Of equal importance is also to integrate the domestic Islamic financial system with the international financial system. For more than two decades, we have witnessed the success of the development of each of these respective components that has contributed to the rapid expansion in Malaysia's Islamic financial services industry. Indeed, we have seen the development of a comprehensive Islamic financial system. This has placed the Malaysian Islamic financial system at the forefront of the global Islamic financial system. Notwithstanding this, there have been imbalances in the pace of the growth of the components of the financial system. While Islamic banking, being the core component, has recorded significant progress, more efforts need to be directed to promote the growth of takaful and the financial markets. My remarks today will focus on measures to accelerate the growth of the Islamic financial markets by strengthening its required linkages. Of most importance is the development of a wider range of Islamic financial instruments, developing the relevant indicators to support benchmarking and an efficient pricing mechanism as well as to actively promote the role of the market players. Development of a wider range of Islamic financial instruments For Islamic financial institutions to effectively manage its funds, there is a need to have diversity in the type and the maturity of the Islamic financial instruments. This is one area in Islamic finance that offers formidable challenges and opportunities to market participants in Malaysia. A broader range of products and services is vital in this fast changing global financial landscape.
In today's marketplace, there are only a number of Islamic financial instruments that have been developed to cater for this need which for the most part constitutes straight private and government Islamic papers. In a bid to deepen and broaden the Islamic bond market, the government has been regularly issuing Islamic and conventional securities with different maturities, enabling the creation of a benchmark yield curve. This was further enhanced with the introduction of an Auction Calender in the year 2000. In the 2000, Government Investment Issues or GIIs were introduced, followed by Islamic negotiable notes, private debt securities, Treasury Bills and sukuk. Furthermore, following the amendment to the Government Investment Act in year 2005, the Government has started issuing shorter-term Islamic Treasury Bills and longer-term sukuk or Islamic bonds with a maturity of 10 years in order to further diversify the Islamic financial instruments available for investors. Under the Act, the Government is able to issue Islamic instruments under various Shariah principles and for different tenures; short and long term, to  BIS Review 49/2005  1  meet the varying needs of investors. Islamic private debt securities (PDS) too have been fast growing in importance and size, accounting for 50% of the total PDS market in 2004. Despite these developments, there has been an inadequate supply of short-term Islamic instruments thereby providing less flexibility to the institutions in managing their asset and liability profiles.