Building a conducive FDI ecosystem
09 Oct 2023
Banks will continue to play a key role in working with the government to build an ecosystem conducive to attracting more foreign direct investment (FDI) into the country, according to banking experts.
Financial institutions will also be providing essential services to companies looking to expand abroad and invest in Malaysia, they added.
To increase the country’s appeal in a competitive landscape, banks would be supportive of the long-term plans and strategies that focused on resilience and sustainable growth via the Madani Economic Framework, the National Energy Transition Roadmap (NETR), the New Industrial Master Plan, and the mid-term review of the 12th Malaysia Plan.
HSBC Bank Malaysia Bhd chief executive officer Datuk Omar Siddiq said the government should also enhance conditions for trade and investment, among other initiatives in the upcoming Budget 2024.
“As a trading nation, as outlined in the New Industrial Master Plan, Malaysia needs to focus on the development of high- impact industries or economic activity that can push the country across the high-income threshold,” he told StarBiz.
He said the budget would need to focus on attracting FDI in high-impact industries in line with the competitive and shifting global supply landscape.
This can be achieved by enhancing the country’s investment frameworks to make it easier for businesses to invest and grow while making the environment conducive for startups as well as research and development (R&D)-related activities, according to Omar.
“Banks will continue to support an ecosystem essential to attracting more FDI into preferred sectors. They will also continue to assist companies looking to expand abroad and invest in Malaysia,” he added.
To achieve the nation’s goal of becoming carbon-neutral by 2050, the government would need to allocate funds to accelerate the adoption of renewable energy and invest in new climate technologies.
The technologies include carbon capture and storage, green hydrogen and biomass.
He said great strides had already been made with the plans and targets announced under the NETR.
“An increased focus on sustainability provides banks with an opportunity to support customers in their environmental, social and governance or ESG journey. This includes helping high-impact ESG sectors to become more sustainable.
“The government will need to continue to invest in the frameworks and put aside the capital needed to make the low-carbon transition possible with a particular focus on higher-emitting industries.
“Encouraging the creation of a reliable pipeline of sustainable investment is also crucial. The government can play a role by creating supportive policy and regulatory frameworks as well as investing in R&D to encourage greater adoption of environment-friendly options such as sustainable aviation fuel,” he said.
According to Omar, it is important for the country to invest in the development of new industries and high value-added technology-related activities such as artificial intelligence, big data analytics and robotics.
“The banking sector is increasingly capitalising on the latest technology like real-time data and analytics as this is critical in helping banks understand customers better, respond to their needs faster by providing tailored services.
“It is also fundamental to protecting customers, safeguarding the bank’s data against cyber-attacks and financial crime. HSBC is also investing in skills and technology across its global network to build a sustainable future,” Omar pointed out.
UCSI University Malaysia assistant professor of finance Liew Chee Yoong said measures should be in place in the forthcoming budget to encourage government-linked investment companies (GLICs) and government-linked companies (GLCs) to purchase more technology from local-certified digital companies.
Liew, who is also a research fellow at the Centre for Market Education, said the Financial Sector Blueprint (2022 to 2026), which was released in January 2022, would likely be mentioned in the tabling of the national budget on Oct 13.
The government should introduce initiatives to make Malaysia a regional hub for sustainable and responsible investment (SRI)-linked sukuk issuance.
“All the proposals will help to boost the banking industry.
“There are three reasons to explain this. First, by incentivising GLICs and GLCs to purchase more technology from local digital firms, there’s potential for increased collaboration between these entities and the digital banking sector.
“The move can drive digital innovation within banks and enhance their technological capabilities, benefiting their customers and operations.
“Second, Malaysia’s move towards issuing digital banking licences and positioning itself in financial technology showed an inclination to bolster the digital banking ecosystem.
“Third, by proposing innovative syariah-compliant financing and positioning Malaysia as a regional hub for SRI-linked sukuk issuance can attract more investors and financial entities interested in Islamic finance.
“This can solidify Malaysia’s reputation in the Islamic banking domain,” he pointted out.
According to Liew, the current initiatives by the government for the banking sector are resilient and could be improved further, considering that there is a high likelihood of uncertainty within the sector.Bank Muamalat Malaysia Bhd chief economist and social finance head Mohd Afzanizam Abdul Rashid said the deployment of higher development expenditure would help banks finance infrastructure projects for construction companies that required working capital as well as capital expenditure.
“This would help improve the total loan growth which has been experiencing a lethargic trend of 4.2% as of August from 5% in January this year.
“Perhaps, extending the stamp duty exemption would also improve the financing for house buyers who would want to seek their first homes or look to upgrade their existing houses,” Afzanizam pointed out.
Source: The Star