Mukhriz: Develop Islamic finances

SPEECH BY

YB DATO’ MUKHRIZ MAHATHIR

DEPUTY MINISTER OF INTERNATIONAL TRADE AND INDUSTRY

 

 

MALAYSIA – ARAB BUSINESS FORUM

 

 

30 NOVEMBER 2009

 

JW MARRIOTT HOTEL,

KUALA LUMPUR 

 

Assalamualaikum W.B.T, Good Morning and Salam 1Malaysia.

 

1.           It is indeed a great pleasure to be here today at the Malaysia-Arab Business Forum. I am delighted to be addressing this gathering of eminent business people and political leaders from both Malaysia and the GCC member countries. This is a positive step in our continuing efforts to strengthen our longstanding bilateral and economic relations.

 2.           I would like to extend a warm welcome in particular to the GCC delegation which I am made to understand comprises diverse representatives – all of whom are keen to further explore investment and trade opportunities in this region.

 3.           The past 16 months have been very challenging for the global economy. We are now seeing signs of recovery and all bets seem to be on Asia leading the recovery. But even as we get data coming out of China, Korea, Japan, Taiwan and India that point in this direction we are confronted with news of the Dubai debt crisis. The world has crossed its fingers yet again and is holding its breadth, so to speak, hoping that this will not stymie global economic recovery.

  4.           Are the developments that we are experiencing part of the boom and busts that economists talk about? Nobel Laureate Professor Joseph Stiglitz asked “Is boom and bust a permanent feature of the capitalist order? Do global markets need global regulation – and are today’s supranational institutions the right ones to provide it? Is the dream of a Third Way between today’s global capitalism and yesterday’s discredited socialism still alive?”

 5.           In my opinion, a Third Way is not a dream but in fact an option that is available but has not given its due recognition.

 6.           I am talking about the promise of Islamic banking, the potential of the halal industry and the viability of the Gold Dinar. In essence I am referring to the noble principles of the Islamic faith, the practicality of its commandments and the strength in unity of the Ummah.

 7.           Allow me to elaborate. Firstly, the sub-prime crisis in the United States which imploded and was transformed into a full blown international economic crisis has drawn attention to Islamic banking as a viable and attractive alternative to the conventional system. Indeed the official newspaper of the Vatican – ‘Osservatore Romano’ published an article affirming the ethical principles on which Islamic finance is based on and that such noble principles reflect the true spirit which should mark every financial service. In addition, we see several countries, including France, UK and Singapore, vying to be the “capital of Islamic finance”. Thus, in view of these developments – Malaysia and the GCC member countries must seriously take up the challenge to develop and lead the world in Islamic banking and finance.

 8.           For your information, the Malaysian Government has introduced various measures and tax incentives to create a modern and efficient international Islamic financial centre. These measures include the following:  

  • Stamp duty exemption of 20 per cent on Islamic financing instruments;  
  • Tax exemption on banking profits derived from overseas operations; 
  • Tax exemption of insurance and takaful companies derived from overseas operations;  
  • Permitting foreign financial institutions to conduct Islamic banking activities in international currencies; and 
  • Permitting greater flexibility to Labuan Offshore Financial Centre entities that offer Islamic financial services to operate anywhere in Malaysia.

 9.           As a result of these and other measures, Malaysia is gearing up towards being a premier international Islamic financial centre for the origination, distribution and trading of Islamic capital market products, including treasury instruments such as sukuk. In this context, I would like to invite interested parties within the GCC that are seeking Islamic financing facilities to take advantage of the wide range of syariah-compliant services available in Malaysia. I would also like to invite our brothers and sisters in the GCC to work with Malaysia to develop the Islamic banking industry to our mutual benefit. Without unity of purpose we will perhaps short change ourselves and undermine the Ummah. Let us work to jointly develop standardised Islamic financial products, structures and systems. 

 10.       Moving on to my next point about the burgeoning halal industry. Allow me to talk about some of the Malaysian Government’s initiatives as announced by our Honourable Prime Minister at the Malaysia International Halal Showcase (MIHAS) in May this year. He emphasized the Malaysian Government’s commitment to developing Malaysia as the global halal hub. He urged Malaysian companies to invest in the production and export of halal products and services.

 11.       We are also encouraging our private sector to establish strategic alliances with domestic and international players and leverage on each others’ strengths in the supply of raw materials, ingredients, technology and branding in this regard.

 12.       To ensure a more coordinated development of the Malaysian halal sector, the Government has now placed the Halal Development Corporation (HDC) under the Ministry of International Trade and Industry.

 13.       The Government also provides various incentives to promote this industry, such as:

 

  • Double deduction for expenses to obtain halal certification and quality systems and standards certification; 
  • Matching grants for development and promotion of halal products;
    import duty exemption on raw materials/ components;
     
  • Import duty / sales tax exemption on machinery and equipment;
    reinvestment incentives in food processing activities; and
     
  • Incentives for companies providing cold chain facilities and services for food products.

 14.       This sector offers much potential for Malaysia and the GCC business community to collaborate and leverage on our respective strengths to expand our reach not just in our respective markets but beyond.

 15.       Last but not least, the proposition for the Gold Dinar. My friends, this idea is not new. I believe that in light of the decline of the U.S. Dollar as the world’s sole reserve currency, gold prices on the rise and the entire dismal global economic predicament – the viability of the Gold Dinar speaks for itself. Perhaps this is an idea whose time has come.

 16.       Malaysia and the GCC member countries have much to gain from expanded trade and investment. The potential exists not just in our markets but in the wider reach that each of us has through our trade and economic linkages with the rest of the world, namely Malaysia within ASEAN and the various Free Trade Agreements that we have concluded and likewise the GCC with your trading partners. It is for this reason that the Malaysian Government is interested in engaging more deeply with members of the GCC in a Free Trade Agreement. There have been some exchanges in this regard and we look forward to beginning negotiations in the near future.

 17.       At present Malaysia’s economic linkages with the GCC and members of the OIC is mainly with Saudi Arabia and the UAE. From 2008 to September 2009, investments from these two countries totalled RM92.9 billion. And Malaysian companies have a fairly strong presence in these two countries as well. We believe that there is so much potential that we have yet to explore with the other member countries.

 18.       One area of potential is in the services sector. For your information, the Malaysian Government has through its agency, MATRADE, organised the Malaysia Service Exhibition 2009, MSE 2010, earlier this year at the Dubai International Convention & Exhibition Centre, UAE. Given the success and overwhelming response to that exhibition, we will be organising MSE 2010 from the 13th – 15th of April 2010, at the same venue.  Please do mark down these dates in your diary and join us then. You could also get in touch with my officers for further information.

 19.       I must thank you for your attention and the opportunity given to me to share my thoughts with you this morning. I also want to thank you all for your presence and support to this Forum. I hope you will find it a useful platform to network and do business.

 20.       On that note, I am pleased to declare open the Malaysia-Arab Business Forum and I wish you success in your deliberations.

 

Wassalamualaikum W.B.T and Thank you.

Published in: on November 30, 2009 at 12:25  Comments (23)