act to qualified foreign and Malaysian financial institutions to conduct the full range of Islamic banking business in international currencies and enjoy the same tax incentives as those accorded to the International Currency Business Units.
East Asian, West Asian and the Middle East regions – greater inter-linkages Islamic finance has made significant inroads in the international financial markets that has achieved growing global awareness. Islamic finance now has a presence in over 60 countries, with total Islamic assets under management by Islamic banks and conventional banks offering Islamic banking services reportedly exceeding USD400 billion. At present, Islamic mutual funds are estimated to be at a value of over USD300 billion, while issuance of Islamic sovereign and corporate bonds, or sukuk, have reached about USD50 billion. Islamic finance has demonstrated its viability and competitiveness in the current environment of a more liberalised and globalised financial system, with changing business and technological climates. As a form of financial intermediation it is now becoming increasingly integrated with the international financial system. Against the backdrop of this rapid development in the international Islamic financial markets, there is potential to build greater intermediation linkages between the East Asian, the West Asian and Middle East regions to expand further the inter-regional trade and cross border investments. In an increasingly globalised financial environment, sovereigns, development institutions and corporations of capital deficit countries have the option of raising Islamic financial instruments in capital surplus countries through the Islamic financial intermediaries. Significant economic benefits will arise from the strengthening of these inter-linkages. The expansion of inter-linkages of intermediation and markets among these regions would lead to a more efficient allocation of capital and thus enhance the prospects for strengthening further the growth performance.