International Islamic Finance Conference 2010

Dato’ Azizan Abdul Rahman

18th March 2010
Grand Dorsett Labuan

Bismillahi Rahmani Rahim

Yang Berhormat Senator Datuk Dr Awang Adek Hussin
Deputy Finance Minister II of Malaysia

Yang Berhormat Brig. Jen Prof Datuk Seri Panglima Dr. Kamaruzzaman bin Haji Ampon
Vice Chancellor, Universiti Malaysia Sabah

Yang Berbahagia Prof Dato Dr Syed Othman Al-Habshi
Chief Academic Officer, International Centre for Education in Islamic Finance (INCEIF)

Yang Berusaha Prof Dr Rosit Chong Abdullah
Chairman of IIFC

Distinguished Guests

Ladies and Gentlemen,

Assalamualaikum Warahmatullahiwabarakatuh and a very good morning.

It gives me great pleasure to welcome esteemed guests and participants to the International Islamic Finance Conference 2010. Labuan FSA is proud to be associated with this conference as part of our firm commitment and continuous efforts to the development of Islamic finance. This conference brings together industry experts, scholars and academicians from various parts of the world with the objective of engaging in intellectual discussions on new and innovative ways of developing a sustainable Islamic financial system.

We are very fortunate to have the Honorable Deputy Finance Minister II, Yang Berhormat Datuk Dr Awang Adek Hussin, who has availed himself despite his very busy schedule to be with us today to share his thoughts on developing a vibrant, dynamic and competitive international Islamic financial system. Clearly, his keynote speech will provide a vital backdrop and a starting point for further deliberations during this conference.

Ladies and gentlemen,

Islamic finance has steered through the global financial turmoil relatively unscathed. This is largely due to the unique features of Islamic finance which contributed to its resilience and depth in the global financial system. The Shariah principles governing Islamic finance necessitates strict lending requirements, insistence on transparency, requirements that physical assets underpin transactions, good business ethics and the avoidance of leveraging and speculation. It is the presence of these attributes that have shielded Islamic finance from the brunt of the worldwide credit crunch crisis emanating from the western economies.

However, the global financial crisis have also resulted in growing scrutiny for financial services industry to meet international standards and best practices in areas of transparency, corporate governance, risk management and capital adequacy. Islamic financial industry is no exception to this trend of regulatory scrutiny.

This implies that stricter Shariah-compliant framework is harbinger of things to come. It is even more so true as Shariah scholars are now faced with increased criticisms in the wake of the recent high-profile Dubai World/Nakheel corporate defaults which have shed a harsh light on the sustainable growth of Islamic finance. This highlights the importance of having greater transparency in the risk and reward structure of Islamic financial securities so as to ensure public confidence in Islamic finance remains high. In addition to this, there is now growing pressure for Shariah-compliance to extend beyond product approval to include product operationalization such as documentation and disbursement.

Ladies and gentlemen,

As a regulatory and supervisory authority, Labuan FSA is no stranger to these intense international pressures to meet global standards and best practices advocated by international bodies and international standard setting bodies such as the G20 and the Organization for Economic Cooperation and Development (OECD), to name a few. Labuan FSA has always and will continue to ensure that Labuan IBFC remains a transparent, well-regulated international business and financial centre with robust regulatory systems and practices.

In light of this, a comprehensive review of the legal framework in Labuan IBFC was conducted as part of the modernization of its laws to be at par with international best practices and at the same time ensures that the jurisdiction remains competitive in the international arena. The outcome of the holistic review was the enactment of 8 Acts consisting of 4 amended acts and 4 new laws.

In regard to the new laws, a landmark piece of the legislation is the Labuan Islamic Financial Services and Securities Act which streamlines procedures and requirements of all Shariah-related activities conducted in and via Labuan IBFC. The enactment of this Islamic act makes Labuan IBFC the first common law international financial centre to have a specific legislation governing Islamic financial services. This is indeed a significant contribution of Labuan FSA in supporting the Malaysian government’s agenda towards promoting Malaysia as a major hub for international Islamic finance.

Ladies and gentlemen,

As the global financial architecture undergoes structural and regulatory reforms in response to the financial crisis, there is a need to review the Islamic financial architecture in light of recent challenges confronting the international financial system.

This is most pertinent as the role of Islamic finance in shaping a sustainable global financial system has taken a central place in the debate on global financial stability. Against this backdrop, the theme for this conference “Towards an Innovative, Stable and Global Islamic Finance” could not be more appropriate. And with the keynote speech by Yang Berhormat Dato’ Dr. Awang Adek Hussin, Deputy Finance Minister II to deliver his thoughts on Islamic finance this morning. I strongly believe this Conference will be beneficial and rewarding to all participants.

With that note, I thank you and wish you a fruitful conference.

Wassalaamu’alaikum Warahmatullahi Wabarakatuh.
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