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The Islamic banking system has emerged as a
vibrant alternative financial system in Malaysia.
Islamic banking assets (including Islamic assets held by development
financial institutions (DFIs)) currently accounts for 15.4% (11.5% in 2003)
of the total banking assets (including assets held by DFIs) of the Malaysian
financial system. Capitalising on the ready infrastructure and comprehensive
Islamic financial system locally, the strategic development of Malaysia as
an international Islamic financial centre was taken to a new level with the
launch of the Malaysia International Islamic Financial Centre (MIFC)
initiative in 2006. To accelerate the development of Islamic finance, new
banking and takaful licences were offered to attract leading global players
to establish operations in Malaysia.
During the year, 16 approvals were granted for international currency
business operations. Two additional retakaful licences were also granted in
2007 to local and foreign players, further consolidating Malaysia?s position
as an international retakaful hub, while contributing to the development of
enhanced underwriting and claims practices, and product innovations in the
takaful industry. To further facilitate the conduct of takaful business, a
tax treatment that recognises the unique characteristics of takaful
operators had been introduced.
The tax treatment provides for the appropriate
recognition of income and expenses arising from takaful business, having
regard to the distinct role of takaful operators as risk managers in
contrast to conventional insurers, which are risk underwriters. Other
current initiatives include the review of the tax treatment for the business
of leasing which aims to address taxation issues that currently impede the
development and growth of leasing and ijarah business. The Government
continues to provide strong support for the MIFC vision by granting
flexibilities to improve business efficiencies and to attract the best
talent to Malaysia.
In 2007, the Government introduced an ?executive green lane? for immigration
procedures for foreign experts in Islamic finance, and made available
long-term employment passes with multiple entry visas and professional visit
passes. The Government had also relaxed several Foreign Investment Committee
rules for MIFC players.
These include allowing 100% foreign equity ownership in Islamic financial
institutions established under the MIFC and granting flexibilities in the
acquisition of properties and land, both for own use and commercial
purposes.
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