Published April 27, 2009

Government to unveil financial deregulation measures today

Limit on foreign ownership in local banks may be raised

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(KUALA LUMPUR) Malaysia will today unveil measures to boost the financial services sector as part of an economic liberalisation package aimed at luring in more foreign capital.

Prime Minister Najib Razak, who took office on April 3, has promised to take the South-east Asian country away from its dependence on electronics and commodities exports which have been hurt by the global recession.

An influential website (http://www.malaysianinsider.com) reported last week that Mr Najib would raise the limit on foreign ownership of banks from the current 30 per cent, although Mr Najib refused to comment on the possible move ahead of his formal announcement.

'Can you wait till Monday? I will make an announcement on the financial sector,' Mr Najib told reporters in the Malaysian capital when asked whether Malaysia would lift the limit.

At present a single foreign investor is prevented from owning a single stake that is larger than 20 per cent, while the overall limit is 30 per cent for foreign ownership.

'The move to liberalise these services sectors was not sudden...' - Mr Najib

Foreign banks already own some sizeable stakes in the Malaysian banking sector. ANZ owns part of Ambank, Bank of East Asia has a stake in Affin Holdings while private equity firm Primus Pacific has a stake in Affin EON Capital.

Earlier last week, Mr Najib announced a relaxation of rules that stipulate that ethnic Malays must own a 30 per cent stake in some businesses, a measure that has been criticised for stymieing foreign investment in the nation of 27 million.

Measures to relax the quota resulted in the removal of Mr Najib's predecessor as prime minister from a coalition that has ruled the country for 51 years.

'The move to liberalise these services sectors was not sudden but the result of a study conducted by the ministry of international trade for two years and debated upon by the national economic council,' Mr Najib said last Friday.

Malaysia's exports of electronics and commodities such as oil and palm oil fell 15.9 per cent in the year to February, the latest month for which data is available.

While Mr Najib has announced new measures to boost the trade dependent economy, which faces its worst recession since the 1998 Asian financial crisis, many of the measures had already been set out in Malaysia's development plans which call for services to account for 60 per cent of the economy by 2020, up from 55 per cent now.

Under plans that were announced to cover the financial sector to 2010, the country aimed to open up the sector, including banks and insurance, a key demand of the US in trade negotiations with Malaysia. -- Reuters