TRX shaping up to become financial hub in region
The Malaysian Reserve, 27th April 2015:
TRX is to transform KL into the financial hub that can rival the likes of Singapore and Hong Kong
The Tun Razak Exchange (TRX), which has just signed on Australian property developer Land Lease as partner to develop its Lifestyle component, still has some way to goto become the catalyst for Malaysia’s ambition to become a regional financial player.
The development that is going on full swing in Kuala Lumpur (KL) is planned to transform KL into the financial hub that can rival the likes of Singapore and Hong Kong but at the same time TRX must be the sustainable financial centre that can stimulate economic prosperity, wealth creation, protect ecology and draw global capital.
Kuala Lumpur Mayor Datuk Seri Ahmad Phesal Talib is confident that KL has the physical infrastructure, adequate environment protection laws and strong economic cum political backing to make it a success story.
“In terms of infrastructure and facilities we are ready and committed. Our government policies respond to business needs and soon the Asean (Economic) Community will be formed where about 600 million to 700 million people live in the area, which is a good potential for future investors to invest in KL.
“And we are also well-known for Islamic financial system and Bank Negara Malaysia is there to protect the image of our financial administration, so for sure we can succeed as an international financial centre,” he told The Malaysian Reserve.
Ahmad Phesal has reasons to be proud about his city. In the World Bank’s “Doing Business 2015” report, Malaysia is ranked 18th in efficiency among 189 countries surveyed.Outclassed only by Singapore that leads the pact in the region.
Visibly, KL is on track. It is a known global commercial capital, home to about 20 international banks, 5,000 foreign companies from 40 countries and top-notch financial services firms plus a growing expatriate community.
A nation rich in cultural diversity, with a large English-speaking population, political stability, firm monetary rules and investor-friendly policies – adds to Malaysia’s advantages to reach its found dream.
He agrees that KL’s major test as a financial city transcends beyond physical infrastructure. The city needs to create soft infrastructure that is equally vital to complement its physical foundations, for the city to sustain a robust economic growth and competitiveness.
“KL’s business-friendly environment, such as its competitive tax incentives and ongoing infrastructure improvements, has long been Malaysia’s key value proposition for American businesses looking to establish headquarters in the Asean region.
“The completion of TPP (Trans Pacific Partnership) negotiations this year will be critical for Malaysia to remain competitive as an attractive regional hub for American businesses, through the agreement’s forward looking regulatory framework for next-generation issues that any business hub must address,” said Sanjeev Nanavati, president of American Malaysian Chamber of Commerce (Amcham).
TRX sprawls across some 70acres of land, boasting 25 office blocks, residential towers and modern amenities – a city landscape similar to Istanbul or Shenzhen -all vying for hot foreign capital.
Its master developer aims to complete the massive project in 15 years, with its first phase slated for completion by 2018.
Critical questions remain whether TRX can emerge as a sustainable financial city like London, Zurich, or closer to home Singapore or Hong Kong- where industry success hinges beyond gleaming skyscrapers and fancy city names.
It may have a lot of catch-up to do to make Malaysia a leader in the competitive overcrowded financial services industry as more ambitious wealthy governments join the race.
KL is yet to shine in the world’s conventional financial market. According to the Global Financial Centres Index (September 2014), Malaysiawas only ranked 41stout of the83 centres reviewed.
Malaysia needs to show investors its economy is resilient and can weather any financial crisis, the way it managed the 1998 Asian financial meltdown, by introducing innovative financial system, good regulatory framework and market’s governance.
A deep capital market, a sound private banking system, highly-skilled small and medium enterprises and connectivity to global markets are other essential criteria for its sustainability.
“It is crucial that Malaysia, a strong emerging economy at an inflection point of achieving Vision 2020, must elevate to a global level of transparency and competitiveness, and catalyse the growth of a knowledge economy with qualified talent.
“With strategic positioning through the NKEA (National Key Economic Area), Malaysia can leverage its strengths over others, by improving infrastructure and connectivity, nurturing potential for R&D (research and development), and committing to strong IP (intellectual property) protection and a transparent regulatory environment,” said Sanjeev.
With corporate capital flowing from West to East, and global investors continue to romanticise high-growth South-East Asian economies, Malaysia can profit as a cost-competitive business hub, compared to costly Singapore.
“KL has its own advantages and prospects. We can compete in offering quality services and premium offices. In the context of property (prices) we are still affordable, compared to Singapore or even Jakarta where property prices are high,” said Ahmad Phesal.
TRX needs to have deeper trade ties with large economies, like China and India, and even Indonesia, another sleeping economic giant, and integrate with international financial markets to lure foreign direct investment (FDI) to rev its economy for long term survival.
But FDI flows have slowed slightly as new emerging economies from Myanmar to Vietnam, are biting into its share in recent years.
Based on United Nations Conference on Trade and Development (June 2014) report, Malaysia’s net FDI inflow was RM39 billion (US$12.3 billion), placed fourth among Asean recipients, behind Singapore, Indonesia and Thailand.
“Foreign trade and investment is an important contributor to Malaysia’s economic growth and development, but Malaysia’s performance in attracting FDI relative to both earlier decades and the rest of Asean has slowed.
“It is therefore important that Malaysia’s trade policy pursues efforts towards creating a more liberalised and transparent business environment to maintain its attractiveness as a business hub for multinationals,” said Sanjeev.
Safeguarding intellectual property rights is another key area, where Malaysia needs to tighten its laws to convince investors and multinationals-primarily protecting their patents, domain names, design or copy rights.
“Proposals such as those to improve trade secret protection are particularly timely as they not only give confidence to foreign investors but also increase opportunities for Malaysian companies to contribute to international supply chains,” said Intel Malaysia’s MD Robin Martin.
Intel Corp invested more than RM14 billion in Malaysia and employs nearly 8,000 highly skilled Malaysians.
To capture the fast-flowing foreign capital Malaysia needs to endorse its commitment towards low-carbon economy, ensure security for investments, green bonds and talent creation, some prerequisites for TRX to lead the financial market.
Worldwide,cities are becoming sensitive to environmental degradation harming healthy living and carbon reduction is the new agenda of many governments and corporations,which Malaysian policymakers need to address steadfastly.
“Member companies of Amcham are committed to promoting the use of green technology and supporting the creation of a renewable energy economic cluster in Malaysia to address the environmental impact of industry activity in new emerging cities and urban vicinities.
“The Malaysian government has identified sustainable energy as key for the nation to maintain its future economic competitiveness,” said Sanjeev.