In the coming years, as the Shariah principles of using capital to build productive capacity gain wider recognition, Islamic Finance will assume a more prominent role. Estimates of global Islamic Finance assets today range from $ billion to $ 1 trillion and one consultancy firm estimates this could potentially grow to $ trillion by 2012. 4 Countries in Asia are using Islamic Finance to fund urban development and public infrastructure projects to meet the growing demands of their populations. The ADB estimates that Asian countries would need more than $ trillion of infrastructure investment between  3  Kawai and Wignaraja, “The Asian "Noodle Bowl": Is It Serious for Business?” Asian Development Bank Institute Working Paper Series No. 136, April 2009. 4  Oliver Wyman, “The Next Chapter in Islamic Finance - Higher Rewards but Higher Risks”, April 2009. 2  BIS Review 57/2009  2010 and 2020. 5 International financial institutions such as the Islamic Development Bank are active in funding worthwhile investment projects. The global sukuk market remains a relatively new asset class with much room to grow out. In 2007, Asian currency-denominated sukuk outstanding grew by almost 50% but the market contracted by only 1.5% to $ billion at end-2008. 6 Around $ billion in sovereign sukuk issuance will come from Malaysia, Indonesia and Singapore in the first half of 2009, and more private sector issuers are expected to tap the sukuk market and to attract new investors and clients.
2  The World Bank projected Developing East Asia (including China) to grow by 5.3% in 2009; South Asia by 3.7% and Middle East and North Africa by 3.0%. BIS Review 57/2009  1  force an acceleration of structural economic change in Asia. The drive towards greater domestic consumption, as well as greater Asia intra-regional trade, investment and consumption, will take on greater urgency. The growth of intra-Asia trade and investments will be driven by both bottom-up initiatives as businesses expand their ties, as well as top-down policy measures as governments enter into agreements on free trade and economic cooperation. A recent survey by the ADB Institute found that a higher than expected 22% of responding firms use preferences accorded by free trade agreement (FTA) and more are planning to do so. 3 China, Japan and Korea have implemented their FTAs with ASEAN. The ASEAN-Australia-New Zealand FTA was signed in February 2009. Singapore has signed FTAs with the GCC and Jordan, and we can expect more of such pacts within Asia in the future. Cross-border capital flows between the GCC and East Asia will grow significantly in the coming years. With this forced pace of global re-balancing, the relative economic weight of Asia will rise. This would be a positive development for the global economy, as more engines of growth provide greater resilience. Financial services and Islamic finance However, it is crucial that our optimism does not turn into hubris. Economies in our region face many important challenges.