Official Opening Ceremony of the Islamic Capital Market Week
Kuala Lumpur International Islamic Capital Market Conference
YBhg Datuk Ali Abdul Kadir
Chairman, Securities Commission, Malaysia
26 March 2002
Yang Amat Berhormat Dato Seri Dr Mahathir bin Mohamad, Prime Minister and Finance Minister of Malaysia, Yang Berusaha Encik Mirzan Mahathir, President of the Asian Strategy and Leadership Institute, Your Excellencies, Tan Sri-Tan Sri, Datuk-Datuk, distinguished guests and speakers, ladies and gentlemen.
Assalamu’alaikum wr. wb. and a very good morning to you.
1. It is indeed our great pleasure to welcome Yang Amat Berhormat Prime Minister and all our guests this morning to the Official Opening Ceremony of the Islamic Capital Market Week and the Kuala Lumpur International Islamic Capital Market Conference.
2. The organization of this conference between the Securities Commission (SC) and the Asian Strategy and Leadership Institute (ASLI), and programmes over the next five days with industry bodies and government agencies underscore the synergistic partnership between the private and public sector in Malaysia in the national effort to build a sustainable economy on the foundation of robust policies and strong supportive infrastructure and institutions. The conference and the Islamic Capital Market Week are also timely given that much has been achieved over the past decade in developing Islamic finance in general and the Islamic capital market in particular. You will be hearing and witnessing first hand from people involved in the industry the significant progress that has been made these past few years.
Ladies and gentlemen,
Prospects and Challenges
3. It should be recognized from the outset that the Islamic Capital Market or ICM in Malaysia is an integral part of the capital market. Within the broader market, the ICM has effectively functioned as an alternative market for capital seekers and providers, at the same time playing an important complementary role to the Islamic banking and Takaful industry. In short, the broadening and deepening of the Islamic financial markets in this country has all the three key pillars: banking, takaful and capital market. While banking and takaful have had a longer history, the development of the Islamic capital market witnessed dramatic growth in the 1990s spearheaded mainly by corporate bodies that began to utilise Islamic capital market instruments to finance their business activities. At about the same time, investors started to invest in approved securities through market intermediaries that operate in accordance with Syariah principles. In short, the ICM complements the conventional capital market by providing value-added services that meet the needs of the market for a broad range of instruments, and have effectively mobilized and channeled the funds to fuel economic growth.
4. In an environment where increasing numbers of Muslims, and to a certain extent non-Muslims, whether in Malaysia or elsewhere, are acting on their preference for more Islamic investment products, we believe that Malaysia has the necessary ingredients to further develop this market. With growing awareness of Islamic investment coupled with the development of competitive and innovative Islamic products, the number of investors in the ICM is likely to grow over a period of time.
5. On the global front, there are presently more than 100 Islamic equity funds operating in various major financial centres around the world. Several of these funds have investments in Malaysian securities but in a limited portfolio, and obviously much more needs to be done to attract these funds. In fact, recent estimates indicate that approximately US$1 trillion of Middle East funds is presently invested in banks throughout the world and global Islamic investment is estimated to be expanding at a rate of between 12% and 15% per annum. Certainly, the availability of such a large amount of Islamic funds internationally is a clear indication of the potential development of the ICM, and thus there is a need for all of us to strive harder to meet the needs and criteria for attracting such investments.
Ladies and gentlemen,
Prospects for Growth of ICM
6. Given the strong potential for ICM to grow therefore, the challenge for the SC is clear. Within our mandate to foster the development of the ICM, we will be focusing on three fronts:
Establishing the necessary infrastructure support;
Increasing the universe of Islamic capital market instruments; and
Enhancing awareness, knowledge and skills.
7. In the Capital Market Master Plan or CMP, we have laid out a comprehensive plan for progressing the Islamic Capital Market, as encapsulated in 13 recommendations that range from enhancing market awareness of ICM products and its opportunities and nurturing ICM expertise to strengthening and fostering ICM market expansion and liberisation. With the guidance from our Syariah Advisory Council (SAC), the SC expects significant things will develop in this area and we will meet our destination to establish Malaysia as an attractive International Islamic capital market centre.
8. Presently, the ICM in Malaysia can be broadly classified into two categories, namely the equity and the Islamic debt securities markets, both having their own segment of activities. Since the establishment of the SAC, many other capital market instruments have been evaluated to determine their acceptability to Islam. At the same time, research is being undertaken to apply various Islamic concepts such as Ujrah, Bai Dayn, Istisna, Mudharabah, Murabahah, Qadrul Hasan and Musyarakah aimed at product origination and innovation. The ultimate objective is to add breadth and diversity of the Islamic capital market both for the purpose of capital raising as well as for private asset allocation, hedging and diversification.
Ladies and Gentlemen,
9. The SC also firmly believes in the inculcation of a learning culture and the creation of a pool of well-informed investors. One of the challenges to the growth of Islamic capital markets is the lack of market awareness and understanding of its diverse investment opportunities. It is indeed for this reason that in organizing this conference we have chosen to address and debate several very important and timely topics relating to opportunities and challenges to the ICM.
The International Capital Market Conference
10. There is so much to be done in the days ahead and I hope all of you here will exchange views, ideas and concepts with each other on how and what is the way towards creating a Islamic capital market that will offer practical value to issuers and investors. A concerted effort must be thought out in creating institutions, instruments and intermediaries that are viable and practical in order to see the formation of an effective and efficient Islamic capital market and at the same time to advance the cause of the Ummah.
11. This conference and indeed the rest of the week, I believe, will be a practical and useful one for all of you who have come here to gain knowledge and a better understanding of new instruments and concepts in the Islamic capital market. I hope all of you will benefit from this meeting of minds and will bring home the wealth of knowledge you have acquired and put it into practice for the benefit of the Ummah as a whole.
12. For all the hard work, support, cooperation and commitment of all persons and organizations that have helped in one way or another in making this conference a success, I would like to say “Terima Kasih, Thank You”.
13. Allow me to also convey the Commission’s recognition and gratitude to the scholars, capital market experts, practitioners, panel speakers and presenters for their efforts and contribution towards this conference, enabling us to continue with our journey to address new Islamic capital market concepts, instruments and investment products in positioning ICM internationally.
14. To the members of the Syariah Advisory Council of the SC who have shown dedication and professionalism in guiding the SC in its efforts in developing the Islamic Capital Market, I wish to put on record that their work is greatly appreciated by all. We hope they will continue guiding us in our relentless efforts in this direction. In fact, I wish to announce that in conjunction with the conference and the Islamic Capital Market Week, the SC is releasing a compilation of the resolutions and views of the SAC that have been made over the years. We hope the compilation will serve to provide clarity and transparency with regards to the syariah arguments used as basis for the formulation of the various resolutions.
15. To Yang Amat Berhormat Dato’ Seri Dr. Mahathir bin Mohamad, Prime Minister and Minister of Finance, who has given his fullest support and encouragement, in particular in making this conference a reality, and in general to all the efforts initiated by the SC, I am indeed very grateful.
16. On behalf of the SC, I would like to place on record our most sincere appreciation to Yang Amat Berhormat Dato’ Seri for making the time to be with us today to deliver a Special Address.
26 March 2002