As such, “Policy dilemma” in Emerging Market Economies is likely to become more pronounced, especially as policy rate hikes from external front are imminent. Along the way, clear and timely policy communications from Advanced Economies will be useful to prepare for any adverse side-effects going forward. Part III: Key policy takeaway and the importance of policy collaborations Ladies and Gentlemen, In preparation for upcoming challenges, policymakers wish to do better than passively “catching up” with the crisis, but to be actively “ahead of the crisis” in order to prevent, or at least, mitigate the impact should one occur. Against this backdrop, lines of policy defenses for each economy have to be strengthened. 2  BIS central bankers’ speeches  If we think of the economy as our own house, then keeping the house in order is always an effective first line of defense. Strong economic fundamentals and macroeconomic policy credibility would play a crucial role in ensuring confidence and the sustainable economic activities. Nonetheless, increasing interconnectedness has made housekeeping more difficult as it creates spillovers. To better deal with the shocks, broader set of policy tools are called for. In a nutshell, sound macroeconomic policy and flexible macro-prudential measures to target vulnerabilities have been employed to minimize unprecedented impact in an appropriate and timely manner. Nonetheless, these policies are reaching their limits, not only in terms of policy space but also effectiveness. For a better solution, reforms in both the financial and real sectors are essential.
For example, Malaysia’s top halal export markets (e.g. China, Singapore and Japan) are signatories to the Net Zero target and non-sustainability practices will lead to an increase cost of business exporting into these markets. Malaysia’s halal food and beverages segment, which makes up 80% of Malaysia’s halal production and 86%5 of total halal exports may be adversely affected by climate change. An increase in temperature will lower the resilience of the agroecosystem against pests and pathogens, resulting in lower yields and quality of crops, affecting the supply of raw materials. In addition, more MNCs are embracing the sustainability agenda compelling halal SMEs to factor in sustainability as part of their business strategies, operations and decision making. It is heartening that prominent halal MNC manufacturers have already started imposing sustainable practices across their supply chain. Nestle for example, has established the Paddy Club back in 2012 as an initiative to ensure rice used for the company’s cereal products is sourced sustainably and responsibly. Another example is the Sustainability Agriculture Code as a pre-requisite for suppliers to enter Unilever’s supply chain as part of the group’s ambition to sustainable sourcing. Towards this end, the Islamic financial institutions have put together a lot of efforts and resources in place, underpinned by the concept of Value-based intermediation (VBI) such that financing and banking activities are in line with sustainability practices.