In 2008, the Export-Import Bank of Korea and Industrial Bank of Korea successfully raised a total of RM2 billion via bond issuance in the Malaysian bond market. Moving forward, the sukuk market represents an important channel to reinforce regional financial integration. It presents an opportunity for Korean corporations to raise financing and issue sukuks out of Malaysia. In addition, Korean investors can also participate in the wide range of Islamic financial instruments in the Malaysian financial markets, including from more than 150 Islamic unit trusts, Islamic REITs, wholesale mutual fund products and other Islamic structured products. In addition to robust economic ties and potential financial links, Korea and Malaysia enjoy a growing mobility of talents. With the rise in Korean investment in Malaysia, this has led to an increase in Korean expatriates. Koreans are also coming to Malaysia as students and to participate in our Malaysia My Second Home programme. In addition, the Korean Wave, which spread to Malaysia in early 2000s, has contributed to make our country more aware of the Korean culture and traditions, thus promoting a better understanding between these two countries. Prospects for the Malaysian economy Malaysia is an economy that is transitioning into a new phase of development. In the current environment, our economy is now firmly on the recovery path. This year, the Malaysian economy is projected to grow in the region of 5% with further upside potential.
The MPC’s remit is to keep inflation at its 2% target, so the key issue for us is how far the financial crisis will affect the wider economy. That will depend on the answer to three broad questions. First, in the short term, how far will the severe liquidity squeeze that has already happened turn in to a full scale credit crunch – by which I mean a sharp tightening in the price and availability of credit to households and firms. Second, how well placed are households and firms to weather any such change in credit conditions? And third, in the longer term, will there be a significant lasting impact on credit conditions, for any given level of Bank Rate? It is too early to answer these questions with any great confidence, especially the last. But we do have some early evidence. There are signs that credit conditions facing firms have already tightened. The terms on corporate bank borrowing are often directly linked to the rates that banks charge each other. These rates have risen and remained high. Our latest intelligence suggests that the main lenders have tightened the terms on which they are willing to lend to businesses, and they plan to tighten them further. UK firms’ financial position is currently pretty healthy, on average, and large corporate borrowers in particular may have good alternatives to bank borrowing. But smaller and more highly geared firms may be more adversely affected.