JOHOR BAHRU: Islamic finance is
poised to expand over the next 10 to 15 years after surpassing the
trillion-dollar mark in 2012, said Minister for Finance Tharman Shanmugaratnam
at the World Islamic Economic Forum in Johor Bahru, Malaysia.
Mr Tharman, who is also Singapore's
Deputy Prime Minister, said that he was optimistic about the potential for the
sector after it chalked up growth of about 19 per cent a year since 2006.
This has lifted total
Shariah-compliant assets to nearly US$1.3 trillion in 2012.
However there is considerable scope
for development since Islamic finance now forms less than 1 per cent of the
global financial industry, said Mr Tharman.
Even in Muslim countries, Islamic
finance constitutes less than 5 per cent of the financial sector, he added.
The minister also noted that Islamic
financial institutions have mainly escaped significant damage from the global
financial crisis.
"They are well-placed to grow at
a time when many of the global banks, especially the European banks, are
deleveraging or focusing on consolidating their balance sheets," said Mr
Tharman.
He adds that Islamic finance has the
potential to diversify into new growth areas such as trade and infrastructure
financing in Asia and emerging markets.
This will allow Islamic banks to
reduce their exposure to the real estate sector and take advantage of the
stronger growth potential of the emerging market economies.
Another factor that can boost the
growth potential of Islamic finance is its focus on transparency, price
certainty and its risk-sharing framework.
Mr Tharman says Islamic finance can
ride this wave of demand for simpler and more basic investments.
Yet, he also pointed out several
challenges in the industry that need to be overcome to ensure continued growth.
Among them is the need to reduce
fragmentation in Islamic finance markets due to differences in accepted
standards of Shariah compliance.
"This has hampered the flow of
liquidity between jurisdictions and is in part why there are presently no
Islamic equivalents to the international monetary and bond markets."
The minister also touched on the need
to manage capital flows in Asia and emerging market economies.
Excessive capital inflows can cause
volatility, and it would be "wise to strengthen our policy toolkits in
Asia, so that we can deal with unpredictable and often excessive capital
flows," said Mr Tharman.
One of the policy responses is to
curtail volatility in the exchange rate in the short term, he said.
Mr Tharman also pointed to
macro-prudential policies such as property cooling measures to discourage
speculative demand for residential properties.
"These targeted administrative
and prudential measures are not conventional macroeconomic tools. But they are
likely to remain part of our policy toolkit, at least for the foreseeable
future."
The finance minister has also called
for greater depth in Asia's capital markets, especially the corporate bond
market.
"Broader and deeper capital
markets will allow investors to invest for the long term while hedging
risks," Mr Tharman said.
Separately, the minister also said
that Singapore and Malaysia were happy with the progress of joint ventures on
both sides of the Causeway.
The two countries will continue to
take steps to improve connectivity, cross-border trade facilitation, and
immigration processes, he said.
Mr Tharman also met Malaysian Prime
Minister Najib Razak on the sidelines of the forum.
DPM Tharman said that bilateral
relations between the two countries were well and that joint developments in
Malaysia's Iskandar region, for example, will enhance the complementary space
between both economies.
Prime Minister Najib expressed
interest in moving ahead with discussions concerning the proposed high-speed
rail link between both countries and also hoped for a joint launch of projects
on both sides of the Causeway next year under the Points of Agreement with
Singapore.
"There will, over time, also be
increasing pressures on our smaller and medium-sized businesses because of
shortage of labour in Singapore and shortage of land. And increasingly, they
will assess where best to base their operations, particularly those that
require more labour and more land. And Malaysia is of course, a very logical
hop away, very easy in terms of operational flexibility and logistics,"
said Mr Tharman.
(Channelnesasia.Com / 06
Dec 2012)
---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com
No comments:
Post a Comment