Factors supporting higher inflows in 2002 include the further liberalisation of domestic regulations especially in the services and construction sectors; open and liberal trade regime; low cost of doing business; overall macroeconomic stability; high quality physical infrastructure; and efficient financial system. The Government emphasis on customizing incentives to meet the specific needs of industries and investors has also provided added stimulus. BIS Review 21/2002  3  Economic, Monetary and Financial Management in 2002 The immediate policy concern in 2002 is to ensure that recovery of the Malaysian economy gathers momentum and that any downside risks are minimised. Given Malaysia's strengthened fundamentals, Malaysia is well positioned to tap the emerging global recovery. Macroeconomic measures have provided a positive environment that contributes to improving the enabling environment for businesses. Malaysia macroeconomic policies are essentially already in place. The focus of policy is therefore on supply side measures to enhance Malaysia's competitive advantage. Emphasis is therefore on policies to accelerate further structural adjustments. Supply side measures aim to address the issues of enhancing efficiency and productivity to reduce the cost of business operations in Malaysia. Improving efficiency requires strengthening institutional infrastructure as well as more specific measures that contribute to increasing efficiency of public services, lowering cost of inputs to be in line with international prices, raising education and skill levels and enhancing use of information technology to widen technical capacities. These measures would essentially reduce operational costs and improve the nation's competitiveness. In this more uncertain environment a stable exchange rate is a major competitive advantage.
In the area of research and training in Islamic banking and finance, an industry-owned institute named Islamic Banking and Finance Institute Malaysia (IBFIM) was established. IBFIM will become a one-stop centre for the purposes of education, training and research. On the international front, significant progress was achieved on two initiatives, namely, the International Islamic Finance Market (IIFM) and the international standard-setting body. BNM participated actively in both initiatives. The standard-setting body, to be located in Malaysia, will focus on developing international best practices and prudential standards governing the supervision and regulation of Islamic financial institutions. These encouraging developments will contribute further to the overall development of the global Islamic financial system. The insurance industry maintained a positive growth trend in premium income for the third consecutive year since the Asian crisis. Premium income grew by 12.4% in 2001 while the capitalisation of insurers strengthened further to RM4.9 billion as at the end of 2001. The increase in the minimum capital requirement to RM100 million, with effect from 30 September 2001, has been instrumental in advancing the consolidation of the industry. Since 1999, a total of eight mergers and acquisitions were completed. Seven other M&As involving 13 insurers are currently at various stages of implementation. In 2001, macroeconomic policy was focused on managing the downside risks arising from the slowdown in the major economies. Macroeconomic policies were targeted at creating a positive and enabling environment for domestic demand to support growth.