The biggest risk to an orderly rebalancing of our economy comes from abroad. Efforts to restore world demand are impeded by the scale of the imbalances in trade, which are beginning to grow again. If the UK and other low-savings countries are to rebalance their economies, demand for their products must increase overseas. Lower domestic demand in the deficit countries must be accompanied by strong growth in domestic demand in the surplus countries if the world economy is not to slow. That will require a change in the strategy of those countries that have built their own policies around export-led growth. In searching for a solution, some ask who is to blame. But that misses the point. Before the crisis, all the main players were rationally pursuing their own perceived self-interest. Policymakers in countries like China wanted to develop via an export-led strategy, and policymakers in the low-saving countries took actions to maintain an adequate level of overall demand, consistent with steady, low inflation. But what seemed to make sense for each player individually did not make sense in aggregate, and we can see the consequences. A key lesson from the crisis is that we must find better ways of ensuring the right collective outcome. That challenge is clearly visible today. All countries accept that global rebalancing is necessary.
As Islamic financial activities are increasingly crossing national boundaries, it is critical for more such dialogues to take place at an international level, in order to gain wider perspectives that can contribute to the development of a legal framework for Islamic finance that is internationally facilitative. Islamic finance today has become a major industry worldwide with over 300 institutions and an estimated asset size of more than USD1 trillion. Its continuing advances in the international financial landscape have recently been accompanied by several major efforts aimed at strengthening its international financial infrastructure. A key structural enhancement achieved recently was the establishment of the Islamic Financial Services Forum (IFSF) that serves as a platform for cross-border engagement among regulators to achieve financial stability in the Islamic financial system. Another important development achieved more recently was the establishment of the International Islamic Liquidity Management Corporation (IILM) as a mechanism for more efficient management of liquidity across borders for Islamic financial institutions. These continuing efforts to strengthen the foundations of Islamic finance have served to ensure its preparedness in meeting the challenges on the path of internationalisation. As we open a new chapter of global growth and development with the unfolding of a new decade, Islamic finance is in a position of strength to play a greater role in the global financial landscape. Today, many jurisdictions are interested in Islamic finance and have taken initiatives to develop the industry.