Financial sector to play vital role in 2020 economic target

Friday June 6, 2008
KUALA LUMPUR: The financial sector has an important role in helping Malaysia develop its economy by 2020 via the channelling of productivity and driving endogenous growth in other economic sectors, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said.
In her keynote address at the 12th Malaysian Banking Summit yesterday, Zeti said Malaysia had strong competitive advantages in two areas: Islamic finance and shared services and outsourcing (SS0).

“Malaysia is at the forefront of Islamic finance, housing the world’s largest sukuk market with 65.8% of the global outstanding sukuk as at end-March,” she said at the summit, themed Taking the Leap in Paradigm Shift of Banking - New Wave, New Ventures.

Zeti said the promotion of Malaysia as an international Islamic financial hub was expected to catalyse growth in other economic sectors.

“Positive effects are expected to spill over into the markets and related industries such as property, health, education and business services, spreading the sector’s growth momentum to the economy.

“The Malaysian banking sector on the whole is sound. Domestic banking institutions, in particular, have benefited from the broad-based reforms and capacity building measures that had been undertaken following the Asian financial crisis,” she said.

Zeti said the progress of the financial sector had surpassed initial expectations outlined in the Financial Sector Masterplan.

The financial sector, she said, had maintained a steady growth momentum since the Asian financial crisis, with the profitability of the Malaysian banking system growing by 36.7% to RM17.7bil last year.

Zeti said going forward, the industry’s liberalisation plan aimed to reinforce the role of the financial sector in the next phase of development, capitalising on core comparative advantages while reaping benefits from alliances and partnerships. “An area that will be pursued is increased strategic alliances with foreign partners and greater foreign participation in our financial markets,” she said.

On the regulatory front, Zeti said Bank Negara would continue to direct significant efforts and resources towards strengthening its surveillance capabilities to detect, monitor and to deal pre-emptively with emerging risks in the financial system.