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9th July, 2009
KUALA LUMPUR: Bank Negara Malaysia has received several enquiries on the proposed setting up of a mega Islamic financial institution here, Governor Tan Sri Dr Zeti Akhtar Aziz said yesterday.
If the mega institution is established, Malaysia will be the first country to have a mega Islamic financial institution with a paid up capital of at least US$1 billion.
Zeti said: “There are enquiries on the process of submitting applications.
There are several that have come and shown interest.
“The closing date for this will be in October so there is still some time. And we have had even more applications for the conventional licences as well,” she told reporters at the Malaysia-UK Islamic Finance Forum here.
The enquiries came from the Middle East and the West with at least two parties interested in forming partnerships with local institutions, she said.
Asked on the impact of the unexpected higher job cuts in the US on the local economy, she said that the central bank had already priced that in its forecast.
“Our assessment is that the second quarter will be very much the same as what we saw in the first quarter. We expect improvements in the second half of this year and going into 2010.”
Last month, US employers shed some 467,000 jobs, sending the unemployment rate up to 9.5 per cent – the highest in nearly 26 years.
Malaysia’s first quarter gross domestic product contracted by 6.2 per cent.
As both stimulus packages totalling RM67 billion already impacted the economy, the governor said the effect was expected to be felt in the third and fourth quarter of this year.
“There is already implementation of these and it is being aggressively implemented,” she said.
Whether the packages would give a substantial effect, Zeti said: “It will be important in sustaining domestic demand.”
On the possibility of further cuts in interest rates, she said the present rate was at the appropriate level under the current economic scenario.
“We see our domestic economy condition being stable and certain sectors showing trend towards positive growth. From time to time, we will review the outlook and in particular the external environment, and from there we will decide on the interest rate policy.”
The overnight policy rate currently stands at two per cent.
Zeti said the current policy direction focused more on providing access to financing.
“Interest rates are already at historical lows and we do not believe that it is a factor that is a constraint on financing. It is more the access and therefore many measures, the credit enhancement measures and so on, have been put in place to enhance access to financing.
“And what is very encouraging is that growth of lending has continued to be sustained in the region of 10 per cent,” she said
Asked on the ringgit’s comfort level, Zeti said that Malaysia had never relied on the exchange rate to gain competitiveness.
“In the immediate and short term, we see volatility in our exchange rate just like we see volatility in major currencies in the international financial system that is determined by financial flows across borders.”
However, she said that over the medium term, the unit would continue to reflect the underlying fundamental. “As our underlying fundamental is expected to improve, then the currency is also expected to strengthen gradually, overtime.”
The local unit is hovering at 3.55 to a US dollar.
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