YB TUAN LIM GUAN ENG
MINISTER OF FINANCE, MALAYSIA IN CONJUNCTION
40 TH MALAYSIAN INVESTMENT BANKING ASSOCIATION ANNUAL DINNER
AT THE GRAND MAHKOTA BALLROOM, HOSTEL ISTANA KUALA LUMPUR
FRIDAY, 1 NOVEMBER 2019
Dato’ Robert Cheim,
Chairman, Malaysian Investment Banking Association;
Distinguished guests, ladies and gentlemen;
Good evening and Salam Harapan.
1. It is a pleasure to be here at the 40th Malaysian Investment Banking Association (MIBA) Annual Dinner 2019. Thank you to MIBA for inviting me to tonight’s Dinner. As this occasion marks the end of the 2019 MIBA Annual Games, I would like to congratulate all Members of MIBA for having participated successfully in this year’s Games.
TRADE TENSIONS AND THE GLOBAL ECONOMY
2. As we are all aware, the global economy is undergoing a period of tremendous uncertainty and is expected to grow at a slower pace. Being an open and trade-oriented economy, Malaysia is not insulated from external challenges including the ongoing US-China trade tensions and volatility in the global financial and commodity markets. This year our region’s growth rate is projected to slow down slightly, but we are still growing at a projected rate of 4.6%, higher than the projected global growth of 3%.
3. The ongoing US-China trade war is resulting in short-term gains for several Southeast Asian countries, including Malaysia, including increased foreign investment resulting from trade and investment diversion. Approved foreign investment across all sectors in Malaysia have roughly doubled from RM25.1 billion (USD6.0 billion) in the first half of 2018 to RM49.5 billion (USD11.8 billion) during the first half of this year. A majority of the approved investment was within the manufacturing sector, which the US being the biggest source of approved investment worth at RM11.7 billion (USD2.8 billion), followed by China with RM4.8 billion (USD1.2 billion). As China is our largest trading partner, FDI from China should be comparable with the US. As such, the Government is establishing a ‘Special Channel’ under InvestKL to attract further investments from China.
4. Nonetheless, this will be short-lived as prolonged trade tensions will in the end benefit none. I would like to reiterate once again that Malaysia urges all parties to return to the an open, multilateral global economy that follows the rules and regulations set by international bodies such as the World Trade Organisation, to ensure that trade is not only free, but also fair to all participants.
5. The Government is vigilantly monitoring financial developments affecting the country to protect our economy and maintain stability. Through some of the fiscal reforms and consolidation which have been implemented, Malaysia’s economic fundamentals have improved greatly, with Gross Domestic Product expected to grow by 4.7% this year and improving to 4.8% in 2020.
6. Major rating agencies such as Moody's, Standard & Poor’s and Fitch have given Malaysia a stable outlook and reaffirmed our sovereign credit ratings at A3/A-. This is a reaffirmation that our economy is on the right track, and a vote of confidence in the government’s fiscal consolidation efforts.
7. Successful institutional reforms have also resulted in Malaysia improving its ranking in the World Bank’s Ease of Doing Business to 12th best in the world in 2020 from 15th in 2019. Malaysia is also among the best improved economies in the World Bank’s 2018 Worldwide Governance Indicators (WGI) published earlier this month, which is a strong credit positive in the evaluation of sovereign credit ratings and in ascertaining our country’s improving institutional quality.
8. It is indeed quite a commendable achievement for Malaysia which had to contend with a series of factors including widespread kleptocratic practices that threatened to compromise our economy, which we are still recovering from. Despite the heavy burden and responsibilities that the present government has been saddled with, we will not compromise on our responsibilities to the people, to the investing community, and certainly not too the market.
CAPITAL MARKETS REMAIN RESILIENT
9. Although fund raising activity in the capital market is lower due to cautious market sentiments, funds raised by the private sector as at end-August 2019 amounted to almost RM94 billion with about RM89 billion in corporate bond issuances and RM5 billion in the equity market.
10. Malaysia continues to pursue Islamic finance in the domestic financial market as well as internationally, and remains a leader in the sukuk market accounting for 50.4% of global sukuk outstanding as at end of last year. To further promote the Islamic Finance ecosystem and position Malaysia as the centre of excellence for Islamic Finance, the Ministry of Finance has set up a Special Committee to look into formulating an Islamic Economic Blueprint and develop a deeper understanding of Islamic Finance.
11. The Malaysian capital market has demonstrated long-term resilience in its growth despite the global environment which has allowed the capital market to remain a key source of financing for the real economy. As at September 2019, the size of the Malaysian capital market has expanded to RM3.2 trillion. This development certainly bodes well for our country.
12. Today, traditional finance institutions are facing increasing competition with the rapid expansion and application of financial technology (FinTech) which is changing the landscape of the financial markets around the world.
13. The Government and financial regulators are proactively responding to this emerging trend and exploring ways to facilitate innovation and to modernise the financial sector, while ensuring that necessary safeguards are in place.
TRUST AND SUSTAINABILITY ARE CRUCIAL
14. Let’s also not forget that the success of any component of the capital market relies on investor trust and confidence. As our market continues to develop, there are expectations and demands for higher standards of corporate governance. Hence, it is important that industry participants practice good business ethics, promote accountability and transparency to preserve the integrity of our financial market.
15. In this regard, I am pleased to note MIBA Members’ significant role as financial intermediaries in the green financing ecosystem, facilitating issuances of green bonds and sukuk. Malaysia saw the issuance of the world’s first green sukuk for solar power plant in July 2017 and thereafter several more notable issuances followed suit.
16. The growth potential of the green economy in Malaysia is enormous with large untapped opportunities. Financial intermediaries can play a catalysing role in the development of this sector and support the Government’s transformation efforts towards a more sustainable and green economy.
Ladies and gentlemen,
17. As we head into 2020, the Malaysian economy is expected to remain resilient, led by favourable domestic demand. Underpinned by the Budget measures, policies are in place to spur economic activities which are crucial in supporting Malaysia’s growth target, and ensuring our markets remain vibrant and attractive in a rapidly evolving region.
18. Fundraising in the capital market is expected to remain robust driven by various strategic projects. Therefore, the investment banking industry can expect to play a more prominent role focusing on key activities especially in capital raising, project financing and investment management.
19. The Government is committed to providing a conducive environment for the private sector to take the lead in generating economic activities and looks towards the financial sector to continue to be the enabler of growth, facilitating the nation's transformation.
20. Whilst the nature of the challenges faced by investment banks today is increasingly complex, I am confident that MIBA Members will strengthen their capabilities to remain competitive and keep pace with changing needs so that we are able to capitalise on new opportunities that emerge.
21. On that note, I thank the investment banking and capital markets community for its contribution to the continued development of our financial markets.
22. I hope MIBA will continue to serve as an effective platform for the growth of the capital markets in Malaysia.
23. I wish Members of MIBA and everyone present a wonderful evening.
1 November 2019