Authority Member of Labuan Offshore Financial Services Authority (LOFSA) Dato' Mohd Azlan Hashim said Malaysia is proud to be able to feature a dual banking system, one conventional and the other Islamic with both equally comprehensive and viable.
"This dual financial system, each complementing the other, provides a comprehensive choice to all users.
"For Labuan IOFC, the opportunity to succeed in further developing the Islamic financial system, is even greater as key elements are either already existing or easy to establish here," he said.
Mohd Azlan, who is also Chairman of the Labuan International Financial Exchange (LFX) was delivering his keynote address Opportunities For A Promising Future Of Labuan IOFC at the Labuan Week : Conference On Strategic Development Of Labuan As An IOFC today.
Mohd Azlan added the three key elements essential for success include:
- a large number of instruments being available to meet the different needs of different investors and borrowers.
- a large number of institutions to participate in the financial system to facilitate mobilisation and allocation of funds, including initiation and innovation, and
- an efficient and effective linkage between instruments and institutions
At the international level, efforts were initiated to ensure that Islamic financing, as a unique selling proposition for Labuan IOFC, continued to be enhanced. The International Islamic Financial Market (IIFM) was established in November 2001 not only to enhance co-operation amongst Islamic countries and financial institutions but to expand research and development into new Syariah compliant products and services. A market and product development committee was also set up by IIFM in July 2002 to provide further support.
"Moving forward, LOFSA will continue to spearhead the development of the Labuan IOFC in Islamic financing. This includes attracting more participants in Islamic financing from the Middle East, Africa and Asia Pacific," Mohd Azlan said.
He said for the longer term, LOFSA plans to collaborate with internationally renowned universities to provide various courses, including key programmes on Islamic financing. It is envisaged that this will provide research and development capabilities to enable the creation of new Islamic products, as well as deepen and broaden the scope of Islamic financing in Labuan IOFC.
LOFSA will also continue to review the regulatory framework to address any concerns and risks for the effective management of Islamic financing. Efforts will also be extended to promote Islamic financing in equity and debt markets, insurance and trade financing.
Mohd Azlan said an outstanding achievement strengthening the unique selling proposition of Labuan IOFC in Islamic financing, is the issuance of the Sukuk (Islamic securities) in 2002. The issuance of the Sukuk propelled the Labuan IOFC to the forefront of innovative Islamic product development, establishing international acceptance and recognition of Islamic financing.
"The Sukuk had a primary listing on Luxembourg and a secondary listing on LFX in 2002. Last week, the Sukuk had another secondary listing on the Bahrain Stock Exchange. This global Sukuk has successfully bridged Islamic financing in Southeast Asia, Europe and the Middle East.
"It is in this respect that LFX provides significant opportunities in bridging and networking the markets of the world in both conventional and Islamic financing.
"LFX will continue to establish strategic alliances with other offshore exchanges to further enhance the accessibility of its listed financial instruments and investment securities," he said.
Mohd Azlan said as an efficient and cost effective mechanism for the listing of a wide range of multi- currency instruments, based on conventional and Syariah principles, LFX currently serves 12 listed instruments with a market capitalisation of over USD 1.9 billion. These include 3 Syariah compliant instruments, 3 conventional debt securities and 6 open-ended funds, supported by 7 listing sponsors and 5 trading agents.
"Work in progress for LFX include further listing of instruments for public and private sector funding, including dual listings with other offshore exchanges.
"There is indeed greater awareness and interest in LFX. In the near future, LFX seeks to list more Sukuk instruments as well as Labuan Depository Receipts.
"It is expected that by the end of 2003, LFX will list additional financial instruments of at least USD1 billion," Mohd Azlan said.
In concluding his keynote address, Mohd Azlan said that Labuan as an IOFC has all the necessary components for further growth and development of the participants, the regulatory framework, the incentives and the network.
"In fact, the Labuan IOFC has for over 13 years proven that diversity can work in harmony.
"Malaysia will continue to welcome international financial institutions to play an important role in developing not only the conventional financial system but also the Islamic financial system. In that spirit, we welcome innovators, creators, providers, users, supporters from all over the world to the Labuan IOFC.
"However, participants and institutions should remain committed and build upon the achievements of Labuan as an IOFC. Innovation and creativity in the offshore environment will continue to be essential," he said.
