Idea Transcript
AIF Board of Directors Dr Zeti Akhtar Aziz Chairman of the Board Governor, Bank Negara Malaysia (BNM) Datuk Ranjit Ajit Singh Vice Chairman of the Board Chairman, Securities Commission Malaysia (SC) Tan Sri Azman Hashim Chairman, Institute Bank-Bank Malaysia (IBBM), & Executive Chairman, Amcorp Group Bhd. Dato’ Sri Zukri Samat Managing Director, Bank Islam Malaysia Berhad, & Chairman, Islamic Banking and Finance Institute Malaysia (IBFIM) Dato’ Dr Nik Norzrul Thani Nik Hassan Thani Advocate & Solicitor, Zaid Ibrahim & Co. Dato’ Hj Syed Moheeb Syed Kamarul Zaman Non-Executive Director Dato’ Yusli Mohamed Yusoff Non-Executive Chairman of Mudajaya Group Berhad Mr Kung Beng Hong Director, Alliance Finance Group Berhad & Alliance Bank Malaysia Berhad En Hashim Harun Chaiman, The Malaysian Insurance Institute (MII) President/Chief Executive Officer, Malaysian Reinsurance Bhd
Editorial Team Chief Editor Dr Raymond Madden Co-editors Dr Sofiza Azmi Richard Yu Assistant Managing Editors Dr Zamros Dzulkafli Fara Iza Abd Rahim DISCLAIMER: The Asian Institute of Finance does not represent nor warrant the completeness, accuracy, timelines or adequacy of this material and it should not be relied on as such. The Asian Institute of Finance does not accept nor assumes any responsibility or liability whatsoever for any data, errors or omissions that may be contained in this material or for any consequences or results obtained from the use of this information. This publication does not necessarily reflect the views or the positions of the Asian Institute of Finance.
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contents contents 3
Editorial Note
4
Malaysia’s Economic Renaissance: Becoming a Trillion Dollar Economy By 2030
9
Promoting Green Technology Financing
13
The Financial Services Bill 2012 and the Islamic Financial Services Bill 2012
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22
editorial
note A
s we move towards the end of the first quarter of 2013, Bank Negara Malaysia has recently reported on the Malaysian economy which grew by 5.6% in 2012. The overall gowth performance was driven by higher domestic demand which outweighed the weak external environment as a result of slow recovery in the US and uncertainties in the Euro-zone area. More importantly is the robust performance of investment activity with private investment registering 22% growth. The share of private investment rose to 15.5% of GDP in 2012, which is the highest post the1997/98 financial crisis and has set a new benchmark which is critical to ensure sustainable growth going forward.
Human Capital Exchange: Financial Services Industry Global Trend in Green Investment and Green Growth
AIF are expanding our role to include three new areas; Ethics, Standards Development & Assurance as well as a focus on Strategy & Policy Development
Recognising the potential from these encouraging statistics, this issue of Asian Link looks ahead at new forms of innovation which are important if we are to achieve developed nation status by 2020. Green growth and green financing in particular has been earmarked as the way forward for Malaysia’s low carbon economic initiatives. This is in line with the aspiration to create a new avenue of growth for the country from green technology, as outlined in the New Economic Model. As such, it is timely that we ought to take the opportunity to promote further private investments in green technology, and support from the financial services sector in terms of financing as an enabler for these initiatives. 2013 will also see the implementation of both the Financial Services Bill 2012 and the Islamic Financial Services Bill 2012, which were passed in December 2012 by both the Dewan Rakyat and Dewan Negara, and are now awaiting royal assent. Both Bills are designed to bring stability, sustainability and efficiency to Malaysia’s financial sector as we continue to benefit from both conventional and Islamic financial systems. Furthermore, the implementation of the Bills strive to enhance Malaysia’s position as a regional leader in the financial services sector and improve investors’ and consumer’s confidence. Recognising the ever developing global financial sector, we at AIF are expanding our role to include three new areas; Ethics, Standards Development & Assurance as well as a focus on Strategy & Policy Development. It is envisaged that these new areas will further strengthen AIF’s role in attracting and developing high quality talent needed by the financial services industry for years to come.
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By Rajiv Biswas
economic growth over the next two decades. Malaysian GDP forecast is to increase from USD 300 billion in 2012 to USD 630 billion by 2020, rising to USD 1.2 trillion by
electronics during the 1960s and 1970s, Malaysia’s exports diversified, with the export-led growth model continuing to drive the Malaysian economy.
2030. This will bring substantial increases in per capita
MALAYSIA’S ECONOMIC RENAISSANCE: Becoming a Trillion Dollar Economy By 2030
“Malaysian GDP is forecasted to increase from USD 300 billion in 2012 to USD 1.2 trillion by 2030, with Malaysia set to join the ranks of Asian advanced economies by 2020.”
Overview The Malaysian economy is experiencing an economic renaissance since Prime Minister Najib Razak launched a major economic policy initiative in 2010 to transform Malaysia into a high income nation by 2020. The remarkable process of economic change that Malaysia is currently undergoing is epitomized by Malaysia’s surge in its position on the World Bank’s Ease of Doing Business ranking. Malaysia achieved 12th place out of 185 countries in the World Bank’s 2013 ranking, compared to its 23rd place just three years previously, in the World Bank’s 2010 ranking. This is one independent measure of the determined efforts that the Malaysian government has made in the last three years to make the Malaysian economy more
living standards, with Malaysian per capita GDP forecast to exceed USD 20,000 by 2021, making Malaysia one of Asia’s advanced economies. Underlying these IHS forecasts are assumptions that the Malaysian economic reform initiatives will continue to be sustained, with ongoing efforts to build value-adding industries and boost productivity growth, as well as creating an enabling environment for private investment to flourish. An important competitive strength of Malaysia has been its stable macroeconomic environment, with low inflation, a stable exchange rate and strong external account position. These factors provide significant confidence for investors in the overall country risk in Malaysia relative to other comparable developing countries in the Asian region.
The Engines of Malaysia’s Future Economic Growth Malaysia’s economic development since independence in 1957 has been strongly driven by export growth. A range of natural resources, notably oil and gas, but also including other commodities such as palm oil and rubber, have contributed an important part of Malaysian exports. As Malaysia became an attractive location for production of low-cost manufacturing exports in key sectors such as
However, the Economic Transformation Programme (ETP) that was initiated in 2010, as well as other initiatives such as the Financial Sector Masterplan launched in 2001, have been creating the architecture for new export growth industries in higher value-adding sectors. Notably, Malaysia is rapidly emerging as an exporter of services. The ETP aims to increase the share of services in GDP from 58 per cent in 2010 to 65 per cent by 2020. A leading example of the success of Malaysian service sector exports is the financial services industry. The Malaysian financial services industry has already made remarkable progress in the last decade, as Malaysia has become the world’s leading Islamic financial services centre, developing a strong cluster of excellence in this segment of financial services. Some of Malaysia’s leading banks have also become fast-growing regional and international players in commercial banking as well as Islamic finance, further strengthening Malaysia’s role as an exporter of financial services.
Malaysian GDP Forecast 2012-2030, USD billion 1400 1200 1000 800 600
competitive through the Economic Transformation
400
Programme launched in 2010.
200
According to long-term macroeconomic forecasts
However, as Malaysian per capita incomes have risen, the competitiveness of Malaysia as a location for low valueadded manufacturing based on low wages has gradually been eroded. Manufacturing foreign direct investment flows moved towards other Asian nations such as China, Vietnam and India, and Malaysia struggled during the period since the East Asian Crisis to find its new export growth engines.
0 2000
2012
2020
2030
done by IHS Global Insight, the Malaysian economy is projected to experience sustained strong average
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Source: IHS Global Insight forecast
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The Malaysian international tourism industry has also seen strong growth, with total international tourism arrivals reaching 24.7 million in 2011, and the ETP setting a goal of reaching 36 million tourist visits by 2020. Tourism is already Malaysia’s seventh largest industry, and is also an important area of foreign direct investment inflows into new tourism-related projects. Other service sector exports where Malaysia is increasingly competitive include transport and logistics, with the rapid growth of Air Asia, headquartered and hubbed in Malaysia, as one of the leading airlines in the Asia-Pacific. Malaysia is also building its competitiveness in health and education exports. Malaysia has also become a very competitive business process outsourcing hub, with many large multinationals having established back office units in Malaysia. In the construction and infrastructure sector, Malaysian firms already have a proven track record in construction-related projects globally, particularly in Asia and the Middle East.
manufacturing, where Malaysia already has significant capabilities. The ETP is already generating substantial results, with very strong growth in investment recorded during 2012. In the third quarter of 2012, gross domestic fixed capital formation was up 22.7 per cent on a year ago. The total investment inflows related to the ETP by November 2012 were estimated at around 27 per cent of the total cumulative investments target by 2020, representing very significant progress towards the 2020 goal.
South-South Trade An important factor that is supporting Malaysia’s longterm growth prospects is the strong trade ties Malaysia has built up with other developing countries, notably in Asia and the Middle East. The outlook for Malaysian exports is supported by the rapid growth of the emerging markets of China, ASEAN, South Asia and the Middle
with the focus of trade efforts increasingly targeting key emerging markets rather than the mature, low -growth OECD economies. The existing free trade area that has been constructed amongst ASEAN member countries, together with the ASEAN bilateral free trade agreements in place with China and India, are also contributing to the rapid growth of Malaysian trade with other emerging Asian countries. The creation of the ASEAN Economic Community (AEC) will further strengthen intra-ASEAN trade and investment flows, with liberalization of trade in services being an important aspect of the AEC vision.
The Rise of Malaysian Multinationals An important aspect of Malaysia’s increasing international competitive advantage has been the rapid growth of Malaysian companies with international operations. Leading examples of the rise of Malaysian multinationals
Key Economic Challenges Despite the significant efforts that have been made since 2010 to boost Malaysia’s international competitiveness, a key challenge facing Malaysia will be strong competition from other Asian economies in some of Malaysia’s key value-adding industries. In manufacturing, Malaysia has already experienced the impact of competition from countries with lower wage costs, such as China, Vietnam, Indonesia and India. However, as Malaysia moves into higher value-industries there will also be strong competitive pressures. For example, in the construction sector, Malaysia has to compete with Japanese, South Korean and Chinese construction firms for construction tenders in other developing countries. In the service sector, Malaysian health care and education institutions will face competition from other Asian service sector exporters such as Singapore and Hong Kong, while back office and IT outsourcing already faces strong competition from India and the Philippines.
An important competitive strength of Malaysia has been its stable macroeconomic environment, with low inflation, a stable exchange rate and strong external account position
Business services are one of the key strategic growth industries identified by the Malaysian ETP. Outsourcing and data centres comprise some of the major sectors contributing to the rapid growth expected in this sector. Amongst the examples of multinational companies which have already established shared services and outsourcing centres in Malaysia are BMW, HSBC, DHL and Dell. IHS has also established a shared services centre in Penang serving the global operations of IHS. The IHS Penang office opened in late 2011 and is expanding rapidly. In addition, the ETP aims to develop higher value-added manufacturing exports, such as in oil and gas related
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East. The fast-growing middle classes of China, India and ASEAN are already creating strong growth in demand for Malaysian service exports in sectors such as tourism and financial services, and this provides a major long-term underpinning for the growth in Malaysian high-value added service exports. The geographic re-orientation of Malaysian exports away from the OECD countries that used to dominate Malaysia’s export direction of trade towards emerging markets such as China, India and the Middle East is a structural trend that will continue for decades ahead. This will have important implications for the conduct of Malaysian international economic and trade policy,
include Petronas, which has become one of the world’s largest oil and gas companies with extensive worldwide operations, Air Asia, which has rapidly emerged as a leading Asia-Pacific airline, Axiata in the regional telecommunications industry as well as Malaysian banking giants Maybank and CIMB, which have both established significant regional operations and are becoming important international players in the AsiaPacific banking industry. While this has resulted in Malaysia recording net foreign direct investment outflows in recent years as these multinationals have invested in acquisitions and organic growth abroad, this is an important long-term strength for the Malaysian economy as an increasing number of Malaysian companies tap growth opportunities in fast-growing markets abroad. This has the potential to create significant growth in high value-adding jobs in Malaysia in a wide range of headquarter functions as the international operations of these multinationals continue to grow.
At a microeconomic level, a strong focus will be needed on maintaining productivity gains on a sustained basis to maintain international competitiveness. This will require the development of strong vocational and tertiary education systems with educational institutions working in collaboration with industry to provide the necessary flow of human capital to support Malaysia’s high growth industries. The attractiveness of Malaysia in terms of its regulatory environment, tax system and investment guidelines will also need to be continuously improved to ensure that Malaysia remains an attractive destination for investment flows. Efforts to constrain government debt as a share of GDP and gradually reduce the fiscal deficit as a share of GDP are also important policy priorities. One of the significant weaknesses of Malaysia that needs to be addressed is the low level of research and development expenditure as a share of GDP. Malaysia is suffering from a technology deficit, with overall R&D
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Promoting
Malaysia: Forecast of GDP per head to 2020 Nominal GDP per person, USD
Green Technology Financing
USD per person 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000
By Tuan Syed Ahmad Syed Mustafa and Dr Zamros Dzulkafli
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
0
Source: IHS Global Insight
spending as a share of GDP of only 0.7 per cent, which is less than one-third of the OECD average. As Malaysia is a middle income developing country whose manufacturing sector needs to rapidly move up the value-adding chain in order to maintain international competitiveness, this low R&D spending is a key policy concern. The ETP has included new strategies to try to boost Malaysia’s technological capabilities, but this will be a long process involving significant change in many sectors of the economy, including the higher education sector, research institutes and private corporations, as Malaysia tries to create clusters of excellence in various areas of industry R&D.
Malaysia’s New Role as an Advanced Economy Despite these various economic challenges, Malaysia stands on the threshold of becoming an advanced economy by 2020. The next decade will bring about a significant improvement in living standards and household incomes for Malaysian households. However as Malaysia enters the ranks of Asia’s advanced economies, this will bring new roles and responsibilities in terms of engagement with other developing countries. With many other Asian economies still at much lower levels of economic development in terms of per capita incomes and various human development indicators, Malaysia has an important leadership role to play as a source of economic development assistance as well as technical advice on a wide range of development issues for other developing countries.
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The achievements of Malaysia’s central bank, Bank Negara Malaysia, in reforming the financial sector since the East Asian financial crisis are remarkable, and Malaysia can provide an important source of technical advice to other developing countries worldwide in financial sector regulation and supervision, banking sector reform and capital markets development. Within the South-east Asian region, Malaysia will therefore have an increasing development assistance role to play, particularly with the other ASEAN member countries, but also through other international institutions such as the Commonwealth Secretariat, the Asian Development Bank, the IMF and the World Bank. Malaysia also has the potential to become a leading knowledge hub for developing countries worldwide, through its educational infrastructure in key clusters of excellence, such as Islamic financial services, agriculture, healthcare, oil & gas and construction. As Malaysia becomes an advanced nation by 2020, the aspirations and vision of the Federation of Malaya’s first Prime Minister, Tunku Abdul Rahman to make Malaya “a beacon of light in a disturbed and distracted world”, as he had stated in his Proclamation of Independence speech in August 1957, may finally be realized. Rajiv Biswas is the Asia-Pacific Chief Economist for IHS Global Insight. His previous experience includes working as Director for South-east Asia for The Economist Group and as Executive Director for Asia-Pacific Country Risk for UBS. He has also worked as an economist for the Commonwealth Secretariat and for the Royal Bank of Scotland. He is a graduate of the LSE and Imperial College, London University.
Tuan Syed Ahmad Syed Mustafa
G
Realising the importance of green technology for Malaysia’s sustainable growth, Asian Link spoke with Tuan Syed Ahmad Syed Mustafa, Acting Chief Strategic Officer of Malaysian Green Technology Corporation (GreenTech Malaysia) to get his insights on the Green Technology Financing Scheme (GTFS), the trends and challenges ahead.
reen growth has been earmarked as the way forward for Malaysia’s low carbon economy initiatives. This is in line with the aspiration to create a new avenue of growth for the country from green technology, as outlined in the New Economic Model unveiled in October 2010. Specifically mentioned is the policy measure on promoting green growth and energy efficiency. YAB Dato’ Seri Mohd Najib Tun Abdul Razak, Prime Minister of Malaysia in his Budget Speech 2010 announced that “GreenTech Malaysia will function as the focal point to set standards, promote green technology,
intensify green awareness activities and practise environmentally friendly lifestyle”. Earlier, the government launched the National Green Technology Policy in August 2009 with the objective of providing direction towards the management of sustainable environment. Realising the importance of the issue, Asian Link met up with Tuan Syed Ahmad Syed Mustafa, Acting Chief Strategy Officer of Malaysian Green Technology Corporation (GreenTech Malaysia) to get his insights on the current green technology financing scheme and the trends.
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The Green Technology Financing Scheme
be high technology and to participate in the Scheme the project must satisfies certain green criteria as follows :
Malaysian Green Technology Corporation or more commonly known as GreenTech Malaysia was established on 12 May 1998 as the Malaysian Energy Centre of Pusat Tenaga Malaysia (PTM). As a national energy centre, PTM focused on the energy sector, especially on technological research and demonstration of renewable energy and energy efficiency. PTM was later restructured as GreenTech Malaysia in April 2010, to act as the implementing arm for the Ministry of Energy, Green Technology and Water (KeTTHA) ) with a wider mandate to be the focal point for green technology development. To promote the adoption and utilisation of green technology in Malaysia, the Green Technology Financing Scheme (GTFS) with a maximum disbursed allocation of RM1.5 billion for the 2010-2012 period targeted at producer and user companies was launched in January 2010. It was subsequently increased to RM3.5 billion covering for the extended period until 2015. GreenTech Malaysia has been entrusted to promote and implement the GTFS, assessing projects eligible to participate in the Scheme prior to their application to the participating financial institutions. Syed Ahmad informed that as defined in the National Green Technology Policy, green technology refers to the development and application of products, equipment, and systems used to conserve the natural environment and resources, which minimizes and reduces the negative impact of human activities. He explained that green technology need not necessarily
• •
Minimise degradation of the environment; Zero or low greenhouse gas emission; Safe for use and promote healthy and improved environment for inhabitants; Conserve the use of energy and natural resources; Promote the use of renewable energy resources.
The GTFS of which the financing comes from the commercial banks, Islamic banks and developmental financial institutions is aim at facilitating companies pursuing green technology businesses, providing them with easier access to financing from the banking sector. This soft loan scheme provides a maximum loan of RM50 million to “producer” companies and not more than RM10 million loan to “User” companies. Incentives such as 20% rebate on the interest or profit rate and 60% guarantee on the loan amount which are the main features of the Scheme will lower cost of financing. The policy statement of the National Green Technology Policy indicates that green technology shall be a driver to accelerate the national economy and promote sustainable development. The objectives are to reduce the energy usage rate and at the same time increase economic growth, facilitate the growth of the green technology industry and enhance its contribution to the national economy, increase national capability and capacity for innovation in green technology development and enhance Malaysia’s competitiveness in green technology
i. Energy supply sector
in the global arena, ensure sustainable development and conserve the environment for future generations and enhance public education and awareness on green technology and encourage its widespread use.
Power generation and energy supply side management including co-generation by the industrial and commercial sectors
Eligible sectors
Sector Energy sector
• • •
Details
ii. Energy utilization sector Energy utilization sector and demand side management programmes
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Building
Construction, management, maintenance and demolition of buildings.
Water and Waste Management
Management and utilisation of water resources and waste water treatment, solid waste and sanitary landfill
Transportation
Public transportation infrastructure, green vehicles and biofuels
In line with the Policy the Scheme covers 4 focus sectors, which are the energy sector, building, water and waste management as transportation. The introduction of the Scheme attests the Government’s commitment to encourage green technology development paving the way for the move towards sustainable economic development. While there were challenges during the initial stage of its establishment, the take up rate of the Scheme has now shown promising results. As of February of this year a total of
82 certified green projects have secured financing from 21 participating financial institutions with total loans of RM1.1 billion. Among the challenges faced during the initial phase were due to financial institutions facing difficulties in assessing risks associated with green businesses. Syed Ahmad stated that one of the biggest challenge is to educate green technology entrepreneurs to prepare proper and complete loan proposals fulfilling the bank’s assessment requirements while inculcating banks’ awareness to recognise business opportunities within this sector and make green technology financing as part of their loan portfolio development.
Challenges and the Way Forward Asian Link posed the question to Syed Ahmad on what the challenges ahead are and the way forward for the green
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technology sector in Malaysia. He said that GreenTech Malaysia shall continue its effort in promoting the Scheme to increase the level of awareness among the financial community and green technology entrepreneurs through a series of programs including business matching sessions and outreach programs. He explained that one of the major setbacks is the lack of familiarity among the banking sector on green technology projects, which slows down the financing approval as creditworthiness screening hinges quite heavily on historical and established track record. “But I’m confident that by creating greater awareness and breeding familiarity through the dissemination of adequate information, the banking community will understand the industry better and recognised as well as support the needs to develop green technology and we hope to see more banks participating in the Scheme”, said Syed Ahmad. Another area which is equally important is in assisting and training of credit as well as risk officers in the financial industry on green project technical evaluations and the assessment of project risks. Most of the time, lack of understanding on green technology and its requirements, leads to misconceptions on project viability and feasibility. Nevertheless, GreenTech Malaysia will continue with countrywide road shows to create green awareness to the industry players and financiers alike. GreenTech Malaysia will continue being at the forefront between the industry and the financial services sector as well as educating the young ones at schools on the importance of green technology and a green lifestyle in Malaysia. Green Technology is a new area of focus with high growth potential for Malaysia and we need to take the opportunity into developing this sector, ahead of our competitors. “Competition within the region; countries such as Thailand in a way, is ahead of Malaysia in terms of implementations of green projects. And we should take the opportunity with the opening of the regional market from the ASEAN Economic Community 2015 (AEC)”, said Syed Ahmad.
The policy statement of the National Green Technology Policy indicates that green technology shall be a driver to accelerate the national economy and promote sustainable development Asian Link 12
The recent global crisis in 2008 which entailed fuel, food and financial crises is a wakeup call that we just cannot afford to continue to follow, along the same growth path that we have been following all this while. It is not sustainable and we ought to push for a more sustainable growth in going forward. Hence, going green is not an option but rather a necessity to create a resilient growth path and to preserve the resources for future generations. Tuan Syed Ahmad Syed Mustafa is Acting Chief Strategy Officer at the Malaysian Green Technology Corporation and Dr Zamros Dzulkafli is Head of Research & Publication at the Asian Institute of Finance.
By Dr Raymond Madden
The Financial Services Bill 2012 and the Islamic Financial Services Bill 2012
T
he global financial services sector is changing rapidly. Integration and globalisation are the norms in today’s business environment and Malaysia’s financial sector must respond to international and domestic challenges. While the liberalisation of the financial sector is welcomed, sustained regulation and supervision is vital to maintain Malaysia’s national interests and as a player in the ASEAN financial sector. Looking from a global perspective, the Basel Committee has been working to improve the supervision of financial groups globally. This is to minimise the impact from any spill-over and contagion from other parts of the world. From Malaysia’s financial sector perspective, both the Financial Services Bill 2012 (FSB) and the Islamic Financial Services Bill 2012 (IFSB) were passed in December 2012 by both the Dewan Rakyat and Dewan Negara, and are now awaiting royal assent before becoming law.
The Financial Services Bill 2012 (FSB) The FSB is a consolidation of 4 previous Acts of Parliament (the Banking and Financial Institutions Act 1989, Payment Systems Act 2003, Insurance Act 1996 and the Exchange Control Act 1953). The FSB provides for the regulation and supervision of financial institutions, payment systems, and other relevant entities as well as the oversight of the money market and foreign exchange market to promote financial stability. The wide provisions of the FSB cover financial intermediation activities that occur within and outside the banking system by imposing greater obligations, while strengthening regulation, supervision and governance of financial institutions, as well as provide for timely regulatory intervention by Bank Negara Malaysia (BNM). Under the FSB, financial holding companies will fall within the purview of BNM, and could therefore be subject to prudential requirements. Further, the FSB would limit activities of a financial holding company in investing in corporations which are primarily engaged in financial services or ancillary to financial services. Besides that, another key feature of the FSB is its corporate governance provisions which specifically target directors, CEOs, and senior management. Amongst others, directors will now face increased
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By Dr Zamros Dzulkafli
statutory obligations, including the duty to ensure and oversee the effective design and implementation of sound internal controls, compliance and risk management systems. The FSB will also provide greater regulatory powers for BNM to specify prudential standards, protect consumers, conduct investigations, and issue directions, amongst others. Further, the FSB imposes stricter penalties for non-compliance, including fines of up to RM50 million and/ or up to ten years imprisonment.
The Islamic Financial Services Bill 2012 (IFSB) The BNM’s Financial Sector Blueprint 20112020 states that “A key pillar of financial sector development for this decade is the strengthening of Malaysia’s position as an international Islamic financial centre” 1. Hence, it is important for Malaysia to build a resilient and robust Islamic financial sector, as the way forward in achieving the 2020 targets. While achieving the target is welcomed, safeguarding and ensuring financial stability as well as compliance with Shariah Law, which are the construct of Islamic finance, are equally important. The IFSB will consolidate and repeal the Islamic Banking Act 1983 and the Takaful Act 1984. The IFSB is more prescriptive on the definition of “Islamic businesses” and “Takaful business”, compared to the Islamic Banking Act 1983 (‘IBA’) and the Takaful Act 1984 (‘TA’) respectively, which are more in general in nature.
The IFSB imposes a statutory duty on Islamic financial institutions to ensure at all times that their aims, operations, business, affairs and activities are in compliance with Shariah. Where there is non-compliance, the Act imposes a duty on the institution to notify the Bank of such non-compliance immediately; cease the breach; and within 30 days, submit a plan to BNM on the rectification of non-compliance. It should be noted that a failure to do so could result of a fine of up to RM25 million and/ or imprisonment of up to 8 years. BNM may set standards on Shariah matters, such as Shariah governance and any other matter for the purposes of compliance with Shariah. The Bank may also require an institution to appoint any person as approved by the Bank to carry out an audit of Shariah compliance by the institution. The duties of such persons shall be specified by BNM. Further, internal policies and procedures on Shariah must be consistent with the standards set by BNM and must at all times be complied by the institution, its directors, CEOs and senior officers and members of its Shariah committee.
The Shariah Committee Approved persons/operators of designated payment systems are required by the IFSB to establish a Shariah committee to ensure compliance. The entity shall have regard to the advice of its Shariah committee in
respect of the Islamic financial business carried out by such persons. The duties of the Shariah committee will be set out in the form of standards, yet to be specified by the Bank. The IFSB stipulates that the Board of Directors of an institution shall have regard to any decision of the Shariah committee on any Shariah issue. Further, BNM may require an institution to appoint any entity to carry out an audit on Shariah compliance by the institution. The remuneration and expenses of the appointed entity shall be borne by the institution. Both new Bills are designed to bring stability, sustainability and efficiency to Malaysia’s financial sector as the country continues to excel in conventional and Islamic finance. Furthermore, the implementation of the Bills will strive to enhance Malaysia’s position as a regional leader in the financial services sector and improve investors’ and consumers’ confidence. Dr Raymond Madden is Chief Executive Officer at the Asian Institute of Finance.
Human Capital Exchange:
Financial Services Industry Sasana Kijang, 12 December 2012
Background As outlined in the Financial Sector Blueprint (FSB) released in 2011, the financial services industry is expected to require an additional number of 56,000 talents by 2020. This is an average of 3.34% a year growth. And one of the nine focus areas of the FSB is “talent development to support a more dynamic financial sector”. With such a scenario, the financial services industry will definitely need to be ready to face the skill supply challenge. How would these talent
requirements be met and what are the strategies going forward to maintain sustainable growth? How do we attract, hire and retain talents, and what are the possible collaboration to resolve talent issues? These are among the issues discussed during the Human Capital Exchange session held on 12 December 2012, jointly organised by Asian Institute of Finance (AIF) and TalentCorp. The half a day session was attended by 18 HR practitioners from various financial institutions.
Size of Malaysia’s financial system Asian Institute of Finance acknowledges the
RM trillion
helpful advice provided by YBhg Dato’ Dr Nik
10
Norzrul Thani Nik Hassan Thani, member
9
of AIF’s Board of Directors & Chairman
8
and Senior Partner of Zaid Ibrahim & Co., Advocates & Solicitors, in the preparation of this article.
2.2
7 11% pa
6 5 4 3 2 1 0
8% pa
11% pa
6.9
3.2 1.2 2000
2010
2020(f )
1
BNM’s Financial Sector Blueprint 2011-2020, page 40.
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Source: BNM Financial Sector Blueprint 2011
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conduct periodic gap assessments, surveys and studies. More importantly it should be generating information on the required data for the sector. An annual survey among banks would also help in assessing the industry talent needs and it should be able to gather a rich matrix of information for a dynamic talent agenda. The Talent Council will also serve as a conduit for communications and thinking among industry members. The gaps and challenges need to be identified for a more competitive framework. This is certainly true as Malaysia’s financial institutions are increasingly venturing into regional markets, whereby the business challenges and strategies are different as the products and services would need to be customised to local markets.
Human Capital Issues in FSI The industry definitely needs graduates from universities to be ready to join them with very minimal training needed to be industry ready. But this is not happening now. There is still a skills gap between market needs and supply of talent, or rather the skills mismatch remains to be existing still. A recent ADB report indicated a similar situation in the Asia Pacific region. As this is not specific to Malaysia, we may as well prepare for aggressive competition for talent from other countries in the region. In a way, the FSTEP programme has proven as a stop gap measure to address and minimise the issue of skill mismatches. At the end of the day, it is hoped that universities will adopt the FSTEP module in their university curriculum. Mr. Johan Mahmood Merican, CEO of TalentCorp presented some work being done for the non-financial services industry and cited the SIDC survey done in January 2012 for the capital market industry involving 117 companies. The survey was aimed at assessing the human capital resources required in the capital market industry from 2012 to 2014. By gaining insights into the industry’s specific human capital requirements and related resourcing issues, appropriate initiatives to grow the capital market talent pool can be developed. The survey estimated that some 14,000 new members of staff are required for the capital market industry between 2012 and 2014. Key areas facing skills shortages are the securities dealing segment, and the corporate finance advisory and fund management segment. Demands are both at entry and experienced
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levels. The findings also attest that business acumen skills, interpersonal skills and leadership skills, in addition to technical skills, were commonly mentioned as critical skills required in meeting organisations’ business goals in the next three years. The findings indicate the need for graduate development programmes that employ a multimodal approach, emphasising both technical knowledge and soft skill acquisition to ensure well rounded talents are produced. Despite the easy way out by pinching staff from another organisation, such a move does not guarantee similar performance of the staff at the new organisation due to different branding, different environment and different management culture. Hence it is better to grow and develop own internal talents from within, who already know the company’s expectations. So, what can we do together to solve this issue and maintain Malaysia’s competitive advantage?
With regional markets in sight, Malaysian FSI should be encouraging their employees to enhance themselves with professional certification that demonstrates the achievement of the minimum professional standard of core competencies for the banking and finance industry, examples of which could include the Chartered Banker by IBBM, IBFIM’s accreditation and the Certified Credit Professional (CCP) professional qualifications. AIF could spearhead the efforts by building up standards and the appropriate curriculum to raise talented professional capabilities.
This is a large group and they are the group that will lead Malaysia to become a high income nation by 2020. Employers should take advantage of their potential and more importantly, understand their needs such as the need for refined proper training i.e. they prefer on the job training rather than formalised classroom training setups. What is needed is proper strategized succession planning which is imperative to ensure an ongoing continuous business approach process. Gen Y personnel need empowerment, culture change, the right mind set and functions. They also require flexi benefits and flexi working hours. Another issue brought to the discussion was that the higher a person climbs the corporate ladder, the more the need for the person to be a generalist. But in actual real situations, most people are specialists in their own area. As an example, one of the banks once even had a scheme whereby after a few years performing services in head office departments, the staff would undergo a move to a regional posting. While the purpose is good in that it would enhance talents through a different working exposure, some people just preferred to opt out especially those with family. There is also a need to make career paths and career progression opportunities as visible and as transparent as possible; even to the extent of allowing for self- managed career progression plans.
Gen Y Talent
Potentials of Internship and Management Trainee
Gen Y generally refers to those born after 1980. And according to the data from the Department of Statistics, Gen Y makes up about 34% of Malaysia’s labour market.
Internship is a good approach as the route to be employed, as an employer would be having better visibility on a trainee’s capabilities and suitability for employment. As
One of the ways is to set up a Forum with the objectives among which is to create a common open, sharing, and trust atmosphere for the benefit of the industry. The Forum can be spearheaded by mutual independent facilitator such as AIF or TalentCorp. It is important to be able to find the right skill sets. Hence the university involvement idea is vital, aiming at getting feedbacks on the design of a comprehensive integrated curriculum. The establishment of the Financial Services Talent Council as aspired by the FSB will help to steer greater strategic focus to collaborate, formulate policies, implement recommendations, and
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Gap between HR perception and customer satisfaction on ‘Bank Staff’
loyalty to the company has not yet been instilled in the trainee’s mind, more often than not, companies put the trainees in the general departments such as the marketing and corporate communications departments where there is not much risk of confidentiality breaches. This could have limited the trainees’ ability to show their talents and capabilities to the fullest. This is also the best chance to test out potential career choices and to get real-life experience doing the work of an employee in an organization. This is also a good way to learn about different management styles and work environments. It is also the best way to connect the learning done at universities to the world of work. Hence it is basically learning by doing. Internships contribute to more solid resumes and increase the chances of getting hired later.
Appropriate solution and feedback to customer's problem
Gap 1.15
Delivery of services promised
Gap 1.02
Courteous response
Gap 1.03
Level of banking knowledge and skills Gap 0.94 2
3
4
5 HR Staff perception Customer satisfaction
Source: AIF
Dr Raymond Madden, Chief Executive Officer of Asian Institute of Finance
Despite the attractiveness and potential benefits from internship programmes, there are a few issues surrounding the scheme as interns are normally given low end jobs and tasks during the internship period. As such, not much could have been gained at the end of the internship and employees could have lost the opportunity to assess the real potential of candidates for hiring. Hence, the industry needs industry wide internship standards which possibly be part of recruitment cycle. Internship programmes must be designed and conducted not over too short a period of time to ensure a win-win situation and the industry should absorb the cost costs to get long term gain. The period must be structured to enable trainees to gauge a better understanding of rules and regulation in the financial industry and to instil better engagement and collaboration between the industry and the universities. To avoid the risk of being treated as a source of cheap labour, transparency is vital to ensure there is sufficient talent pool of potential employees for the industry.
Likert scale 1 to 5.
• •
Understanding banking needs of customers Delivery of services promised
In relation to this, AIF undertook another survey, this time focusing on banks’ HR Directors - to get feedback on similar issues from the first survey. The question asked was “Please rate the staff in your bank based on the following items”. • • •
Level of banking knowledge and skills Delivery of services promised Appropriate solution and feedback to customer’s problem
•
Courteous response (including ‘Respect to customers’, ‘Understanding banking needs of customers’ and ‘Warm & friendly gesture’)
Interestingly in both surveys, the “Level of banking knowledge and skills” attribute was consistently given the lowest marks by both customers and HR Directors. Results from both surveys indicated that there is a gap between customers’ and HR Directors’ satisfaction levels. The largest item being the “Appropriate solution and feedback to customer’s problem” attribute, which is the combination of soft and hard skills. Hence, banks need to further enhance the employees’
Customer Satisfaction and Business Driven HR Another issue during the day is on business driven HR practice. Dr. Madden presented on the importance of business driven HR and put forward findings from the two surveys conducted by AIF. The first survey is on customer satisfaction among banks in Malaysia, a survey conducted in 2011. The survey involved 2,524 customers from 17 banks operating in Malaysia and for the purpose of the session, the focus involved the Bank Staff dimension only. The question asked was “Please describe your level of satisfaction on the following items based on your bank”. • • • Mr Johan Mahmood Merican, Chief Executive Officer of TalentCorp
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•
Level of banking knowledge and skills Warm and friendly gestures Appropriate solution and feedback to customer’s problem Respect to customers
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combination of soft and hard skills requirements especially for those handling customers. Focussing on either hard or soft skills alone would not be sufficient anymore as customers nowadays are more educated and demand services which are up to their satisfaction. Liberalisation in Malaysia’s banking sector is also a major factor to take into account as new entrants into the industry would be aggressive in fighting for employees with the required skills as well as fighting for the same customers. And sometimes, the quest for cost cutting has resulted in the budget for training being scaled down and this could have had adverse impact on the employees’ performance in the long run. Participants discussed a few questions to get feedback and response in relation to business driven HR. The first question was, “How skilled are we at helping customers solve their own problems? Do they look upon us as helpful experts?” The group came to the conclusion that employees have indeed been given the required skills as experts to assist customers, together with proper guidelines, checklists, problems
and issues for guidance. As such the HR division by default becomes the subject matter experts on how to handle customers. And an employee’s performance in handling customers should be measured via a satisfaction survey. Communication with employees is the key as well as the need to establish a checkpoint on matters such as open days, clinics, training assessments. Questions to be asked should include what is the skills-technical knowledge levels required, soft skills, competencies on asking the right questions, and caring about others. The second question was “Do our staff/ personnel who has contact with clients have the ability, the authority and the resources to fulfil reasonable requests?” The feedback was that the issue is rather true for higher level staff but not for the lower level staff. There is also the tendency that the sales staff only attends to customers from whom he /she is confident to secure a desired deal. Hence, the existence of a knowledge management centre could be a good facility for customers to offer initial information about products and services being offered as well as be offering problem solving solutions.
The third question was “Do our customers feel that when we make mistakes, we correct them promptly and courteously?” Some banks have 24 hour feedback system-facilities and have an open culture of admitting their mistakes and rectifying them accordingly. But some banks just don’t have the culture. This is certainly true when there is a merger and acquisition of banks taking place. The clash of different cultures will not give customers a good perception on how they are being treated. There may be some uneasiness during the initial stage, but these could be resolved via customer care culture workshops as rectification measures as a standard procedure. Daily monitoring of the situation is vital to ensure smooth communication between the management, HR as well as counter service staff and the customers.
Major Takeaways The session has been successful in trying to bridge the gap to achieve a win-win situation for the industry, especially in reducing skills mismatches and increasing the links between training and industry needs. The
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follow up effort is to create a HR Directors Forum to provide formal inputs and suggestions to BNM as well as for future Talent Council discussions. There is also a need to strengthen the internship programs for the industry and calls for a standardised internship module. The HR also needs to be business driven and as such, training - and - development initiatives have to be closely related to business requirements. As the industry skill demand is quickly undergoing upgrading processes, growing economies are faced with a persistent gap between supply and demand of skilled employees. The current situation in Malaysia ignites a war for talent and it is in the form of a zero sum game. Things are expected to be more intense with Malaysia’s financial sector liberalisation; Malaysia now has seven new foreign banks and they are expected to be aggressive in fighting for talents. Finally, there is also a need to work towards HR profession’s accreditation. Dr Zamros Dzulkafli is Head of Research & Publication at the Asian Institute of Finance
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By Dr Zamros Dzulkafli and Jacqueline Chang
Global Trend in Green Investment and Green Growth T
he concept of green growth has been widely discussed in international platforms such as OECD, UNEP, World Bank and G20 meetings. Green growth can be defined as economic progress that fosters environmentally sustainable, low carbon and socially inclusive development 1. It involves achieving economic growth while using less resources and generating less emissions. A green economy is characterized by substantially increased investments in economic activities that build on efficient natural resource usage or reduce ecological scarcities and environmental risks. The United Nations Environment Programme (UNEP) defines a green economy as one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. The concept of green growth and green economy has been taken one step further with the introduction of the Global Green Economy Index (GGEI). The index
1
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measures both perceptions and performance of the largest national and city green economies for 27 nations comprising over 90% of the global green economy. The GGEI features both perception survey data and performance index data and measured based on four major factors i.e. Leadership (15%), Policy (35%), Clean Technology Investment (35%) and Sustainable Tourism (15%). Inputs were received from 1,440 responses with highly diverse international sample representing a wide range of perspectives on the global green economy, representing 73 different countries. Currently, the index has been dominated by the developed countries which have extensively adopted green initiatives in their economic growth policies. Hence, Asia and other developing countries could learn by implementing green growth strategies to enhance more efficient use of our natural wealth without compromising on growth potentials.
Green Growth, Resources and Resilience -Enviroment Sustainability in Asia and the Pacific
The Potential for a Green Economy Adopting green growth strategies have been envisaged to have positive impact on economic growth. Economic modelling by UNEP2 investigates the macro-economic impacts of investing 2 per cent of global GDP on an annual basis over the coming decades into businessas-usual and green economy scenarios. Under a green economy scenario, half of the investment is allocated to energy efficiency and the development of renewable energy sources. The remainder is devoted to improve waste management, public transport infrastructure and natural capital-based sectors, such as agriculture, fisheries, forestry and water supply. The report stresses that a green investment scenario delivers long-term growth over 2011 to 2050 while avoiding considerable downside risks, such as the effects of climate change, water scarcity and the loss of
2
ecosystem services. The global economic growth under business as usual will nonetheless be constrained by increasing scarcity of energy and natural resources. Even with conservative assumptions, a green investment scenario achieves higher annual growth rates within 5-10 years and an increase in renewable resource stocks that contribute to global wealth. Primary demand for energy is projected to return to current levels by 2050, which is about 40% less than what is expected under business as usual. The scenario envisages that the combination of demand and supply side measures would reduce energy prices below business as usual in the coming decades, reducing the vulnerability of the global economy to potential energy price shocks, and contributing to stable economic growth. In addition, savings on capital and fuel costs in power generation under the green economy scenario are projected to average about USD760 billion per year between 2010 and 2050.
UNEP Towards a Green Economy
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Global Green Economy Index (GGEI): Top 10 Ranking 2012
30
Perception
Performance
Perception
Performance
1
Germany
New Zealand
Germany
Denmark
2
China
Denmark
Denmark
Germany
3
Denmark
Germany
Sweden
Italy
4
US
Norway
US
Sweden
5
Sweden
Iceland
China
UK
6
Brazil
Sweden
Norway
New Zealand
7
Norway
Brazil
New Zealand
Spain
8
New Zealand
Canada
Brazil
Norway
9
Netherlands
Finland
UK
Brazil
10
Canada
UK
Australia
Australia
% (difference Green vs BAU)
2011
Ranking
Impact of green investment scenario relative to business as usual
policies by incorporating green initiatives in their growth strategies.
The Chinese Academy of Social Sciences estimated that annual damage to the China’s economy was as much as 9% of GDP. This is not far from the World Bank’s estimate of the cost of environmental degradation at 8% of GDP in 2012 for the world as a whole. Similar estimate for India is at 6% of its GDP, mainly attributed to poor sanitation and water pollution. These estimates envisage that the costs of environmental degradation, if left unchecked, can seriously threaten both competitiveness and welfare of a nation. As such, it is not surprising to see that several countries have made drastic changes to their economic
South Korea for example is investing approximately 2% of its GDP annually (around USD23 billion) in green growth actions, which is double the amount recommended by the United Nations (UN). It also plans to attract private businesses to invest in the new and renewable energy (NRE) field. As for China, the adoption of the 12th five-year plan, for 2011 to 2015, signals a new departure in the country’s industrial evolution. The plan sets new goals to re-balance the economy, through increasing domestic consumption, and relaxing annual growth targets to 7 per cent and at the same time with emphasis on resource
3 -1
8
2
1
-1
-3
-20 -40
3 2.5 2 1.5 1 0.5
-22
-22 -40 -48
Real GDP
GDP/capita
Energy demand
Water demand
Forest land
Foot print/ biocapacity 2015 2030 2050
Source: UNEP Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication, a Synthesis for Policy Makers (Nairobi, 2011).
efficiency. Interestingly, China is investing USD468 billion into green key sectors in its current five-year plan versus USD211 billion in the previous plan. GDP is traditionally measured as the market value of all goods and services produced by a country within a specified time period. As such, positive changes in GDP indicate that the economy is growing, but not whether growth is sustainable, as the use of natural wealth is not taken into account. Looking at China for instance, the near 10 per cent annual GDP growth is being partly offset by environmental depletion and degradation, reducing its adjusted net national income growth to an estimated 5.5 per cent (World Bank and DRC 2012).
The Kyoto Protocol to the UNFCCC (United Nations Framework Convention on Climate Change) is an amendment to the international treaty signed in 1992 on climate change, assigning mandatory emission limitations for the reduction of greenhouse gas emissions to the signatory nations. The objective of the protocol is the stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.
3.5
-8 -13
-20
-30
-60
-4
Malaysia and the Kyoto Protocol
Projected Trends in global annual growth rate
Percent (%)
-10
14
-50
Source: Dual Citizens
Should Countries Worry About Not Being Green Enough?
10 0
21
16
20
Malaysia is a party to the UNFCCC and has ratified the Kyoto Protocol but as a developing country, Malaysia has no quantitative commitments under the Kyoto Protocol at present. Nevertheless, Malaysia is already committed under the UNFCCC to formulate, implement, publish and regularly update national and, where appropriate, regional programmes containing measures to mitigate climate change by addressing anthropogenic emissions by sources and removals by sinks of all greenhouse gases. The next seven years to 2020 is critical for Malaysia to strive to meet the carbon3 and economic targets of a 40 per cent cut in emissions in terms of emission intensity of GDP (compared to 2005 levels) and a minimum USD15,000 per capita income respectively. No doubt, green technology has been recognized as one of Malaysia’s driver of future economic growth and at the same time ensures energy security as well as climate change mitigation and adaptation. Policies to strengthen institutional frameworks introduced include the formation of a Green Technology Council and a Cabinet Committee on Green Technology, chaired by the Prime Minister, and the establishment of a Malaysia Green Technology Agency. Policies include support for higher-learning and research
0 2010
2020f
2030f
2040f
2050f Green Investment Scenario Business as usual
Source: UNEP, Towards a Green Economy
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3
Greenhouse gas comprising carbon dioxide, methane and nitrous oxide
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institutions for R&D; increased foreign and domestic investment into green technology; establishment of a Green Technology Fund; feed-in tariff legislation to woo renewable energy in power generation; and the recognition of green products through standards, ratings and labelling programmes.
• CFSB has been given a mandate to carry out a due diligence process for the early stage companies that seek investment and also to validate the investment made by the angel investors so that the angel investors are able to apply for the tax incentives after 2 years of investment.
Besides the Government initiatives, the EU-Malaysia Chamber of Commerce & Industry (EUMCCI) had established a Green Finance Task Force in December 2011 to focus on green project financing issues. In 2012, a specific project was developed in collaboration with the British High Commission under the Prosperity Fund for South East Asia entitled “Financing Solutions for the Future of Green Growth in Malaysia”. The Ministry of Energy, Green Technology & Water (KeTTHA) and Malaysian Green Technology Corporation are the active stakeholders in this project and the AIF is a Strategic Partner. The EUMCCI’s Green Finance Task Force spearheaded this project with the aim of reducing the existing green financing barriers and gaps between green entrepreneurs/businesses especially SMEs and banks in Malaysia by leveraging on SMART (Specific, Measurable, Attainable, Relevant and Time-bound) tools.
• CFSB to act as interim secretariat for the Malaysian Business Angel Network to accredit suitable individuals as qualified angel investors. (ii) Exit strategies: by aligning core green initiatives, business execution and global investment participation. (iii) Market development as a core competence: The cornerstone for funding and industry relevance, it is imperative for green entrepreneurs to embrace and embody this. (iv) Coaching and Clustering: The combination of having lead entrepreneurs guide new innovators and researchers: to create compelling value proposition for industry and communities.
A green economy is characterized by substantially increased investments in economic activities that build on efficient natural resource usage or reduce ecological scarcities and environmental risks From various initiatives by the task force, among the issues faced by Malaysian players, fund managers, local investors and green asset owners are: (i) Facilitate innovators in the financing eco-system via angel networks, grants, venture capital, private equity and project financing. Here, Cradle Fund Sdn Bhd (CFSB), an agency under the Ministry of Finance, Malaysia (MOF) manages the Cradle Investment Programme (CIP) since its inception in 2003 together with mentors/coaches: • To stimulate and encourage angel investments into start-up companies in Malaysia, the Government is prepared to give an incentive in terms of tax deduction to qualified individual investors and/or spouses based on the qualified investments into a qualified start-up. • The reason for the tax incentive is to encourage private investments and to ensure that Malaysian start-ups have a private sector funding avenue that would allow them to grow.
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(v) Crossing the Chasm: Learning and applying from earlier technology adoption challenges especially from the ICT sector of the 1980s and 1990s. Here, entrepreneurs under mentorship are exposed to the wealth creation trend spotting phases which included integration and adaptation as key in unlocking the fusion of technologies, communities of stakeholders and ensuring policy and facilitation are very much aligned and practical to spur growth at all levels. (vi) Risk Capital: Unlocking risk capital via Public Private Partnerships that are sustainable and inclusive of and including the understanding of climate risks which comprise physical risks, regulatory risks, litigation risks, and commercial risk as well as reputation risks. (vii) Accelerating Green Technology Financing Scheme (GTFS) adoption: Discussion on the gaps evident today, and ways to bridge financing for green entrepreneurs; and
(viii) Technology Convergence: Combining different domains to create powerful differentiators. For example, the Centre for Climate and Energy Solutions assist entrepreneurs and investors on adaptation to climate change i.e. incorporating it in their business approach and understanding the importance of partnership for resilience and environmental preparedness which is also termed as “Value Chain Climate Resilience”.
and certification mechanism for green technologyrelated skills; and brain gain programmes to strengthen local expertise in green technology have also been introduced.
Let’s Go Green
Furthermore, most asset owners and fund managers are aware of climate change but do not factor it into their investment decisions. It is important that Malaysian industry players and the financial players keep themselves up to date on climate science, impacts, tools and resources to help them better analyse and understand these new risks and/or opportunities across their investment portfolios. Green entrepreneurs/asset owners and fund managers in Malaysia should use tools available to integrate climate change into investment processes and to use climate data, trends and factor in uncertainties such as a climate change policy or the price of carbon into investment practices and decisions. To spur green technology and a low carbon economy in Malaysia, it is important that financial institutions play a role in encouraging mitigation and adaptation efforts.
Going green is not an option anymore. It is a necessity for Malaysia and full support from the financial services industry would provide real opportunities for Malaysia to achieve the dual targets of 40 per cent cut in emissions in terms of emission intensity of GDP and achievement of USD15,000 per capita income by 2020. Building the right infrastructure as the enabler for green growth is also vital. Similarly the issue of human capital requirements in the new growth areas will create new jobs and opportunities for both the green industry as well as the financial sector that supports the green industry. Both developed and developing countries are shifting fast into the green economy and as a nation Malaysia, we do not want to be left trapped in the middle income group and risk losing green competitiveness. The transition and planning period had lapsed, now is the time to implement and live the green lifestyle for the good of the nation and our next generations.
On human capital development, several incentives (financial and fiscal) for students pursuing studies in green technology disciplines at both the undergraduate and graduate levels have been introduced; retraining and apprenticeship schemes for green jobs; a grading
Dr Zamros Dzulkafli is Head of Research & Publication at the Asian Institute of Finance and Jacqueline Chang is Policy and Project Manager (EU Projects Desk) at EU-Malaysia Chamber of Commerce and Industry’
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