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SINGAPORE: Experts said on Friday that Malaysia's recent economic liberalisation measures are geared towards attracting investors from the Middle East as it aims to boost investment flows into the country.
Earlier this week, Malaysian Prime Minister Najib Razak removed a rule which required initial public offerings to reserve 30 per cent of stock for Bumiputras or indigenous Malays.
Moreover, foreign investors no longer need to obtain approval for acquisitions and mergers. This is a clear sign, some say, that Malaysia is open for business, and there is one particular foreign market that the country has its eye on.
Mohammad Faiz Azmi, partner & global leader, PWC Global Islamic Finance Team, said: "When we look at foreign investment, we are not just looking at more traditional European and American investments, but also very specifically at the Middle East market.
"If you notice, the oil prices have been very gradually inching up, so we believe that there probably will be a possible impact of these players coming into the market again."
In April, Malaysia gave out nine new banking and insurance licences – four of them for Islamic finance. But Malaysia is not the only Asian country that is looking to tap into Middle East funds.
Earlier this year, Singapore's Monetary Authority of Singapore introduced two new guidelines to grow the local Islamic finance market.
The first measure allows Singapore-based banks to enter into a form of home financing or diminishing musharaka financing and spot murabaha transactions, which are contract sales between banks and their clients.
The second initiative provides Singapore Islamic bonds with equal tax and liquidity treatment as Singapore government securities.
It is estimated that globally, the Islamic finance market is worth some US$500 billion and 80 per cent of those funds are expected to come from the Middle East.
Experts said following the current financial crisis, the market is expected to grow at a rate of 15 to 20 per cent per year. Some are expecting the market to hit US$1.6 trillion globally by 2012.
Raj Mohamad, managing director, Five Pillars, Islamic Financial Services, said: "The rich economies in the Middle East are the ones that currently have the capital. So for the markets to attract the capital, they have to provide products that are palatable to these economies.
"For that reason, I think that Islamic finance has got its attention. In fact, the financial fraternity is looking at how to develop products simply because they are looking to attract money from the Middle East."
Experts said 30 per cent of the possible Islamic finance funds could flow into Asia next year.
- CNA/so
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