Investment opportunities abound amid development
Discovery Reports - Malaysia's Financial Services
With the government's limited investment participation under the ETP, business opportunities abound for the private sector.
The programme has identified six BOs in the financial services sector. The industry requires 145.8 billion ringgit (HK$360.6 billion) in fresh capital, 95 per cent of which is expected to come from the private sector.
"We have interesting areas businesses can look into," says Dr Mohammed Emir Mavani Abdullah, PEMANDU director for oil, gas and energy and financial services. "Foreign companies, for example, can issue their sukuk here while local companies can provide Islamic financing overseas. We can facilitate cross-border mergers and acquisitions (M&As)."
The BOs that investors can look into cover commercial, investment and Islamic banking, insurance and takaful, and asset and wealth management. These opportunities will account for 71.9 billion ringgit in incremental gross national income (GNI) by 2020, creating 229,000 jobs including 100,000 professional and technical positions.
The following are the areas of growth in the financial sector.
BO 1 - Commercial banking
To help build the commercial banking sector, the government is inviting businesses to invest in areas that cover innovative financial services, branchless banking, support for small and medium enterprises and personal finance. The segment has a large profit potential. Underneath its expected annual growth of 7 per cent through 2020, commercial banks will be the financial sector's largest income generator, contributing 29.6 billion ringgit in GNI by 2020.
BO 2 - Investment banking
After the Felda Global Ventures and IHH Healthcare initial public offerings (IPOs) held this year, investors can look forward to more exciting IPOs as the government privatises more government-linked investment companies (GLICs). Businesses can anticipate a more robust investment banking segment as Malaysia exploits its Qualified Domestic Institutional Investor status with the mainland and mutual recognition agreements with Hong Kong and Dubai. Consolidations in several key sectors are also expected to increase M&As. All these developments are expected to fuel the 15 per cent projected yearly growth from 2010 to 2015, and 10 per cent expansion from 2016 to 2020.
BO 3 - Islamic banking
Being one of the core strengths of the Malaysian financial sector, the Islamic banking segment offers some of the most exciting investment opportunities in the sector. Aside from world leadership in issued and listed sukuk, additional investment options lie in Islamic pawnbroking or ar-rahnu and opportunities arising from the migration of money lending business to conventional or Islamic banks. Growing 15 per cent annually from 2010 to 2015, and by 12 per cent from 2016 to 2020, this BO requires 50.2 billion ringgit in additional capital funding.
BO 4 - Insurance and takaful
The main attraction of takaful and retakaful is their combined 20 per cent forecast annual growth from 2010 to 2014, and 15 per cent from 2015 to 2020. This expansion outpaces conventional insurance and reinsurance, which is forecast to grow 6 per cent yearly through 2020. The government sees greater insurance take-up brought on by Malaysia's information campaign on financial planning and insurance protection. Further consolidation, rationalisation and development of cheaper distribution models for micro insurance will open up channels for private investments.
BO 5 - Asset and wealth management
Investors can partake in opportunities arising from higher demand for unit trusts, mutual funds and wealth management services among foreign workers and returning Malaysians. The creation of the 500 million ringgit Mudharabah Innovation Fund and 20 billion ringgit public-private partnership fund will allow broader participation. This BO requires 1.3 billion ringgit in funding, 1.2 billion of which will come from the private sector.
Businesses can invest in segments such as developmental financial institutions, private equity and venture capital which require some 1.9 billion ringgit in overall funding under the ETP.
"We encourage companies to check out these opportunities, go out of the country and grow their services," Emir says. "We will help them talk to other countries and provide them support through policy development."