Zeti Akhtar Aziz: Malaysia’s experience in strengthening its market for global sukuk activities Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 2nd Malaysian Islamic Finance – Issuers and Investors Forum 2007 "Malaysia as Global Sukuk Centre: Towards Greater Vibrancy of Malaysian Sukuk Market", Kuala Lumpur, 13 August 2007. The original speech, which contains various links to the documents mentioned, can be found on the Central Bank of Malaysia’s website. *  *  *  It gives me great pleasure to speak at the 2nd Malaysian Islamic Finance – Issuers and Investors Forum 2007 that brings together industry practitioners and investors to discuss recent developments and key issues in Islamic finance. Islamic financial markets in particular, have experienced significant evolution and rapid expansion. We are now seeing the emergence of highly innovative products and services in sukuk market. My remarks today will focus on the vast growth potential of the global sukuk market and Malaysia's experience in strengthening our market for Global Sukuk activities. Vast growth potential for sukuk The growing role of Islamic finance in mobilising and channelling funds to productive investment activities across borders contributes to more efficient allocation of funds across borders and facilitates international trade and investment. Greater diversification of risks also contributes towards promoting international financial stability. The more recent developments in Islamic finance is the growing significance of the sukuk market to become an increasingly important component of the Islamic financial system.
For most observers, including politicians, this is the most striking issue: the Fed has a dual mandate, including price stability and maximum employment, and the strategy review shifted its emphasis to the latter. The ECB, meanwhile, has a primary objective of price stability, according to the Treaties. Of course it is our duty to stick to the Treaties and our strategic review won’t deviate an inch from them. However let me only remind you that our legal mandate is not, as often assumed, a purely “single mandate”: it is rather a twotiered one that includes at least two other objectives without prejudice to price stability: “to support the general economic policies in the Union” contributing among other aims to a “social market economy, aiming at full employment and social progress”iii; and “the stability of the financial system” iv Furthermore, I would argue that there is less of a difference between a dual mandate and flexible inflation targeting than people think: noticeably, the measures we have taken to offset the effects of negative shocks such as the Global Financial Crisis or the sanitary crisis have a direct effect on growth and employment. As far as demand shocks are concerned, the monetary policy prescriptions are the same. In principle there are conflicts when there are supply shock but inflation targeting central banks also tend not to react to temporary supply shocks but respond only if there are signs of second-round effects.