Tun Razak Exchange: ‘Wall Street’ for Malaysia
by Ronnie Teo, email@example.com. Posted on August 5, 2012, Sunday
KUCHING: The Tun Razak Exchange (TRE) launched earlier this week by Prime Minister Tan Sri Najib Tun Razak has been seen as a positive move by economists to reshape the fi nancial landscape of Malaysia, particularly in Islamic finance.
Dr Yeah Kim Leng, chief economist at RAM Rating Services Bhd (RAM Ratings) believed the TRE could potentially be the next ‘Wall Street’ for Malaysia, being one of the front-running countries of the global Islamic finance scene.
“With the country’s early mover advantage in Islamic finance, TRE could fulfi l its aspirations of becoming, if not a global Islamic financial centre, then a thriving regional centre for Islamic financial services serving the Asean Economic Community that will be a reality in 2015,” he outlined to The Borneo Post in an interview.
The TRE, previously known as the Kuala Lumpur International Financial District (KLIFD), is one of the early Entry Point Projects (EPPs) under Malaysia’s Economic Transformation Programme (ETP), a national roadmap to more than double Malaysia’s per capita income to RM48,000 in 2020 while propelling the nation to a highincome economy.
The exchange would house a physical clustering of the right mix of key international institutions and support services, while estimated to grow to three times its current size.
The RM26 billion project also looked to deliver on the aspirations for Greater KL to drive rapid growth in parallel with upgrading the city’s liveability ranking to the top 20 in the world.
There would be strong emphasis on quality of life, appealing to the talent needed to support Greater KL.
“We expect the real value-added of Malaysia’s financial services sub-sector to expand between six to seven per cent annually over the next decade,” added Yeah.
“We view the TRE which will provide world class infrastructures and facilities, to be a key driver of the above gross domestic product (GDP) trend growth envisaged for the financial services sub-sector.”
“The planned large scale investment and the agglomeration effects created by the concentration of large Islamic investments and financial service providers, together with the multiplier effects on the economy through employment generation and business spending are expected to sustain the growth of Islamic finance in the country over the next few years.
“It remains positive because of the strong support given by the government as well as the sustained rise in local and foreign participation in Malaysia’s Islamic banking and sukuk markets.” Nor Zahidi Alias, chief economist at Malaysia Ratings Corporation Bhd (MARC) supported this view, believing that the general outlook for this was positive.
“It is a part of the ETP efforts to promote the services sector and make Malaysia as a regional financial hub which people generally view it positively. And of course since Islamic fi nance is one of Malaysia’s great strength, it will further enhance the country’s position as the Islamic hub in the world.” Special task force During the launch of the exchange, Najib also announced a special task force to oversee the development of the TRE until the project is up and running.
He said the task force would be led by the Economic Planning Unit in the Prime Minister’s Department and chaired by the Minister in the Prime Minister’s Department, Tan Sri Nor Mohamed Yakcop, with its members comprising senior officers from the Finance Ministry, Bank Negara, Securities Commission and related agencies.
The task force would ensure that the exchange received the support of the entire government machinery in every step of the way – from planning and development and until the exchange was fully up and running, said Najib.
“The government will go out of its way to ensure that the exchange is a success and as a first step, I can announce to you today that we will begin a comprehensive review of business regulations,” he said in his keynote address before launching the exchange.
Providing incentives The prime minister also announced that further incentives were in the pipeline, building on the incentives that he had announced last year.
These included a 100 per cent income tax exemption for 10 years, stamp duty exemption on loan and service agreements, Industrial Building Allowance and Accelerated Capital Allowance and 70 per cent income tax exemption for fi ve years for eligible property developers at the TRE.
Previously, Najib outlined several incentives in Budget 2012 for the development of KLIFD.
The Prime Minister added that over 250 of the world’s leading companies would be located at the exchange, creating some 500,000 jobs directly and indirectly by the time the exchange was fully completed.
“40,000 will be knowledge workers specialised in financial services, reflecting our ambition for the Tun Razak Exchange to be home to a strong, vibrant and diverse international business community,” he said.
With the new exchange, Najib hoped for further growth on Islamic finance which he believed was a sector of unlimited potential.
Najib unde r scored the government’s commitment to making the exchange easier for investors to participate in Malaysia’s Islamic finance markets and further strengthen its position as a global hub for Islamic finance.