This is a commendable achievement but we still have a lot to do. As Malaysia moves forward with the economic transformation programme, the demands for the financial sector as enabler, catalyst and driver of growth will increase. The financial sector as a whole is expected to grow in size, from 4.6 times GDP now to 5–6 times GDP by 2020. The significance of financial markets, relative to funds raised through financial intermediaries such as banks, will continue to rise. In meeting the needs of the new high value added economy, our financial sector needs to be developed further and innovative in its approach in order to facilitate higher levels of domestic and international trade and investments. One such innovative approach is the development of a comprehensive and vibrant Islamic financial industry. It is our aspiration to transform Malaysia as the Islamic Financial Hub. Crucial to the transformation is intensifying of our efforts to further develop the foreign currency markets in Malaysia. In particular, we should seek to capitalise on our competitive advantage in Islamic financial markets and move beyond our previous focus of advisory and promoting primary market issuances and move up to build an end-to-end value chain capability – where we should also focus on secondary market trading, settlement and custody services. But this aspiration of ours could only be achieved if there is a collaborative effort between the industry and the authorities.
The country’s improved economic fundamentals and the resilient financial system have enabled the gradual pace of liberalisation of the FEA rules since 2003. A fact that is often over looked is that, during the recent crisis, contrary to actions undertaken by many, Malaysia had further liberalized the FEA rules to promote greater efficiency in the conduct of international trade, promote a conducive business environment and to allow the use of domestic currency in the settlement of trade with the country’s major trading partners. This is a timely measure, given the country’s strong linkages with the global and regional economies in particular, the Asian economies. The various measures put in place by the authorities have enabled Malaysia to be ranked as the Top 10 most competitive nation in the World Economic Report by IMD, Switzerland. On ease of doing business, FEA’s ranking had also improved significantly from 13th (which is one of the most problematic) in 2005/2006 to 2nd place (easiest for doing business) in 2009/2010 reflecting partly the stakeholders’ positive assessment on FEA to support the conduct of business in Malaysia. The country’s easy and facilitative regulatory environment including FEA rules, had also contributed to Malaysia’s recent upgrading from a “Secondary Emerging Market” to a “Advanced Emerging Market” status in the FTSE’s Country Classification Index, hence the potential increase in non-residents’ investments in Malaysia following the increase in Malaysia’s weightage in the index from the current level of 2.41% by June 2011.