This approach has proven to be successful and critical in instilling public confidence in the Shariah integrity of the industry. Whilst enacting a separate governing law avoids the trap of confining the scope and operation of Islamic finance within the mould of conventional finance, this approach has proven in Malaysia to be the most efficient way possible to regulate Islamic finance. Recently, Malaysia has undertaken the initiative to establish a Law Harmonisation Committee with the main objectives to review existing Malaysian laws which are applicable to Islamic financial transactions and to propose necessary amendments to give legal recognition to Islamic financial transactions under the law. The mandate of the Committee extends beyond those that are regulatory in nature to include all laws relevant to execute the whole chain of Islamic finance practices. The desired outcome of the Committee’s work is the creation of laws that are facilitative, contemporary, and easily enforceable. Another objective is to provide facilitative legal framework for the Islamic finance industry and develop Malaysian laws as the law of choice for international Islamic financial transactions. This initiative is consistent with our continuous effort to foster an efficient, innovative and competitive Islamic financial system, given the more globalised and liberal operating environment within which Islamic finance will operate. The consideration for evolving the legal framework in Islamic finance would not be complete without extending due regard to the robustness of Shariah governance framework. This is inevitable given that Islamic finance has its roots in Shariah.
In the long run, monetary policy can deliver price stability, and in the short run it can also mitigate the effects of shocks and reduce fluctuations in output and employment. But monetary policy cannot have a long-term impact on the real exchange rate. As such, it can do little to mitigate the crowding-out effect of strong growth in a new export sector. If it tried to, the effect would be only temporary, and it would come at the expense of sacrificing the objectives with which monetary policy has been entrusted – objectives that it can achieve. Industrial and fiscal policies can have such a real impact over the long term, however, and it is to them that concerned parties should turn. 9  But it is possible to choose from among various options on the spectrum between a rigid peg and a free-floating exchange rate. And it is possible to adopt another currency, either unilaterally or in bilateral or multilateral cooperation. These were the options explored in the Central Bank’s 2012 report. 4 The conclusion was that a unilateral peg with unrestricted capital flows could run aground, as it did in so many economies after capital movements were liberalised further in the 1980s and 1990s. A firmer peg such as a currency board could pose risks to financial stability, and the same was considered true of unilateral adoption of another currency. It was deemed highly uncertain – and actually unlikely – that bilateral adoption of another currency would be on offer anywhere.