Assalamualaikum Warahmatullahi Wabarakatuh
Bismillahi Rahmani Rahim
Beta bersyukur ke hadrat Ilahi kerana dengan izin dari Nya juga, Beta dapat berangkat untuk menzahirkan titah di majlis perasmian pada hari ini.
- It gives me great pleasure to speak at today’s launch of CIMB Principal Islamic Asset Management. This is indeed another great milestone for the Malaysia International Islamic Financial Centre (MIFC) initiative, as well as for CIMB Group who were able to draw a global Fortune 500 firm, the Principal Financial Group, to participate in the burgeoning Islamic finance industry.
- The international community is facing new challenges and uncertainties in the current global financial environment. The contagion effect of the global financial uncertainty has indeed spread beyond the United States and has increased the likelihood of a global financial crisis. We are seeing in the global financial markets, banks continuing to deleverage and to reduce lending activities, causing a contraction in credit supply. Financial Markets are expected to continue to be volatile. Hence, the global financial community is searching for centres that provide stability and new asset classes to spread their investment and business risk.
- While Islamic finance is still in its infancy in the global financial arena, here in Malaysia, it has been practiced for over three decades. Fundamentally, Islamic finance is founded on the principle of equity, where both profit and risk are shared between the provider and recipient of funds. This principle that aligns the interests of both parties and promotes transparency in financial transactions has found wide appeal among Muslims and non-Muslims.
- In Malaysia, the practice of Islamic finance was initiated through the establishment of Lembaga Tabung Haji, our pilgrimage fund, in 1962, and has since evolved to house more than 20 Islamic financial institutions with assets of more than RM150 billion. The confidence in Malaysia’s vision for Islamic finance is evidenced by the diverse set of players offering the full range of Islamic financial products in banking, capital markets and takaful.
- With the help of the private sector, the Malaysian government has worked hard to develop an Islamic finance industry that is as robust as it is vibrant and that co-exists in harmony with the conventional financial system. Key to our achievement has been a strong regulatory and legal framework which has balanced the distinct needs of Islamic finance with commercial objectives, while staying true to shariah principles. Recognising the need for uniform prudential standards, in 2002 Malaysia collaborated with a number of countries to establish the Islamic Financial Services Board (IFSB) which serves as the international-standard setting body to support the industry’s development.
- Malaysia launched the Malaysia International Islamic Financial Centre (MIFC) initiative in 2006 to strengthen Malaysia’s position as an Islamic financial hub in the Asian region. This initiative has 5 objectives: to establish Malaysia as a centre for:
- Origination, distribution and trading of Islamic bonds or sukuks;
- International Islamic banking;
- International takaful and retakaful;
- Islamic asset and wealth management services; and
- Islamic finance education, training, consultancy and research.
- Significant progress has been made in the development of the sukuk market. Malaysia’s sukuk market has now evolved into the world’s largest Islamic bond market, accounting for more than 60 percent of the global sukuk outstanding, which now stands at about USD100 billion. The sukuk market has now become an important source of financing for productive investment activities, and for investors it provides greater potential for diversification into new asset classes.
- The Malaysian bond market has been liberalised to enable foreign entities to raise ringgit and foreign currency denominated funds from our market. International issuers may now issue multi-currency sukuks or alternatively have the flexibility to swap domestic currency funding into other currencies. Stamp duty exemption for a period of ten years beginning 2007 has been granted on these instruments. Withholding tax exemption on any profits or income on non-residents’ investments in non-ringgit Islamic securities is also given.
- As an investment destination, the Malaysian capital market offers a wide range of Shariah – compliant products:
- More than 85 percent of Bursa Malaysia’s listed companies are Shariah – compliant, representing about 60 percent of total market capitalisation;
- There are over 130 Islamic unit trusts in Malaysia;
- There are two Shariah-compliant real estate investment trusts (REIT) listed on Bursa Malaysia, namely a hospital REIT and an oil palm plantation REIT — the first of its kind in the world; and
- Asia’s first Islamic exchange traded fund (ETF) was issued in January 2008.
- In addition to putting in place a comprehensive Islamic financial system that includes the legal, Shariah and regulatory infrastructure, the financial landscape has been liberalised to allow for global players to establish their presence here. The foreign equity ceiling has been liberalised to a maximum of 49 percent in existing Islamic banks and takaful companies.
- New licenses for International Islamic Banks and International Takaful Operators to conduct the full range of Islamic banking, takaful and retakaful businesses in international currencies are being offered to reputable international players. New licensees are given the operational flexibility to be set up as a branch or subsidiary that will enjoy tax exempt status until 2016. These financial institutions are allowed to be wholly foreign-owned and will have the freedom to employ expatriate staff.
- Having a sufficient pool of the best talent is key to strengthening Malaysia’s position in Islamic finance. To this end, Bank Negara Malaysia established the International Centre for Education and Islamic Finance (INCEIF) in 2006, which is envisioned to become the premier professional certification body and post-graduate education centre in this field of study. In fact, INCEIF’s flagship programme, the Chartered Islamic Finance Professional is the world’s first professional Islamic finance certification programme. In addition, the Islamic Banking and Finance Institute Malaysia (IBFIM) provides training to meet industry needs. Recently the International Shariah Research Academy for Islamic Finance (ISRA) was established to promote applied research in the area of Shariah and Islamic finance.
- The MIFC initiative underlines Malaysia’s commitment to develop the vast potential of Islamic finance. It is indeed gratifying to note that our efforts have not gone unnoticed and we have been acknowledged as a mature Islamic finance market by the much older and more established international financial hubs such as Hong Kong, Singapore and Dubai. The MIFC received global recognition when it was named “The Best International Islamic Finance Centre” at the 2nd Annual Sukuk Summit Awards of Excellence ceremony held in June this year in London.
Ladies and gentlemen
- Today’s launch of CIMB Principal Islamic Asset Management is a ringing endorsement of the MIFC agenda. Islamic asset management has been an area of rapid growth. There are now more than 250 Shariah-compliant mutual funds managing an estimated USD300 billion in assets. And it is an area with enormous potential. The Islamic fund management industry currently manages only 6 percent of the total funds under management of global Islamic financial institutions. Clearly CIMB and Principal are on to something here.
- CIMB have taken the lead to create another dimension within the MIFC arena by bringing a global powerhouse to Malaysia. I applaud CIMB Group and Principal Financial Group for their vision and efforts to bring MIFC and Islamic finance to the global stage. I wish CIMB and Principal a successful venture together.