Foreign direct investment has been sustained, particularly into the new areas of growth. The private sector continues as the main driver of economic growth for the fifth consecutive year, while the public sector plays a supportive role. While Malaysia continues to attract investment, both domestic and foreign from the traditional sectors, new sectors such as the services, manufacturing and oil and gas sectors are gaining in importance. The services sector such as information technology services, shared services and outsourcing as well as financial services, in particular Islamic finance, has increased its market share. BIS Review 129/2007  1  The Malaysian Islamic banking system saw strong performance in 2006 with higher profitability, and has remained well capitalized. Islamic banking assets amounting to about USD34 billion or 13 percent in terms of market share. The takaful sector stands at USD1.7 billion, with the assets growing at an average rate of 27% per annum since the past five years. The performance of the Malaysian Islamic capital market has been equally encouraging. Our capital market has depth and breadth that is supported by an active secondary bond market. Islamic corporate bonds, or sukuk, now amount to USD36 billion or 48 percent of the total outstanding corporate bond issuance in Malaysia. The multinationals and multi-lateral institutions such as the International Finance Corporation and the World Bank has begun to tap funds from the Malaysian capital market by issuing ringgit sukuks, thus increasing the market's depth and diversity.
Bank Negara Malaysia has received positive response from the local and foreign financial institutions to participate in the MIFC, particularly in the establishment of International Islamic Banks (IIBs), International Takaful Operators (ITOs), as well as International Currency Business Units (ICBUs) of Islamic banks and takaful operators. To date, 14 financial institutions have been granted approval to set up ICBUs. IV. Critical areas of contribution – Malaysia's role  In this last segment of my address this morning, allow me to share several key areas in Islamic finance where Malaysia can play major roles, particularly by capitalizing on various initiatives and incentives under MIFC banner. The first area is retakaful. The Malaysian Government has focused efforts towards the development of the retakaful sector in complementing the encouraging growth and expansion of the takaful industry. This is a critical response to the challenge of the shortage of strong and credible retakaful capacity globally which poses an impediment to the growth momentum of the takaful sector. Besides fulfilling the need for retakaful support from the takaful operators, and reducing the industry's dependency on conventional reinsurance support, the retakaful operators will also play key roles in enhancing the technical knowledge in the market, as well as in promoting product development and innovation in the takaful industry. For this, Bank Negara Malaysia has taken a strategic move to further strengthen Malaysia's edge as a retakaful hub by inviting strong and qualified applicants, both local and foreign, to make Malaysia as their platform for retakaful activities.