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Duli Yang Teramat Mulia Raja Dr Nazrin Shah, the Crown Prince of Perak Darul Ridzuan and Ambassador, Malaysia International Islamic Financial Centre (MIFC)
His Excellency Declan Kelly, Ambassador of Ireland to Malaysia
Yang Berbahagia Dato’ Sri Nazir Razak, Chief Executive, CIMB Group
Yang Berbahagia Dato’ Charon Wardini Mokhzani, CEO, CIMB Investment Bank Berhad
Mr Jim McCaughan, President & CEO, Principal Global Investors
Yang Berbahagia Dato’ Dr Syed Muhamad bin Syed Abdul Kadir, Chairman, CIMB-Principal Islamic Asset Management
Distinguished Guests, Ladies and Gentlemen,
Assalamu‘alaikum and a very good afternoon.
I am delighted to be here this afternoon to join you in celebrating the establishment of CIMB-Principal Islamic Asset Management’s fund platform in Ireland. My heartiest congratulations to CIMB-Principal Islamic for taking this significant step and timely initiative to introduce Islamic funds to the global arena. This development represents another milestone in the Malaysia’s ongoing efforts to deepen, broaden and further internationalise our Islamic capital market, of which Islamic fund management is a critical component.
Over the past decade, Islamic finance has achieved tremendous development internationally, continue to strengthen its foothold in the international financial landscape as manifested by the significant growth in terms of market size, geographical reach and product diversity.
In the area of Islamic fund management, the size of assets under management globally stood close to USD60 billion as at the end of 2010, reflecting an average growth rate of 11.2% per annum over the previous five years. Malaysia is among the leaders, accounting for approximately 15% of the total funds under management [1].
To date, Malaysia has achieved several noteworthy milestones in innovating and commercialising Shariah-compliant investment funds, including the historic launch of the world's first Islamic Real Estate Investment Trust in 2005 and Asia's first Islamic Exchange Traded Fund (ETF) in 2008. With the full liberalisation of the Islamic capital market, we now have 16 full-fledged Islamic fund management companies operating in Malaysia including some of the biggest players in the international fund management industry. In fact Malaysia is unique in being the only jurisdiction to offer specialised Islamic fund management licences.
Our vision for continued growth of the Islamic capital market is encapsulated in our second Capital Market Masterplan. The size of Malaysia’s Islamic capital market is projected to grow at an average rate of 10.6% per annum over the Masterplan period of ten years, to reach RM2.9 trillion in 2020. Over the same period, the Net Asset Value of Islamic unit trusts in Malaysia is expected to increase by 20.7% per annum.
We believe that this growth will substantively be driven by greater internationalisation, with expansion in the number of markets and industry participants embracing Islamic finance stimulating greater cross border activities. This in turn will be facilitated by the development of standards eg by the Islamic Financial Services Board (IFSB), the greaterharmonisation of Shariah interpretation, which will provide a common platform for enhanced cross border activities.
To achieve this robust growth projection, it is also important for Islamic finance to offer a more distinctive value proposition, incorporating universal values that appeal to a wider cross section of issuers and investors. An important element in this regard is the availability of risk-sharing instruments, which combine the universal values of fairness and collaboration, which can not only broaden the customer base to investors seeking risk-participatory products but also to offer product diversification. The true spirit of risk-sharing engenders entrepreneurship that is supported by strong risk management, which in turn will contribute to real value and wealth creation.
We believe that Islamic fund management companies are well-positioned to drive this growth strategy for Islamic finance and should therefore seek to provide more Shariah-based fund management solutions that have universal appeal in order to fulfil investor demand and optimise their business potential.
Ladies and Gentlemen,
As the Islamic fund management industry moves towards greater internationalisation, there is pressing need to address cross-border issues including the regulatory framework for funds approval, distribution and supervision. In this regard, cross-border collaboration among regulators is an important aspect of industry development. The MoU entered into between the Securities Commission and the Central Bank of Ireland in November 2011 provides an arrangement for the two regulators to exchange information and cooperate in the area of regulation and supervision of authorised entities offering collective investment schemes. Such a regulatory arrangement is critical in ensuring appropriate investor protection and effective oversight of related intermediaries and their cross-border activities. In this regard, I would like to acknowledge the cooperation extended by the Central Bank of Ireland in facilitating the process towards establishing the MoU.
I am very pleased that this collaboration between the SC and the Central Bank of Ireland has paved the way for CIMB-Principal Islamic to establish its Islamic fund platform in Ireland, as part of its strategy to internationalise its product offerings and enhance the visibility of its Islamic funds among global investors. I certainly hope that this pioneering initiative will encourage other Malaysian intermediaries to undertake similar efforts to capitalise on the vast opportunities in Islamic fund management and, while at the same time, strengthen their ability to build scale. While regulators can continue with efforts to develop facilitative and appropriate regulatory frameworks, it is the private sector that need to play an integral part in operationalising and realising relevant business opportunities.
Before I conclude, I would like to take this opportunity to thank Duli Yang Teramat Mulia Raja Dr Nazrin Shah, the Crown Prince of Perak, and also Ambassador of the Malaysia International Islamic Financial Centre, for Yang Teramat Mulia Tuanku’s tremendous support and encouragement towards the growth and development of Islamic finance, both in Malaysia and globally. The SC has benefitted tremendously from DYTM Tuanku’s encouragement and guidance.
I would also like to thank the management of the CIMB Group and Principal Global Investors for inviting me to join you in celebrating this significant and momentous event, and I wish you great success.
Thank you.
