PM hints at easing 30% limit on foreign ownership in local banks

KUALA LUMPUR: Banking liberalisation was one of the topics addressed at Invest Malaysia 2012 conference, with both Malaysian and Indonesian rules on the issue being talked about.

Prime Minister Datuk Seri Najib Tun Razak hinted that Malaysia's ruling of a 30% cap of foreign ownership may be “liberalised in the near future”.

“At the moment it is at 30% (foreign ownership cap for local banks). It is possible that we may increase it in the near future,” Najib, who is also Finance Minister, said.

Najib was responding to a question from a delegate at Invest Malaysia on the issue of Indonesian regulatory authorities planning to lower foreign ownership allowed for banks there and on the possibility for countries in the region to eventually lift foreign ownership limits for the banking sector as well.

On this matter Najib said that any possible increase for foreign ownership in banks in Malaysia must be accompanied by reciprocity as well.

“It is important within Asean that there is reciprocity in terms of greater liberalisation. If that can be tackled on a reciprocity basis, then I think we can move towards greater integration within Asean. I am quite keen to see that happening but it is a little bit slow and I'd like to see more of that happening,” Najib said.

Meanwhile, Malayan Banking Bhd (Maybank) president and chief executive officer Datuk Seri Abdul Wahid Omar said Maybank had been in discussion with the relevant authorities in Indonesia over the recent foreign shareholding cap issue on the banking sector. He hopes that the ruling would not apply to the banking group.

“We have been engaging with the relevant authorities there and will wait for the guidelines on foreign shareholding cap to be issued. Before that, we will continue to engage with them,'' he added.

Maybank currently holds a 97% stake in PT Bank Internasional Indonesia (BII).

Quoting sources, Reuters last Friday reported that the central bank of Indonesia was set to limit the maximum stake a single shareholder can hold in the country's banks to below 50% from the current 99%.

It added that the rules were expected to be announced next month, and Bank Indonesia's (BI) board of governors were slated to hold a meeting in regard to the matter this week. The proposed regulations are expected to apply to both domestic and foreign investors, although government-owned banks are unlikely to be affected.

Asked whether the foreign shareholding cap was something to be worried about, Wahid said it depended on the approach taken.

If the intention is to improve corporate governance by limiting the control by any single entity or individual, then the concept was something not new and had been practised in other countries including Malaysia, he said, adding that the same did not apply to banks. “It is our hope that this shareholding cap does not apply to banks,'' he said.

In a separate press conference, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said the ministry was waiting for the outcome of the World Bank's study on services sector before deciding on how to liberalise the sector.

He said any recommendations for that sector would depend on the study to some extent.

“Another thing to consider is that we need to consult domestic service providers,” he added.

He noted that the ministry needed to ensure local players were prepared to compete on an international pedestal.

Mustapa said that of the 17 sectors announced to be liberalised, nine had been implemented 100%.

“The other eight are in progress as we have to amend the law and certain acts,” he said, adding that all 17 sectors will be “done deals by December this year”.

Meanwhile, Najib said Malaysian companies should strive to be regional champions and must aim to grow not only domestically.

“We need our companies to (eventually) go beyond to become regional and eventually global champions. I (also) like to see companies become more innovative in using technology and best business practices so that they become more and more competitive,” he said.

“Our productivity has gone up but it is not going up as fast as I'd like it to be. We must improve on our ability to compete (which) must not be on the basis of cheap labour anymore. It must be on the basis of the right inputs,” Najib said.

“Relying on cheap labour and cheap gas from the Government; that's not good. You must be able to compete because you are efficient and because you are in the right industry and able to stand on your own,” Najib added.

In a separate presentation at Invest Malaysia, Minister in the Prime Minister's Department and CEO of the Performance Management and Delivery Unit Datuk Seri Idris Jala said Malaysian CEOs should consider paying more to hire top talents.

“If you say you don't have the best talent, you must be prepared to look for them and renumerate them in the hope that they will then help you to grow. Look at Dubai, they don't have oil and gas in Dubai but they grew because they hired a lot of top talents there. Singapore and Hong Kong has done the same thing,” Idris said.

“As we (companies) begin to regionalise and become multinational, we need to think multinational and act multinational in the way we deal with top talents. If we do that, we (Malaysia) will fly,” he added.

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