COMPETITIVENESS INFOLINE I N F O L I N E : THURSDAY, JULY 27, 2 017 0 2 / 2 0 1 7 FDI INFLOWS TO CREATE HIGH -VALUE JOBS MEGA INFRASTRUCTURE PROJECTS Major investments by foreign companies in Malaysia include China’s Huawei, which is UALA LUMPUR: A list of domestic investing RM2.2 billion for its global operations mega projects, which are already headquarters, data hosting and global training in progress or to be started soon, centers, employing more than 2,370 staff. have attracted an inflow of Saudi Aramco is investing US$7 billion foreignK direct investments (FDIs), which will (RM30.03 billion) for a 50 per cent stake in the create high value and ready jobs in future for Refinery and Petrochemical Integrated youths, particularly in the capital intensive sector. Development in Johor, while HSBC’s future Malaysia’s mega infrastructure projects are regional headquarters at the Tun Razak Exchange expected to boost the country’s economy by more will cost more than RM1 billion to build. than 50 per cent to RM2 trillion in the next seven to eight years, which will drive job creation in high-value services and knowledge-intensive industries. MIDF Amanah Investment Bank Bhd chief economist Dr Kamaruddin Mohd Nor said in the first quarter, FDI had ballooned to RM17 billion and was the largest value since December 2012. Comparatively, Malaysia recorded an FDI of RM13 billion in the fourth quarter of last year. “Theoretically, FDIs have a direct and indirect impact on job creation. The spillover effect will in turn help to boost employment and consumption,” he said. INFOLINE: 02/2017 COMPETITIVENESS INFOLINE I N F O L I N E : MONDAY, AUGUST 21, 2017 0 2 / 2 0 1 7 GROWING THE ISLAMIC BANKING BUSINESS alaysia has long been regarded as a leading country on the global front in Islamic finance (IF), after being around for over 30 years. MThere are presently 16-fully-fledge licensed Islamic financial institutions in the country including several foreign-owned entities, while the nation’s sukuk market share. These commendable statistics are not surprising, considering the government’s efforts to realize the industry’s full potential amid the rise of IF across the world. The local sector is well-supported by BNM in recent strategic paper noted that the market comprehensive market infrastructure, a robust share of Islamic banks in Malaysia quadrupled from 7.1% in 2010 to reach 28% in 2016 regulatory framework and dynamic market participants. 2016, the country surpassed Iran in the Islamic Finance Country Index (IFCI) for the first time Over the past two decades, the global Islamic since the inception of IFCI in 2011, largely due to financial industry has grown to register overall the government’s commitment to use Islamic total assets of US$1.88 trillion (RM 8.08 trillion) banking and IF as a policy tool and an integral as at end-2015, as per the Islamic Financial part of the economic agenda. Services Industry Stability Report 2016. Bank Negara Malaysia (BNM) in a recent The World Bank and Islamic Development Bank strategic paper noted that the market share of Group’s Global Report on Islamic Finance 2016 Islamic banks in Malaysia quadrupled from 7.1% said Shariah-compliant financial products and in 2010 to reach 28% in 2016.However, the services are now offered in 50 Muslim and non- industry’s annual growth rate slowed from Muslim jurisdictions worldwide. 24.2% to 8.2% in 2016, signaling a need to explore new opportunities for sustained growth. Yet, it was only last year that Malaysia rose through the rank to become the global leader in BNM’s July 2007 statistics showed total assets of Islamic banking and IF. Malaysia’s Islamic banking system (IBS)- As noted in the Global Islamic Finance Report Comprising Islamic banks, IBS of commercial INFOLINE: 02/2017 MALAYSIAN RESERVE MONDAY, AUGUST 21, 2017 banks, and IBS investment or merchant banks– as at January 2007 stood at RM126.27 billion. Among the was the Islamic Financial Services Acts 2013 (IFSA), a comprehensive legal Some 10 years later, as at January 2017 the figure framework building on the earlier Islamic had risen to RM584.45 billion. By June 2017,the Banking Act 1983, fully consistent with Shariah industry’s total assets reached RM610.52 billion. principles in all aspects of regulation and supervision from licensing to the winding-up of Total loans applied to Islamic banks amounted to an institution. RM21.92 billion in January this year before declining to RM19.74 billion in June. Year 2017, has not been short of action either. Last month, the Securities Commission Total loans approved for Islamic banks in January Malaysia (SC) said it would launch a sustainable stood at RM8,69 billion in January 2017 and rose to and responsible investing (SRI) investment RM10.45 billion in June. funds framework by year-end-year to capitalize on the values shared by SRI and IF. The For non-performing or impaired financing, the framework comes on the back of the SC’s SRI Islamic banking system (Islam banks, IBS or sukuk framework, introduced in 2014 to commercial banks and IBS of investment or continue pioneering the development of a merchant banks) recorded a total of RM6.36 billion Shariah-compliant SRI segment. in January 2017. Moody’s Investors Service Inc also said in an By December that year, non-performing financing April report that it expects Shariah-compliant dropped to RM5.56 billion and remained relatively investment accounts at local banks to display flat over the next few years, dropping to a low of strong growth over the next three to five years, RM4 billion in December 2012 before rising to with an upward trajectory of Shariah-abiding RM5.54 billion in January 2017 this year. investment accounts in the country already For June 2017, impaired financing for the IBS rose to seen since July 2015, following the RM6.18 billion. implementation of IFSA. Malaysia has done much to develop a Shariah- The local sukuk market has been registering compliant ecosystem, beginning with the increasing interest as well, as a source of institutionalisation of Islamic financial players in funding alternative to the equity and 1980, which saw the formation of first Shariah conventional bond markets, in addition to committee by Bank Islam Malaysia Bhd, which then being an option for Islamic investors seeking became the first Islamic bank established under the Shariah-compliant debt instruments. Islamic Banking Act 1983. According to RAM Rating Services Bhd, the In 1997, a centralized Shariah advisory was created, global sukuk issuance reached US$22.2 billion including the Shariah Advisory Council, the as at end-March this year, of which, Malaysia dedicated Muamalat Court and several relent and led the pack with 38.5% of the lot. knowledge institutions to nurture talents and generate knowledge. Outstanding global sukuk amounted to US4346.7 billion as at end-March 2017, with By 2007, the diversification if Islamic financial Malaysia again holding the majority at 48% of business had begun, thus requiring legal and the pie. regulatory frameworks to ensure end-to-end Shariah compliance of such ventures. China-based property developer Country INFOLINE: 02/2017 MALAYSIAN RESERVE MONDAY, AUGUST 21, 2017 Garden Holdings Co Ltd issued a RM1.5 billi0n sukuk Statistic About Islamic Banking in Malaysia two years ago. Just last month, BEWG Number of Islamic banks:16 (M) Sdn Bhd, a wholly owned indirect subsidiary of Largest Islamic Bank: Maybank Islamic Bhd Beijing Enterprise Water Group Ltd, issued a RM400 (total assets RM182.6 billion end 2016) Total Islamic bank assets: RM610.5 billion million sukuk in Malaysia to finance its water (end of June 2017) treatment project in Terengganu. Total financing: RM448.6 billion (end of June 2017) Non-performing financing: RM6.18 billion (end of June For all Malaysia’s achievements, it needs to move 2017) quicker if it wants to maintain its pole position. Financing applied: RM19.7 billion (June 2017) Financing approved: RM10.45 billion (June 2017) London, already a landmark financial center, has been making an efforts to challenge traditional IF power house, while Dubai in recent years had announced its intention to become a hub for sukuk issuance. As BNM has pointed out, the industry’s annual growth rate has reduced from double digit to single digit expansion. Calls have been made for greater broadening of the offering mindset-to extend beyond compliance, to deliver value propositions not just to financial consumers, but also to the wider stakeholders within the society and economy at large. Malaysia’s IF sector also needs to move beyond short -term objectives to take a long-term view, with performance measurement based on both financial as well as no-financial aspects such as people and the planet. Key stakeholders-consumers, employees and the public-should be more proactive in implementing an impact-based approach that fosters good conduct. After all, a main principle of IF is to take on sustainable, interest-free projects with high returns to be distributed to stakeholders, thus maximizing the social benefits and bringing prosperity to the economy. COMPETITIVENESS INFOLINE I N F O L I N E : FRIDAY, JUNE 23, 201 7 0 2 / 2 0 1 7 TM’S NEW SUBMARINE C ABLE SET TO BOOST INTERNET SERVICES IN SABAH AND SARAWAK KOTA KINABALU: Internet traffic in Sabah and Sarawak will be better once Telekom Malaysia Bhd (TM) launches its submarine cable which will result in higher Internet speed for consumers. Sabah TM general manager Sukkuriya Masri said the cable from Peninsular Malaysia to Sabah and Sarawak would provide Internet speeds of four terabytes per second.