Heng Swee Keat: Monetary Authority of Singapore’s initiative to develop Singapore dollar sovereign-rated sukuks Speech by Mr Heng Swee Keat, Managing Director of the Monetary Authority of Singapore, at the 5th Annual Islamic Financial Services Board Summit, Amman, Jordan, 13 May 2008. *  *  *  Introduction It is my honour this afternoon to join my IFSB colleagues in discussion of this very current topic. I am very glad that we are addressing this issue of regional integration of Islamic Financial Services at this point. This is very timely and relevant to both the soundness and vibrancy of Islamic Finance. Let me explain. The global Islamic finance industry has grown rapidly – it is estimated that total assets are now over $ billion. This is impressive. Still, this is a small proportion of conventional finance. The potential for growth is hence very large. While each country is taking measures to promote Islamic Finance, we can grow much faster as well as increase the scope and depth of the industry if we work towards integration at an early stage. Integration increases market size, efficiency and liquidity. This in turn provides for more competitive cost of capital, spurring further growth. Second, having service providers from different regions allow risks to be distributed across a wider group of players, and can improve the overall stability of the financial system. Regional integration between Middle East and Asia, which may have different business cycles, provides a cushion for financial institutions and investors from country specific shocks.
I am pleased that negotiation on a GCC-Singapore Free Trade Agreement has just been completed. This will help to expand trade ties. I hope this can also catalyze the broader pact between the Middle East and ASEAN, which will help to expand trade and investment flows between our two regions. Some 250 Middle East companies, including the Saudi Basic Industries Corporation, Proclad Group from Kuwait and the Emirates National Oil Company, are currently using Singapore as a base for their Asia-Pacific operations. Recently, the Al Futtaim group bought a major department store, Robinsons, in Singapore, as part of their strategic decision to expand into South-East Asia. Shariah-compliant funds which are deployed for investment in Asia have attracted strong interest from Middle East investors. One example is the ARC-CapitaLand Residences Japan Fund which was issued by a Singapore-based property developer. These are just examples from Singapore. I am sure there are more in Malaysia, Indonesia and other parts of Asia. My general point is this: the more we can bring the issuers and investors from both regions together, the more we can promote the use of Islamic Finance to fund some of these projects. 2nd task: addressing the need for appropriate legal, regulatory and supervisory frameworks for Islamic finance All of you would be aware that the IFSB and IDB have co-issued The Ten Year Framework and Strategies. 1 It is a thoughtful blueprint. The Framework highlights the need for appropriate legal, regulatory and supervisory frameworks that effectively cater for the specificities of the Islamic services providers.