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MALAYSIA OVERVIEW

MALAYSIA OVERVIEW
TRANSFORMING VISION INTO OPPORTUNITIES

MALAYSIA OVERVIEW
Successful middle income nation with GDP per
capita of US$8,140 and domestic savings as high as 34.2% of GNI in 2010

MALAYSIA OVERVIEW

Strategically located
in the heart of Southeast Asia with easy access to China, India, the Middle East and Africa

Gateway to ASEAN
600 million population GDP of US$1.85 trillion 28% of the population below 15 years and strong mid-class

Facilitative foreign exchange administration policy attracts substantial

foreign direct investment

World class infrastructure to unlock

potential economic activities and sustain economic growth

1 2 3 4

BNM Annual Report 2010. Global Competitiveness Report 2010-2011 by the World Economic Forum. UNESCO Institute for Statistics (UIS) April 2007 Assessment. Ministry of Higher Education Malaysia.

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One of Asias most vibrant economies,

decades of industrial growth and political stability

thanks to Labour force of 12.2 million1 people is

Multiracial, multicultural and multilingual

population of 28 million living in harmony

highly skilled and productive Ranked sixth based

on its pay-to-productivity ratio
2

High rate of literacy at 91.9% , which compares favourably to

3

other advanced emerging markets

Business friendly government with a

economic transformation and liberalisation

commitment to

Competitive cost structure on top of

favourable tax environment

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MALAYSIA OVERVIEW

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MALAYSIA OVERVIEW

Globally Connected

alaysia has strong historical and commencial links with China, India, Portugal, the Netherland, Britain as well as Middle Eastern and North African (MENA) countries. These strong links have allowed Malaysia to serve as an important gateway for investors and issuers alike to these markets. For example, Chinese issuers often leverage on the historical ties and use Malaysia as a platform for fund-raising exercises targeted at MENA investors.

Malaysia is also a gateway to ASEAN, thereby offering easy access to the ten-country geo-economic alliance with a total population of 600 million... and a market growth rate of 6%.
In addition, Malaysias strategic location between the Far East and the West, along with strong trade ties with the US, Europe, the Middle East, China and India, has further strengthened its global connectivity, allowing it to engage with new and emerging centres of economic growth at the same time as dealing with the West. Malaysia is also a gateway to ASEAN, thereby offering easy access to the ten-country geoeconomic alliance with a total population of 600 million, a combined GDP of US$1,851 billion and a market growth rate of 6% (as at 2010).

Aided by such connectivity, over 1,000 companies from 30 countries have set up their regional headquarters in the country1. These include multinational companies like Shell, Nestle, Intel, Kuwait Finance House, Standard Chartered, HSBC and Citibank which have made Malaysia their regional hub. The success of Malaysias very own regional champions such as AirAsia, CIMB and YTL are also a testament of how the connectivity has helped home-grown companies to ourish regionally and internationally.

PricewaterhouseCoopers, Gateway to Asia 2008.

MALAYSIAS CAPITAL MARKET

Business and Investment Friendly

alaysia has a facilitative foreign exchange administration policy and attracts substantial foreign direct investment (FDI). A total of RM29.3 billion (US$9.7 billion) in FDI was recorded in 2010 and this gure is expected to exceed RM30 billion (US$10 billion) in 20111. Malaysias attractiveness as a business and investment friendly destination has been widely recognised by a number of international studies. According to the World Economic Forum Global Competitive Report 20112012, Malaysia was ranked the 6th most competitive nation in Asia Pacic and 21st in the world. The country also topped the ranks in terms of the ease of getting credit among 183 countries surveyed by the World Banks Ease of Doing Business Report 20102011.

NO CAPITAL CONTROLS
The common misperception is that capital controls are still in place to restrict the ow of capital to and from Malaysia. This may have been the case in the late 1990s and early 2000s but no longer holds true. Capital controls were previously imposed in response to the ow of hot money during the Asian nancial crisis that led to the worse economic depression in Malaysias short history as an independent nation. These controls have long been discontinued. Investors are free to repatriate any amount of their own funds in Malaysia at any time including capital, divestment proceeds, prots, dividends, rental, fees and interest arising from investments in Malaysia. In terms of foreign currency exchange, the ringgit is under a managed oat regime and has the necessary exibility to adjust to movements in capital ows and its value is determined by market forces. The central banks role vis--vis foreign exchange on a day-to-day basis is to ensure that market adjustments are orderly. Since 2007, Bursa Malaysia has allowed regulated short selling. Additionally, overseas companies do not require local equity participation as a requisite for listing on Bursa Malaysia.

Ministry of International Trade and Industry, press release 23 June 2011.

TRANSFORMING VISION INTO OPPORTUNITIES

MALAYSIA OVERVIEW

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MALAYSIA OVERVIEW
In addition, Malaysia is the 16th most competitive nation in the world and ranked rst in nancial risk factor (covering new nancial instruments and NPLs) in the Swiss-based Institute for Management Development (IMD) World Competitiveness Yearbook 2011. While the government implements policies to improve competitiveness, businesses have leveraged on this business friendly climate to create opportunities.

While the government implements policies to improve competitiveness, businesses have leveraged on this business friendly climate to create opportunities.
Malaysia has the highest percentage of companies with an inspiring corporate vision and in the implementation of those corporate visions throughout all layers of the company.1 Malaysia outperformed more developed economies like the USA, China, India, the Netherlands and Germany.

Malaysia is also among the top three shared service outsourcing locations in the world.2 Many foreign and local companies in the country now perform various shared service outsourcing, including in the outsourcing of knowledge, IT and business processes.

1 2

A global study in 2011 by international consultancy rm &samhoud. MSC Malaysia press release October 2010 quoting global study by A.T. Kearney.

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Economic Transformation

alaysia is a successful upper middle income country. Its Gross Domestic Product (GDP) per capita amounted to US$8,140 in 2010 . Year-on-year GDP growth amounted to 7.2% in 2010 and is expected to grow at a rate of between 5.5% and 6.0% in 2011. The countrys total population of 28.6 million (as of 2010) also has one of the highest rates of domestic savings, which stood at 34.2% of Gross National Income (GNI) in 2010. Despite past economic successes, Malaysias economy is currently undergoing structural changes. The government has launched the Economic Transformation Programme (ETP) in October 2010 to transform the country from a middle income to a high income economy. Under the ETP, 12 national key economic areas

have been identied that will be advanced by 131 entry point projects (EPPs) to drive economic growth and development across various industries. As at August 2011, a total of 53 EPPs with a total investment value of RM291 billion (US$97 billion) have been announced; and 84% of the initiatives announced have commenced implementation. These initiatives are generating RM228.5 billion (US$76.2 billion) in GNI and creating over 372,000 new jobs in the process. In addition to the ETP, the government is also embarking on transformation programmes for the development of ve regional cities and corresponding economic corridors in Malaysia as part of its economic transformation plan and to further propel the

countrys economic growth. The programmes will facilitate the development of ve secondary cities and economic corridors namely: Georgetown and the Northern Corridor Economic Region; Kuantan and the East Coast Economic Region; Johor Bahru and Iskandar Malaysia; Kuching and the Sarawak Corridor of Renewable Energy; and Kota Kinabalu and the Sabah Development Corridor.

The development of these ve regional cities will in turn generate signicant growth to the Malaysian economy and the capital market.

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MALAYSIA OVERVIEW

ECONOMIC

RAMME G O R P N IO T A TRANSFORM

(ETP)

The ETP was launched by the government in 2010 with the objective of propelling the country from a middle income economy to a high income nation. The goal is to elevate the countrys per capita GNI from the US$6,700 recorded in 2009 to a level exceeding US$15,000 by 2020. In order for this goal to be achieved, a targeted annual growth of 6% in GNI over the next decade has been set as the objective. Under the ETP, the Malaysian economy is expected to undergo signicant changes to become a developed nation. This would require a shift towards a predominantly service-based economy. During this period, the contribution from the services sector is expected to grow 58% to 65% by 2020. The ETP identies 12 key areas known as National Key Economic Areas (NKEA), which are expected to contribute substantially to Malaysias economic growth. As 92% of the RM1.4 trillion funding required for the NKEAs is expected come from the private sector, the ETP is expected to be primarily private-sector driven but facilitated by the government through prioritized public investment and policy support.

The starting point of the ETP was to focus on specic sectors and areas of the economy to drive such changes. The 12 areas identied on this basis are: Agriculture Business Services Communication Content & Infrastructure Education Electronic and Electrical Financial Services Greater Kuala Lumpur / Klang Valley Healthcare Oil, Gas and Energy Palm Oil Tourism Wholesale and Retail

Once the NKEAs have been identied, various EPPs are then identied to kick start the programme. As an NKEA, the nancial services sector has been further divided into eight sub-sectors namely: Retail banking Venture capital, private equity and hedge funds Business banking Islamic banking Micro nance / Developmental Finance Institutions Investment management Insurance and Takaful Capital market

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Financial Services Encompass Full Range of Solutions Catering to Different Financial Needs

Source: ETP, Performance Management and Delivery Unit (PEMANDU), Prime Minister Department of Malaysia

The EPPs that have been identied to drive the growth in the nancial services sector are: Revitalising Malaysias capital markets Deepening and broadening bond markets Transforming and rationalising developmental nancial institutions Creating an integrated payment ecosystem

Insuring up to at least 75% of the Malaysian population by 2020 Accelerating the growth of private pension industry Spurring the growth of the nascent wealth asset management industry Developing regional bank champions Becoming the indisputable global hub for Islamic nance

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MALAYSIA OVERVIEW

Established Financial Landscape

alaysias nancial system comprises a conventional system that operates in parallel with a well established Islamic nancial system. In fact, Malaysias Islamic nancial system is one of the worlds largest with assets valued at RM1.416 trillion (US$472 billion). The well-developed Islamic nancial system operates parallel to the conventional nancial system, offering Muslims and non-Muslims greater diversity in the types of products and services offered.

BANKING AND FINANCE

Conventional
Financial Market Banking & Financial Institutions Act 1989 Central Bank of Malaysia Act 1958 Insurance Act 1996 Securities Commission Act 1993 Capital Markets and Services Act 2007 Labuan Offshore Financial Services Authority Act 1996 Offshore Banking Act 1990 Offshore Insurance Act 1990 SC BNM Labuan FSA Islamic Banking Act 1983 Takaful Act 1984 Shariah Advisory Council National Shariah Advisory Council (BNM) MIFC

Islamic

Banks Insurers

Islamic banks Takaful operators

__________ Securities Bonds REITs ETFs Unit trusts funds

__________ Shariahcompliant securities Sukuk Islamic REITS Islamic ETF Shariahcompliant unit trust

Capital Market Source: Securities Commission Malaysia

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Continued Liberalisation
n 2009, the government announced the liberalisation of 27 service sub-sectors, allowing foreign investors unrestricted market access with 100 per cent equity. It was an enterprising move, undertaken at the height of the nancial crisis to send a clear signal to the world that Malaysia the outward-looking face of South East Asia was open for business at a time when others were turning inwards and taking refuge in the short-term comforts of protectionism.

Since then, the full range of our domestic regulations has been reviewed to ensure that they do not obstruct the liberalisation measures put in place. A number of steps to boost the development of Malaysias service industries have also been taken including a roadmap of capacity building for SMEs. As a result, the year 2010 saw the total trade in services rise to RM207 billion (US$69 billion) compared to RM194 billion (US$65 billion) in 2009, with service exports increasing by 5.6% to RM104 billion (US$34.6 billion) over the same period.

The government will further liberalise 17 services sub-sectors in phases in 2012 to accelerate investment. This initiative will allow up to 100% foreign equity participation in selected sub-sectors. The liberalisation measures have also encouraged foreign players to invest in the Malaysian nancial sector, and to use Malaysia as a base for their regional and international operations. This further strengthened Malaysias position in fund management, unit trust and stockbroking industries, and enhancing the countrys competitiveness as a destination for fund-raising and investments.

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CAPITAL MARKET
MALAYSIAS CAPITAL MARKET