Value Propositions Wan Abdul Rahim Kamil Consultant, Islamic Capital Market Securities Commission Malaysia

REGULATORY FRAMEWORK SC has undertaken progressive measures to build up regulatory and supervisory framework for Islamic finance to protect investors interest Malaysias comprehensive regulatory infrastructure also ensures there is end-to-end Shariah compliance on a consistent basis - provides assurance to investors Introduction of Shariah-specific rules and guidelines (Islamic Securities, REITs) and best practices (Islamic stockbroking) provide clarity and certainty Market has responded positively to these efforts by quickly bringing new products to the market (Islamic REITs; innovative sukuk structures using Musharakah, Mudharabah and Ijarah) Budget 2008 incorporated specific measures to further bolster the attractiveness and value proposition of the country: Foreign ownership on fund management companies and REITs management companies to be allowed up to 70 percent, while Islamic fund management companies will be allowed to be fully foreign owned These companies will be granted income tax exemption on all fees received in respect of Islamic fund management companies

FACILITATIVE TAX FRAMEWORK An essential tool in facilitating innovation and product promotion Malaysian government and regulators work closely with industry to ensure conducive tax environment for the ICM and to strengthen Malaysias position as international Islamic financial centre Budget 2009 tax incentives: Tax exemption for 3 years for fees and profits earned by institutions undertaking activities relating to arranging, underwriting, distribution and trading on non-ringgit sukuk issued from Malaysia Other tax incentives designed to attract more investment into Malaysia include the abolishment of withholding tax on investments in Ringgit and foreign currency bonds and Sukuk, among others

CAPACITY BUILDING Recognising the dearth of highly trained personnel in the Islamic finance industry not just in Malaysia but also worldwide, Malaysia embarked upon a structured capacity building effort covering all sectors i.e. banking, takaful and capital market. The SC, apart from being a regulator is also entasked with the development of the market. The ICM Department of the SC has conducted numerous research on applications of existing Islamic contracts as capital market tools, as well as have devised several mechanisms that would contribute to efficient market transactions. The highest authority of approval for such tools or mechanisms is the Shariah Advisory Council of the SC. Several developments include structures for alternative investments such as Replicated securities borrowing and lending (SBL) End to end compliant ETF Commodity Murabahah Platform

INTERNATIONALISATION OF ICM In preparing itself for meeting challenges of globalisation, Malaysia took a stand to strengthen its domestic position by way of issuances of guidelines, policies and best- practise approaches that add clarity to the requirement of the market. Investor protection in line with the IOSCO parameters has been our main objective in ensuring market confidence and this is evident in the stipulations of the CMSA Today our guidelines are benchmarked to by many issuers, investors and intermediaries. Now working hard to expand the international dimension of our Islamic capital market, which has been widely recognised as Malaysias key value proposition Efforts have resulted in several leading financial institutions establishing their global and regional Islamic fund management operations in Malaysia Mutual Recognition Agreement An initiative to increase the connectivity of Malaysias ICM to global Islamic capital market network First between two Islamic markets, for cross-border distribution and marketing of Islamic funds