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Thursday, 13 May 2010

Malaysia needs to attract more international investors in line with its aspiration to become Islamic finance hub

Malaysia needs lure more international investors in line with its aspiration to become Islamic finance hub.
PricewaterhouseCoopers (PwC) global Islamic finance leader Mohammad Faiz Azmi said the country currently had all the infrastructures in place, but it still had not realised to its full potential as it could entice more “foreign” money.
“We already have a strong domestic market but if we only bank on that, there will be a limitation. And international investors for Islamic finance does not necessarily come from the Middle East only but from other countries as well.
“For example, a Thai investor that wants to build a building in Abu Dhabi could fund the project via Sukuk or Islamic bonds issuance here.
“Nevertheless, we also have high possibility to be the gateway to Asia and Middle East markets to support global economic growth.
“The bottomline is we must make the country more attractive for decision makers likewise in London where it has become a hub for investors and finance service provides,” he told the press after a briefing on a booklet titled Gateway to Asia: Malaysia, International Islamic Finance Hub, a PwC's publication yesterday.
He added that the country must be conducive the for investors to identify opportunities especially around the region where it could structure the funding products for the investors.
Mohammad Faiz said the country's Islamic finance infrastructure was strong in all aspects in terms of sound regulatory, accounting, Shariah framework and the critical mass of practitioners.
“Our Government, Bank Negara and Securities Commission are very friendly when it comes to Islamic finance. For instance, realising the need for Islamic finance to be backed by underlying assets, Malaysia was among the first countries to accord tax neutrality to its instruments and transactions.
“This is to reduce cost of transferring assets in Islamic finance. On top of that, the country also provides incentives for Islamic finance,” he said.
Mohammad Faiz said Malaysia, compared to the other countries in the Asean region, would be the most suitable to become Islamic financial hub.
In terms of equity market, he said the country's shariah-compliant stocks were interesting particularly for Middle East investors.
Of the effect of the global economic crisis on the industry, Mohammad Faiz said the tightening of banking regulations from the West especially in terms of higher capital requirement was not fair to the Islamic finance industry.
“It will be difficult for Islamic banks to comply as it is not easy for smaller banks to even increase 2% to 3% of their capital.
“And after all, the crisis was due to their failure and not us where the root cause is greed.
“But, of course the crisis proved that Islamic finance is safer haven than conventional finance system,” he said.
Malaysia's Islamic banking industry has recorded significant growth over the last five years, with assets doubling to RM233.7bil as at end 2009 from RM111.8bil in 2005.
Malaysia is also on top of the list with a total of US$19bil or 54% of the global sukuk issuance last year.
According to the booklet, which is the third publication by PwC on Islamic finance, Malaysia ranks at the top of the sukuk market, Islamic equity market, Islamic fund management whilst the second in the takaful and the third in Islamic banking categories.

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