Islamic Finance
Strong Islamic Banking Focus in 2007 Budget
By Noor Soraya Mohd Jamal, BERNAMA
Sep 2, 2006, 12:12

KUALA LUMPUR, Sept 1 (Bernama) - The banking and finance sector applauds the significant focus on Islamic banking and various tax incentives in the 2007 Budget to make Malaysia the leading global Islamic financial hub as well as to encourage local banks to venture abroad.

Bank Islam Malaysia Bhd's managing director Datuk Zukri Samat said the bank was confident that the incentives would stimulate not only local Islamic financial institutions but also attract more global financial institutions to operate in the country.

This would speed up the Islamic financial system liberalisation process in the country, he said.

To encourage more local companies to go overseas, Exim Bank said the government's decision to increase the bank's paid-up capital to RM2.7 billion from RM370 million would make it stronger and increase its customer base.

Chief executive officer Kamal Mohd Ali told Bernama that Exim Bank would be able to provide loans up to RM6.5 billion by year-end from the current RM3.7 billion.

He said with this, the bank would be able to expand services such as multi-currency facility and overseas contract financing.

Bank Negara Malayais has also provided RM1 billion for Exim Bank to extend soft loans to entrepreneurs investing abroad.

According to CIMB Group's chief executive officer Datuk Nazir Razak, the 2007 Budget has surprised with its upside for the private sector.

Nazir said the corporate tax cuts would be motivating and CIMB was pleased with the wide ranging measures to increase vibrancy of the capital market and Islamic finance.

"But for me, the easing of rules for expatriate professionals is potentially most impactful. We need an influx of foreign and returning Malaysian professionals to strengthen management of our companies," he said in a statement.

Alliance Banking Group said the 10-year tax exemption for local and foreign fund managers who managed Islamic funds for foreign investors would also see more intense activities in this area.

Its group chief executive officer Bridget Lai also said that the government's emphasis on the private finance initiative (PFI) was an excellent way of funding major capital investments, without immediate recourse to the public purse.

According to Public Bank's chairman Tan Sri Dr Teh Hong Piow said the 2007 Budget was very prudent and promotes responsible fiscal outcomes.

Teh said based on the presented figures, the surplus in the current account of the government would continue to remain large with the government's debt-service ratio remaining low.

However, the deficit was not an issue because the expenditure on infrastructure and other development projects would go towards building greater capacity for the economy to generate future growth, he said.

At the same time, the government has the capacity to finance the deficit through domestic borrowing, he added.

RHB Banking Group chairman Datuk Azlan Zainol said the 2007 Budget was comprehensive and balanced with emphasis on creating balanced growth.

Incentives such as corporate tax reduction would help to stimulate private investment and cushion the economic slowdown caused by the less favourable external environment, he said.

Azlan said the move to give banks tax exemption on remittances from overseas subsidiaries for five years was a timely boost in light of consolidation on the domestic front.

On the real estate investment trust (REIT) incentives proposed in the 2007 Budget, Standard Chartered Bank Malaysia's chief executive officer Shayne Nelson said it was wise by the government to reduce the taxation framework for REITs, thus attracting foreign fund inflows into real estate investments.

"This will no doubt boost our capital market position to the forefront of economy," he said.

MBF Cards (Malaysia) Sdn Bhd president Huan Woon Han said as a homegrown brand, the government's move to reduce corporate tax would be an added impetus in promoting private sector investments.

© Copyright 2006 by halaljournal.com