This is evidenced by the significant transformation of the financial system that is now more diversified with well developed financial markets and broadened product offerings, that is more competitive with home-grown regional players, that is more inclusive with higher levels of banking and insurance penetration, and with improved financial strength indicators as financial institutions are better supported by strengthened governance and risk management standards and practices. The development of Islamic finance has also made significant strides both in the domestic and international front as Malaysia evolves as an international Islamic financial hub. Enhancements to the payment infrastructure have also supported the increased use of epayment channels. With these building blocks in place, the financial system has also been progressively deregulated and liberalised. The more recent liberalisation to allow for greater foreign participation in the domestic financial markets and increased foreign presence will enhance further our financial and economic international linkages. As we move into the final phase of the Masterplan, we are confident of the strength and resilience of the domestic financial sector to face greater competition and benefit from the liberalisation measures recently announced. We have received strong interest in the new licences from Asia, the Middle East, Europe and the United Kingdom that bring with them strong value propositions that will add significantly to the depth and breadth of the financial sector in Malaysia. In the insurance sector, greater competition will emerge from the progressive deregulation of product rates.
These trends are being further supported by enhanced linkages in the payment systems to facilitate the intermediation of funds in the region. The economic transformation of Malaysia will move us to the next level of development. Malaysia has been a middle income country for almost three decades, having benefited considerably from rapid industrialisation and integration with the global economy. Moving into the next stage of economic development, the domestic economy will change to a productive structure that is more innovation-driven and knowledge-intensive, with the services sector assuming an increasingly dominant role in the economy. In this next decade, the services sector is expected to account for about two thirds of the economy, with growth focused on higher value added activities. To support and drive this transformation, a new blueprint for the financial services sector is being developed by Bank Negara Malaysia. The blueprint will chart the next phase of the evolution of the financial sector, with the aim of positioning the financial sector, including Islamic finance, not only to become a catalyst to the transformation process, but also having the flexibility to respond to the key trends that are emerging. In essence, we need to evolve a financial system that best serves Malaysians in this new environment. As the global financial services industry going forward strives to regain thrust and confidence, the starting point in Asia is to build on the solid foundations put in place during the decade following the Asian financial crisis.