
2/32

Asian Link2

DISCLAIMER: The Asian Institute o Finance does not represent

nor warrant the completeness, accuracy, timelines or adequacy

o this material and it should not be relied on as such. The

Asian Institute o Finance does not accept nor assumes

any responsibility or liability whatsoever or any data, errors

or omissions that may be contained in this material or or

any consequences or results obtained rom the use o thisinormation. This publication does not necessarily reect the

views or the positions o the Asian Institute o Finance.

Contents

Editor's Note

Talent Development :

The New Paradigm

The War for Talent in the

Financial Industry

Positioning Malaysian

Capital Market in the NewDecade

An International Ringgit?

Learning Programme

Assessment and

Accreditation Framework

for the Financial

Services Industry

AIF International Symposium

2011

Market Alerts

Board of Directors

Activities and Events

2

3

5

8

12

16

18

24

27

31

Editor's Note

As the world clambers out o the

economic downturn, a gradual ow o

economic power rom the West to East

has ignited a talent war in the region.Across Asia, we are hearing laments

o employers over the war or talent.

The same sentiment was echoed by

speakers and delegates during the

recent AIF International Symposium on

Talent Development organised by the

Asian Institute o Finance.

The strong headlines economic growth

in Asia is translated into the creation

o employment, backed by a robust

demand in the economy and an

increase in business activity. But a closer

look at the workorce suggests that not

all is rosy in the region. The main issue

with employment in contemporary Asia is one o quality, not the number o

jobs out there. The shrinking talent pools are building heavy competition or

the best employees, especially within the nancial services industry. Hence, the

biggest challenge or emerging economies in Asia is supporting this impressive

growth perormance with eective talent management.

Although the ocus in human capital development has been waxing and

waning in the business environment or the last 3 decades, the notion o talent

development has once again taken centre stage in many organisations. The

workorce landscape has changed dramatically in the last ew years but theskills mismatch remains a critical and growing problem. A notable change is

that individuals are no longer expecting to grow and develop within the same

organisation throughout their career. More oten than not, the best way to

advance a career is by taking a higher level position in another organisation.

Many organisations have woken up to these pressing issues. We are now

seeing a resurgence o ocus on talent development. Large organisations are

now committed to training and talent development in their eort to recognise

and nurture the very best in their employees. This is evident with the talent

development job titles appearing in the workplace.

These new realities and challenges acing the nancial services industry in human

capital development were the highlight o the AIF International Symposium.

The Symposium placed considerable signicance on the importance o talent

development as a key driver o productivity, competitiveness and growth o the

nancial services industry. An article on the symposium provides an overview

o the main issues discussed.

The articles in this issue touch on many hot button issues the talent war, the

internationalisation o the ringgit and the Capital Market Masterplan 2. We

know you will enjoy reading them and hope they will bolster your thinking

on these issues.

Dr Amat Taap ManshorEditor

[email protected]


3/32

3 Asian Link

The New Paradigm

TalentDevelopment:

Signicant new trends continue to reshape

the nancial services industry. In this recent

two decades, the intensiication o theglobalisation process, the advancement

in technology and the unprecedented

consequences o the global inancial and

economic crisis have contributed to these

changes. While the global economy is now on

a recovery path, several challenges continue

to remain.

The ocus o the crises aected countries

have been on the immediate term challenges

involving the resumption o the unctioning

o inancial markets and the inancial

intermediation process while supportingthe overall economic growth. As part o

the response to the crisis, is the inancial

is particularly urgent or Asia as it emerges

as an important growth centre in the global

economy.

With Asia's nancial services industry poised to

grow rapidly, this growth must be supported

by the development o capabilities among

the inancial industry proessionals. Going

orward, the investment in this core pillar will

be a dening actor in the perormance and

the capacity o the industry to reinvent and

transorm and thus enhance its resilience and

sustainability.

Forces Shaping Talent Landscape

The path orward needs to be guided by

a strategic response to the orces that are

shaping the new talent landscape. There is

now an increased demand or highly-skilled

knowledge workers that are able to meet the

changing requirements o an increasinglyglobalised and borderless workplace. More

interconnected businesses within national

economies and across the globe have also

increased expectations or employees to be

highly versatile and able to adapt to the ast

changing conditions.

Talent mobi li ty has thereo re increased

substantially not only across geographical

boundaries, but also across sectors, as the

demand or talent in inancial services by

the energy, telecommunications, sotware

and consultancy sectors are likely to increaseover time. Organisations including nancial

institutions thereore need to give greater

This is an excerpt rom the special address by Tan Sri Zeti Akhtar Aziz, AIF

Chairman and Governor o Bank Negara Malaysia, at the opening ceremony

o the AIF International Symposium 2011 on 7 April 2011.

regulatory reorm both at the national

and international level. This has also been

reinorced by a tightening o the supervisory

oversight. These cumulative developments

are also dramatically transorming the nancial

landscape o the international and national

nancial systems.

Closing the Talent GapThe u tu re has th ereore become more

complex, uncertain, unamiliar and more

ambiguous . In the context o these

undamental and ar reaching changes,

less attention has however been accorded

to the necessary changes to the human

capital development that is required or the

eective participation and perormance in

this new inancial landscape. Indeed, the

talent required also needs to be transormed.

These changes have also precipitated a revisit

and review o education systems around theworld over to address the current discontent

that the education has not kept up with the

changing human capital requirements o the

nancial services industry.

The World Economic Forum has projected

that 'staggering' talent gaps will arise in

large parts o the world by 2020, and this will

have a bearing on national competitiveness

while organisations compete or talent on

an unprecedented scale. Managing talent

has consequently become signicantly more

challenging and needs to be addressedwith talent development. The objective is to

harness the ull potential o the workorce. This

Human Capital


4/32


5/32

5 Asian Link

Human Capital

The phrase War or Talent was rst coined

by Steven Hankin o McKinsey & Company in

1997 to describe the phenomenon o talent

shortage experienced by organisations. This

phrase has since been echoed many times

and has now taken a new global shape. Ater

two decades, this war continues unabated as

organisations engage in erce competition to

attract, hire and retain the very best people.

The inancia l industry in As ia has been

eeling the pressure o a skills shortage. I the

escalating talent shortages are not addressed

properly, this could have serious implications

on the sustainable growth o Asias nancial

industries and subsequently could hampergrowth prospects o the emerging Asian

economies.

Forces Fuelling the War

The talent war in the nancial services industry

is not showing any sign o waning, withthe increasing shortage o talent aecting

all sectors in the inancial industry and

aecting career paths as well. This event

is maniested by a number o sweeping

changes. The recent Robert Hal Workplace

Survey reported that across the Asia Pacic

region, the inance and accounting sector

is experiencing skills shortage with 82% o

employers surveyed acknowledging that the

pool o nancial talent has not expanded as

ast as the industrys growth. This nding is

backed up by the results o a separate studyconducted by Deloitte Touche Tohmatsu and

the Economist Intelligence Unit, in which

The Waror TalentFinancialIndustryBy Wan Nursoza Wan Azmi

inthe

57% o CFOs being surveyed believed that

inance talent is indeed in short supply.

Among the undamental orces uelling

the talent war are changing workorcedemographics, generational dierences and

growth potential o Asia economies.

The most undamental driver o workorce

diversity today is the changing workorce

demographics resulting in a much broader

range o ages in all proessions. As the 'baby

boomer' generation ages, organisations ace

the problem o having a signicant part o

the workorce retiring at the same time. This

translates into two unique challenges - the

employees and their implicit knowledge willleave the companies; and the recruitment

o a qualiied workorce is hampered by


6/32

Asian Link6

skill shortages or talent constraints. Several

proessions in the inancial industry such

as accounting and auditing are now clearly

eeling the eects o employee retirements

and the difculty in sourcing or new talent.

As a result o this development, generational

diversity has become a new realism. The

workorce today is made up o our unique

generations (Traditionalist, Baby Boomers,

Generation X and Generation Y). Each o

these our generations brings its unique

stamp to the workorce and is guided by

a dierent set o values, lie experiences,

belies, expectations and attitudes. With

multiple generations actively engaged in the

workorce, comes a new set o challenges

or employers. Organisations that recognise,

leverage, and bridge the generational divide

will gain a competitive advantage in the

talent market.

Further complicating the generational

diversity is the change in attitude among the

Table 1: Salary Outlook 2011 or the Financial Services Industry in Malaysia

Salary Per Annum (RM)

Analyst Team leader/Manager(1 4 years experience) (5 10 years experience)

2010 2011 2010 2011

Front Oce Banking

Investment Banking 85 - 150k 89 - 180k 157 - 240k 180 - 288k

Private Banking 84 - 110k 96 - 120k 100 - 200k 120 - 220k

Private Equity 80 - 145k 84 - 160k 126 - 240k 160 - 264k

Corporate Banking 52 - 100k 58 - 110k 99 - 192k 110 - 216k

Commercial Banking 45 - 96k 47 - 108k 78 - 132k 108 - 145k

Banking Operations

Treasury Settlements 42 - 72k 42 - 78k 82 - 156k 78 - 174k

Cash Management 40 - 74k 40 - 78k 78 - 145k 78 - 174k

Corporate Governance

Compliance 48 - 99k 52 - 109k 99 - 185k 109 - 212k

Market Risk 45 - 99k 49 - 120k 99 - 201k 120 - 241k

Operation Risk 45 - 90k 48 - 108k 90 -185k 108 - 222k

Internal Audit 44 89k 45 98k 89 - 185k 98 - 212k

Credit Risk 44 88k 45 96k 90 172k 96 - 198k

Financial Accounting

Business Analysis 50 72k 50 84k 72 115k 84 156k

Finance Operations 42 68k 42 84k 66 115k 84 156k

NB: Figures are basic salaries exclusive o benets/bonuses unless otherwise specied.

Source: Robert Walters Global Salary Survey 2011 Malaysia

Human Capital

generations o workers who will remain in the

labour market over the next ew decades.

In today's constantly changing workplace,

one thing remains constant: a younger

generation o workers who have vastly

dierent expectations, needs and patterns

o behaviour that dier markedly rom prior

generations. As the baby boomers ease into

retirement age, employers must learn to

understand the motivations and desires o

the younger generation o employees who

seem to be more motivated by personal

ullment opportunities on the job than by

traditional monetary rewards.

The talent market is now more competitive

than ever beore and is expected to

intensiy urther in the coming decades. In a

knowledge-driven economy, the demand or

highly skilled nance proessionals is on the

rise incessantly. Although the demand may

at times decline with nancial downturns,

the rising trend will continue to linger in the

longer run. This remains true in the wake o

the global nancial crisis.

At the height o the crisis, many inancial

institutions downsized their operations and

sta at the expense o urther expansion. As

the nancial sector scrambles back to its eet,competition among inancial institutions

to expand and rebuild their operations,

particularly so in Asia in their intense quest

to piggy back on the growth potential o

the region, has set o the talent war with

Asia as the main battleground. We are now

seeing large nancial institutions in the likes

o Standard Chartered, Citi and UBS ocusing

and re-ocusing global growth on Asia,

especially so in China and India.

Talent Economy

At the heart o the talent war is the presence

o inated wages. The scramble or nance

proessionals in Asia is pushing up the cost

o attracting and retaining talent. The talent

crunch has driven up wages and narrowed

the salary gaps in most economies in Asia.

In China, or example, a 20% salary hike is

currently being experienced by the nancial

industry whilst Hong Kong proessionals in

the nancial sector reported an average 30%

growth in earnings (salary and bonus) in 2010.

The minimum salary or nance proessionalsworking in Singapore has also registered an

increment o 8% to 10%.

"Among the

fundamental

forces fuelling

the talent war are

changing workforce

demographics,

generational

differences and

growth potential ofAsia economies."


7/32

7 Asian Link

Table 2: Asia Pacic Talent Index 2012

Rank Country Talent Index

Score

Demographics

(rank)

Quality o

compulsoryeducation

(rank)

Quality o

universities& business

schools

(rank)

Quality o

environmentto nurture

talent

(rank)

Mobility

& relativeopenness o

the labour

market (rank)

Stock & fow

o oreigndirect

investment

(rank)

Proclivity to

attractingtalent

(rank)

2012 2007

1 Singapore 53 54 10 6 9 2 1 2 1

2 Australia 52 55 14 2 3 1 3 8 2

3 China 50 47 1 9 2 8 8 12 12

4 Hong Kong 50 49 16 7 10 7 2 1 3

5 New Zealand 48 48 11 1 8 4 4 3 4

6 Japan 44 40 17 4 1 6 13 17 5

7 India 44 41 2 15 6 9 5 14 7

8 Taiwan 42 43 15 3 5 5 7 9 9

9 South Korea 40 38 12 5 7 3 12 13 610 Malaysia 39 36 7 8 4 10 6 6 10

11 Thailand 32 30 9 10 11 12 11 7 11

12 Philippines 30 29 6 14 14 11 9 11 8

13 Vietnam 27 25 5 12 15 14 15 4 13

14 Indonesia 25 25 4 13 13 17 16 15 14

15 Sri Lanka 25 26 13 11 16 13 10 16 17

16 Pakistan 20 20 3 16 17 15 14 10 15

17 Cambodia 19 20 8 17 12 16 17 5 16

According to Robert Walters Global Salary

Survey 2011 or Malaysia, the nancial services

industry is expected to see salary increments

o between 5% and 15% as the job market

becomes more and more employee-driven.

And, salaries o highly qualied proessionals

with 5 to 10 years o experience are set to rise

by as much as 30% compared to the previous

year (reer to Table 1).

Winning the War

Against the backdrop o stronger economic

growth amongst Asian economies, the war or

talent in the region has reached new heights

as nancial institutions embrace more creative

talent management practices in terms o

sourcing, recruiting and retaining inance

proessionals. According to ACCA, some

o the key retention strategies adopted by

institutions include realigning salary packages

to current market rates, oering better career

development opportunities and providing

exible work schedules. The bottom line is

that to win the war or talent, institutionsmust understand current and uture needs

o the workorce. This requires taking a multi-

acetted approach in recruiting, retaining anddeveloping talent.

The global economy has brought about a

paradigm shit in talent management as the

workorces are increasingly mobile, have highly

transerable skills and are technologically

savvy. I talent is not nurtured and managed

appropriately, the brain drain eect could be

detrimental to long term growth.

A Global Talent Index developed by Heidrick

& Struggles and the Economist Intelligence

Unit oers a unique insight into the demand

or talent across the globe as it measures

countries on their capacity or developing,

attracting and retaining talent. The Index

relects not only how well countries are

presently developing their domestic sources

o talents but also at how this capability is

evolving into the uture. In the Global Talent

Index report or 2011, Malaysia was ranked

36th out o 60 countries and is projected

to all by three places to 39 by 2015. In the

recent Asia Pacic Talent Index 2012, Malaysia

retained its 10th position but scores airly lowon Quality Environment To Nurture Talent

and Proclivity To Attracting Talent (see Table

Source: Heidrick & Struggles

Human Capital

2). However, Malaysias ability to attract talent

is projected to all rom 6th position to 10th

in 2012.

World Bank, in its report titled Malaysia

Economic Monitor: Brain Drain, highlighted

that the brain drain situation in Malaysia

has grown rapidly and the trend is likely to

continue. The report goes on to say that the

talent outow was not being replaced with

commensurate levels o inows. The World

Bank report also highlighted that the number

o Malaysians with tertiary education whomoved abroad had tripled in the last two

decades.

The results and projections above re lect

the countrys struggle with brain drain and

retaining talent. I let unchecked, this could

have serious implications on Malaysias

drive to be a high-income nation by 2020.

Hence, Malaysia needs to ocus not only

on attracting talent back onshore but also

on developing strategies or competing or

worldwide talent.

Dr Wan Nursoza Wan Azmi is Senior ResearchFellow o the Applied Finance Research andPublication Centre, AIF.


8/32

Asian Link8

The second Capital Market Master Plan or

CMP 2 which was launched in April this year

charts the strategic development o Malaysian

capital market or the next 10 years. As the

successor to the highly successul rst master

plan, the CMP 2 strategically aims to unlock

the potential o the countrys capital market

which is expected to grow more than double

in size to RM5.8 trillion over this decade.

The growth strategies outlined also aim at

expanding the role o the capital market in

line with the objectives o the New Economic

Model (NEM). The enhancement o not only

public but also private sector involvement in

the capital market would boost value-added

alternative investment opportunities or the

large amount o savings in the country and

also broaden and deepen the capital market

to compete in the contemporary global

network.

The Success Story

Under the rst Capital Market Master

Plan (CMP 1), several major strides

were achieved. The size o the capital

market expanded at an annual rate

o 11% over the period 2001 2010

rom RM717.5 billion in 2000 to cross

the RM2 trillion mark as at the end o

2010. The Islamic capital market also

registered strong growth at 15.2% in

2010 and outpaced the conventional

capital market to register RM1.05 trillion in

2010 rom RM293.7 in 2001. The overall size othe capital market is currently about 2.7 times

the nominal gross domestic product.

PositioningMalaysian

New DecadeCapital Market

The CMP 1 had successul ly achieved a

95% completion rate out o the 152

recommendations and 24 strategic initiatives

proposed. These included initiatives to

improve liquidity; ease und-raising; reduce

transaction costs; develop a broader stock

and bond; ensure a strong and acilitative

regulatory regime as well as establish Malaysia

as an international Islamic capital centre.

The strategies adopted resulted in increased

efciencies and competitiveness which laid

the ramework and provided the landscape or

rapid growth o the Malaysian capital market.

Lessons learned rom the Asian nancial crisis

have also broadened the Malaysian capital

market, equipped it with more sophisticated

nancing sources and better risk management

strategies that enabled the domestic market

to come out relatively unscratched rom the

recent contagious global meltdown.

With the evolution o the market into a

wel l -regulated and res i l ient one, al l

market participants must enhance their

capabilities and proessional standards to

certiy better investor protection. One o

the major achievements o the CMP 1 is

the strengthening o the domestic nancial

intermediaries in preparation or the open

and competitive global environment. Merger

and acquisition strategies implemented on

the domestic banking industry have resulted

in stronger and larger asset based nancial

institutions that can operate according toglobal standards through the achievement

o economies o scale and eiciency to

By Catherine S F Ho

Stockmarket273.1

20002010

Bondmarket444.4

Stockmarket1,246.7

Bondmarket758.7

Capital Market OverviewSize (RM bil)

Total : 717.5 Total : 2,033.9

Source : Securities Commission

Capital Market

inthe


9/32

9 Asian Link

Capital Market

compete in the international domain. Further

enhancement and continuous support must

be rendered in this area in order to acilitate

the exploration o a wider range o businessopportunities and investment assets or the

industry.

Growth with Governance

An important consideration in the conception

o a structural long term plan is a ull

appreciation o the major transormations

o the inancial landscape with particular

reerence to evolution o new technologies,

processes, and products and services. In laying

down the ramework or CMP 2, the changing

dynamics o the capital market both locally

and globally were taken into consideration

with a ocus on our key structural changes:

The growing size o the capital market

which is now in excess o RM2 tr illion

Broad economic base

Signiicant growth o institutional

unds

Greater internationalization o the

capital market

The CMP 2s strategies have been ormulated

to be comprehensive and exible in keeping

pace with trends and challenges that are likely

to aect the capital market in this decade. The

strategies also reect the current state o aairs

in the global nancial market especially in astemerging countries. Thereore, it is essential

that the process o growth be monitored and

governed by appropriate risk management

strategies. Experience rom the past nancial

crises suggests that sustainable growth is

only achievable i it is supported by the right

degree o accountability and a well-structured

governance ramework. Hence, the hallmark

o the CMP 2 lies on the intricate balance

between capital market growth and robust

market governance to ensure credibility and

integrity o the Malaysian capital market. The

adoption o good governance practices is a

undamental pre-requisite or a sound capital

market. With hindsight, a well-structured

corporate governance ramework and a code

o good governance provide a conducive

climate to the orderly development o the

capital market and meet the increasing

expectations o investors.

Th e th em e Growth and Governance

underscores the importance o ensuring

good governance and orms the backbone o

growth. Through the growth and governance

strategies identiied, the CMP 2 strives to

enhance the development o the capital

market without losing sight o high standards

o corporate governance in transormingthe competitive dynamics o the capital

market over the next decade. Key growth

strategies include the need to urther spur

the capital market development to the next

level to support Malaysias economic growth

and meet challenges arising rom intense

competition and globalization. In line with

ostering and acilitating innovative growth,

the governance strategies ascertain that

mechanisms are in place to ensure high

standards o investor protection and market

integrity. The latter is important as sustainable

growth o the capital market depends largely

on condence o investors.

Growth Strategies

Promote capital ormation

Create a conduc ive intermediat ion

environment to seed private sector emergent

companies and industries; nurture the

growth o small and mid-cap companies;

inance large and high-risk ventures with

innovative products and wider access to the

long term bond market; and promote socially

responsible nancing and investments.

Achievements under the Capital Market Masterplan 1

Market segments 2000 (RM b) 2010 (RM b) CAGR (%)

Equity market capitalization 444.4 1,275.3 11.1

Debt securities outstanding 273.1 758.6 10.8

Derivatives (notional value traded) 84.0 512.1 19.8

Investment management (assets under management) 55.2 377.4 21.2

Islamic capital market 293.7 1,050.1 13.6

Source: Capital Market Master Plan 2

Overview o the CMP 2 Strategies

Growth Strategies Governance Strategies

Promotecapitalformation Enhanceproductregulationtomanagerisks

Expandintermediationeciencyandscope Expandaccountabilitiesasintermediationscopewidens

Deepenliquidityandriskintermediation Robustregulatoryframeworkforachangingmarketlandscape

Facilitateinternationalization Eectiveoversightofrisks

Buildcapacityandstrengtheninformationinfrastructure Strengthencorporategovernance

Broadenparticipationingovernance



10/32

Asian Link10

Expand intermediation eiciency and

scope

Address structural constraints to enhance the

efciency o public and private sector savings

intermediation; and oster an innovativeand diverse intermediation environment to

expand the scope and supply o assets to

meet the needs o investors.

Deepen liquidity and risk

intermediation

Broaden the diversity o investment strategies

by promoting diverse portolio allocations;

strengthen market connectivity through

risk intermediation derivative products with

efcient price discovery and hedging across

markets; and widening market connectivity

and the range o inormed, competent and

proessional participants.

level o transparency and airness among

participants to enhance market quality.

Efective oversight o risksExpand regulatory coverage, capacity and

tools to ensure eective supervisory reach

and strengthen oversight o risks to bolster

market stability by identiying critical points

o accountability and controls to eectively

address risk vulnerabilities; enorce securities

law and regulations in maintaining public

conidence and ensure adequate investor

protection.

Strengthen corporate governance

Strengthen the eectiveness o corporate

g o v e r n a n c e t h r o u g h b r o a d - b a s e dapproaches to promote greater stewardship

especially the board o directors; promote

more concerted and coordinated eorts to

empower shareholders as beneiciaries in

ensuring good governance; and strengthen

gate-keeping accountabilities by proessional

accountants, analysts and auditors to pledge

or accuracy o disclosures.

Broaden participation in governance

Promote active participation o stakeholders

in shaping intermediation and corporate

governance on growth-enhancing nancial

innovation; and promote high levels o

transparency, improved ow o inormation

and educational eorts plus a culture o

integrity and increased emphasis on socially

responsible goals.

According to the Chairman o the Securities

Commission, Tan Sri Zarinah, in her opening

speech during the launching o the Capital

Market Masterplan 2, the capital market

is envisaged to play an important role in

nancing Malaysias transormation journey.Hence, the CMP 2 is strategically aimed to

enhance the role o the capital market in

line with the aspirations o the Economic

Transormation Program and New Economic

Model to transorm Malaysia to high-income

status based on principles o inclusiveness

and sustainability by 2020. Specically, the

strategies drawn up meet ive out o the

10 Entry Point Projects identied under the

Financial Ser vices National Key Economic

Areas revitalizing Malaysias capital markets;

deepening and broadening bond markets;

accelerating the growth o the private pension

industry; spurring the growth o wealth

Capital Market

"The CMP 2 is

strategically aimed

to enhance the

role of the capital

market in line with

the aspirations

of the Economic

Transformation

Program and NewEconomic Model to

transform Malaysia

to high-income

status based

on principles of

inclusiveness and

sustainability

by 2020"

Facilitate internationalization

Expand growth boundaries especially in

high growth regions by tapping global

opportunities to acilitate expansion in scaleand to capitalize on hub opportunities in

comparative advantage areas specically in

middle and back-ofce unctions; and widen

and reinorce the Islamic capital market

products, strategies and styles.

Build capacity and strengthen

inormation inrastructure

Strengthen the knowledge base through

talent development and acquisition to

support the expansion o the capital market

into high value-added areas to meet uture

demands o the market; build strong and

innovative inormation inrastructure to

address inormation asymmetries; and

promote service innovation and efciency

in a highly-electronic environment.

Governance strategies

Enhance product regulation to manage

risks

Foster a more conducive environment or

product innovation and diversication while

ensuring an efcient ramework or activeund-raising and inancial innovation that

benet investors; and strengthen reliability

and inormation disclosure, and post-issuance

obligations to protect investors interests.

Expand accountabilities as

intermediation scope widens

Create an enabl ing environment or

participants to broaden intermediation

unctionalities and activities; strengthen

industry capabi l i t ies and s tandards

by broadening and upgrading investoreducation and proessional management;

and examine and monitor any conlict o

interest o all participants including analysts,

investment management companies, and

especially credit rating agencies.

Robust regulatory ramework or a

changing market landscape

Ensure a consistent regulatory approach

to the changing market environment and

ocus on enhancing the quality o markets

through accommodating innovative nancial

processes, products and services, and speed

o technological advances; improve the


11/32

11 Asian Link

management industry and accelerating the

asset management industry.

The targets set out by CMP 2 rest on the

anticipation that equity nancing will playa bigger role in the countrys transition

into becoming a high-income nation. The

aggregate market capitalization is expected

to grow to RM2.4 trillion in the next 10

years rom the current RM1.3 trillion. The

investment management industry will be

driven by the countrys high savings with

assets under management projected to

rise substantially rom RM377.4 billion

in 2010 to RM1.6 trillion by 2020. With

greater internationalization o the

capital market, the Islamic capital

market is expected to expand almostthreeold rom RM1.1 trillion in 2010

to RM2.9 trillion in 2020.

Committed to New Heights

The chal lenges o the next decade are

multi-angled and vast through the rapid

transormation o the global nancial scenario.

Some o the major challenges include

transorming the competitive dynamics o

the Malaysian capital market, managing

risks o an innovative inancial landscapeand ensuring suicient governance to

support the growth and public condence

on the capital market integrity. More efcient

intermediation and innovative products

must be promoted to acilitate product

diversity and risk taking to satisy investors

demands. There is undoubtedly a need or

a more eicient and trustworthy capital

market that can support uture growth and

is internationally competitive. In addition, an

expansion o the derivative market would be

critical in providing risk management optionsto allow intermediaries to build their risk

management capabilities. All these indicate

a much needed mature and vibrant capital

market.

It is certain that the CMP 2 is a timely and

appropriate paradigm to move the Malaysianmarket to the next level .

Malaysia should

denitely capitalize on

its comparative advantage on ethical nancing

and investments rom surplus investors in the

Middle East and elsewhere, and continue

to build on the strength to maintain its

position as the world Islamic nance hub. It

should however be cautious that this is onlya relatively small section o the world capital

market and other nancial segments cannot

be ignored. Relative to other major economies

in the region with much larger and more

established inancial institutions, Malaysia

should nd opportunities to collaborate with

them on a blue ocean strategy term to avoid

direct competition. Additionally, improvement

in eiciency and eectiveness should be

prioritized to remain relevant and be able to

compete in the international eld.

Lessons learned rom the recent global

nancial crisis include the need to constantly

Targets Set Under CMP 2

Market segments 2010 (RM b) CAGR (%)

Equity market capitalization 2,430.3 6.7

Debt securities outstanding 2,053.5 10.5

Derivatives (notional value traded) 4,169.5 23.3

Investment management (assets under management) 1,610 15.6

Islamic capital market 2,900.0 10.7


Capital Market

monitor the creation o new inancially

engineered products and services to prevent

high risk intangible hybrid investments.

The level o household debts should also

be monitored in order to avert a high risko deaults and asset bubbles. The central

bank has recently reinorced the minimum

requirement or credit card holders and

imposed a higher deposit rate or multiple

house owners aiming at reducing bankruptcy

risk and speculation activities. More stringent

standards are also needed or rigorous

credit risk management o inancial

institutions in their credit creation

role especially when approving

loans. In addition, conlicting

roles o inancial institutionsin taking deposits on the one

hand, and providing investment

and inancing opportunities and

managing investors unds on the other,

should be closely supervised to avoid the

moral hazard o the too big to ail syndrome

as well as the dependency on the lender o

the last resort.

Hence, it is pertinent that there is a set

o continuous guidelines, which must be

collectively implemented and enorced, to

champion the persistent development o the

Malaysian capital market in the next decade.

The CMP 2 provides the necessary ramework

o support and governance to work towards

continual promotion o capital growth

to accommodate a sustainable system o

nancial competency and condence that

is in line with the countrys objectives to

achieve a high income nation through ethical

means.

Dr Catherine SF Ho is an Associate Proessor

o Finance and Head, Financial Services andRisk Management Dept, Universiti Teknologi

MARA, Malaysia.


12/32

Asian Link12

Finance

InternationalRinggit?

The decision to implement selective capital control

and to de-internationalize the ringgit in September

1998 was instrumental in restoring the stability othe oreign exchange market and in containing

the speculative activities on the ringgit during the

1997-1998 Asian nancial crisis. However, it was

not well received by international observers and

analysts who saw it as being counter-intuitive to

the open market export led growth. Despite going

against the Washington consensus, Malaysia went

ahead and maintained what many economists

later described as a credible peg. Even some

o the hard line critics rom the IMF came to

acknowledge the role o the peg not long ater

the crisis.

It is now almost six years since the ringgit was de-

pegged rom the US dollar rom a xed rate o 3.80,

allowing the ringgit to be traded in a managed-

oat system which is tied to a basket o dierent

currencies. The move came just hours ater Chinas

announcement to de-peg its yuan against the US

dollar on July 21, 2005. Since the removal o the

peg and the gradual easing o capital controls,

nancial liberalization continues to become animportant agenda in Malaysia. The need or a

liberalized, eicient and competitive inancial

sector is urther enhanced in view o Malaysias

vision and its increasing role as the global and

regional hub or Islamic inance. Despite the

substantial nancial liberalization that has taken

place, the internationalization o the ringgit

considered as the last vestige o the capital control

imposed in 1998 is still not allowed.

Foreign Exchange Liberalization

In August 2010, Bank Negara Malaysia (BNM)announced a series o oreign exchange

liberalization initiatives which reintroduced the

ringgit as a valid currency or the countrys export

and import transactions. This eectively means

that residents can now undertake settlement o

international trade in goods and services with

Source: Data rom Bank Negara Malaysia

USD Exchange Rate Against Ringgit

"The move to

liberalize theforeign exchange

regime was seen

as an imperative

condition meant

to provide

greater flexibility

on sources ofcompetitive

financing for the

real sector as well

as to enhance the

management of

financial resources

within thecorporate sector."

By Saadiah Mohamad

An

3.7

3.6

3.5

3.4

3.3

3.2

3.1

3

2.9

30

/3/2009

30

/4/2009

31

/5/2009

30

/6/2009

31

/7/2009

31

/8/2009

30

/9/2009

31/

10/2009

30/

11/2009

31/

12/2009

31

/1/2010

28

/2/2010

31

/3/2010

30

/4/2010

31

/5/2010

30

/6/2010

31

/7/2010

31

/8/2010

30

/9/2010

31/

10/2010

30/

11/2010

31/

12/2010

31

/1/2011

28

/2/2011

31

/3/2011


13/32

13 Asian Link

non-residents in ringgit in addition to using

oreign currencies. Other measures o oreign

exchange liberalization rules include the

loosening o the convertibility o the ringgit or

non-residents and the abolition o all limits on

cross-border oreign currency inter-company

borrowings. The limit on anticipatory hedging

or current account transactions with licensed

onshore banks was also abolished to acilitate

more eective risk management by residents.

The move to liberalize the oreign exchange

regime was seen as an imperative condition

meant to provide greater exibility on sources

o competitive nancing or the real sector

as well as to enhance the management o

inancial resources within the corporate

sector.

At the same time the central bank o China,

the Peoples Bank o China, announced the

trading o the ringgit against the Chinese

RMB and thus, making the ringgit the rst

Chinas interbank oreign exchange market

transaction in emerging market currencies.

Could these developments be interpreted aspointing towards the possibility o making

ringgit international again? To some, the

gradual series o liberalization in oreign

exchange market by BNM since 2005

is deemed a precursor towards ringgit

internationalization.

Ringgit is Getting Stronger

Since the removal o the peg, the ringgit

has been appreciating against the US dollar,

albeit by small amounts initially. More rapidappreciation has occurred in the last ew years

since the global nancial crisis and the US

quantitative easing has brought large capital

ows to this part o the world. In 2010 alone

the ringgit appreciated by 11% against the US

dollar. The rst hal o 2011 has seen an even

more interesting development, whereby

towards May 2011, the ringgit has reached a

13-year high since the 1998 Asian currency

crisis, reaching a value o 2.97 ringgit to one

US dollar, making an appreciation o almost

20 % since 2009 and a total o almost 22 %

percent since the crisis.

The rise o the ringgit is in tandem with the

weakening US dollar against most currencies

in the Asian region. The ringgit has been

appreciating not only against the US dollar

but also against other major currencies in

the world like the euro and pound sterling. In

2010, the ringgit appreciated 20.6 % against

the euro and 15 % against pound sterling.

Ringgit is now seen as one o the best

perorming currencies in Asia. Noteworthy is

that the recent rise o the ringgit is not only

due to the US dollars continued weakness,but is rather attributed to the relative strength

and attractiveness o the Malaysian economy

vis-a-vis other economies in the region.

Convertible, International orInternationalized?

Against this improved conidence on the

economy and upward trend o the ringgit,

should the ringgit be made ully convertible

and be internationalized? Terms such as an

international currency, internationalizedcurrency or a currency that is ully convertible

internationally are not always well dened and

understood. For one thing, a currency that is

ully convertible outside o its issuing country

need not necessarily be an international

currency. A national currency qualies as an

international currency when it is used globally

or calculations, exchanges and settlements.

Hence, an international currency is one

that is used and held beyond the borders

o the issuing country or transactions with

that countrys residents as well as between

nonresidents. And to be an international

currency, the country need not have a ullyliberalized nancial sector, although nancial

liberalization is indeed an important aspect

leading toward the development o currency

internationalization.

Full convertibility currency, on the other

hand, implies merely the ull conversion o

local currency into a oreign currency and

vice-versa. Although there are a number o

ully convertible currencies besides the US

dollar such as the yen, the Australian dollar,

the HK dollar and the Singapore dollar; the

US dollar and the Euro remain the two veryimportant vehicle currencies o the world.

The market share o the US dollar and the

Euro as the worlds reserve currency in the

second quarter o 2010 is 62.1% and 26.5%,

respectively.

Generally, the basic unctions o a currency

are as a medium o exchange, a unit o

account and a store o value. In most cases,

a currency perorms these roles within the

country where it is issued. An international

currency however is one that eectivelyplays these roles beyond the borders o the

issuance country and can be used or private

"An international currency performs three functions - invoicing currency for

international trade, denominating currency for international assets (such as

international bonds) and vehicle currency for international reserves."


14/32

Asian Link14

Finance

as well as or public purposes. For private transactions, the

currency may be used as a substitute currency, where it

unctions as an invoice and vehicle currency at those places

where trade and nancial assets must be denominated in thiscurrency. The currency may also be used or public purposes

such as serving as ofcial reserves, as a oreign exchange

intervention and as an anchor currency or pegging. In a

nutshell, an international currency perorms three unctions

- invoicing currency or international trade, denominating

currency or international assets (such as international bonds)

and vehicle currency or international reserves.

How Does a Currency become anInternational Currency?

We need to dierentiate between capital account convertibility

and currency internationalization. Convertibility implies that

trading in Singapore ranked th among all countries in the

BIS survey o oreign-exchange trading. This illustrates that

the internationalization o a currency is not a pre-requisite

or the development o a nancial centre.

To be an international currency, the currency needs to play

a dominant role as a global medium o transaction enabling

it to be held as oreign exchange reserves. The US dollar, and

in recent years the Euro, have strong international presence

where trade transactions and inancial instruments are

denominated in these currencies. Not surprisingly, these two

currencies are the most common currencies available in the

reserves o most central banks. In the last year or so, China is

seen to be making inroads towards making the yuan a more

internationalized currency by having bilateral agreements

with various nations so that trade can be settled using the

yuan instead o the US dollar or the Euro. It has signed such

agreement with Malaysia and recently during the Premiers

visit to Malaysia this has been strengthened urther.

Thus, a currency may be ully convertible but at the same

time may not qualiy as an international currency i its role

in the global market is not prominent. The main economic

actors underpinning the internationalization o a currency

include economic strength, exchange rate stability, a

well-developed and liquid nancial market as well

as trade volume.

Benefts and Costs o RinggitInternationalization

Currency internationalization oers many

benets. First, it reduces or limits exposure to

oreign exchange rate risks that are inherent in

international trading and nancial transactions

as the currency becomes the invoice currency or

exports and imports. Second, it provides domestic

rms and nancial institutions access to international

nancial markets without incurring exchange rate risks.

Domestic inancial institutions may also gain an edgeover external competitors as their international dealings

are now conducted in ringgit whilst domestic borrowers

have access to international nancing but in ringgit terms,

thereby avoiding currency mismatches. Finally, currency

internationalization oers the beneits o lowering the

amount o oreign exchange reserves which are held as a

buer against external nancial shocks. Hence, pursuing

the internationalization o currency may be important in

cushioning adverse eects o external shocks.

However, there are potential costs involved in ull convertibility

and internationalization o the ringgit. On the ipside, theoshore trading o the ringgit would risk the possibility o

speculative attacks similar to those that sparked the Asian

Market Share o Foreign Exchange Reserves

62.1%

26.5%

3.9%

4.2%

3.3%

71.2%

18.1%

6.0%

2.7%

1.9%

1999 Q1 2010 Q2

US Dollars

Euros

Pounds Sterling

Japanese YenOther

Source: IMF

there is no barrier to cross border nancial transactions at

market determined exchange rates while convertibility is

important or currency internationalization. In some cases,

currency internationalization can be achieved without

complete capital account convertibility. Take Singapore or

instance. Singapore has always maintained some orms o

control on its oreign exchange rules even though there havebeen a series o liberalization interventions. Yet, it is a major

international nancial centre and the volume o currency


15/32

15 Asian Link

Finance

nancial

crisis. This

may well be one

o the reasons that monetary authorities are

still holding a lid on their currency. Changes in

demand not related to domestic but oreign

shocks would also make the currency more

vulnerable to currency crises and have the

potential to be repeating the debilitating

experience o the 1997/98 Asian crisis in

which the ringgit had come under speculativeattack resulting in it nose-diving against the

US dollar. Concerns that the ringgit would

suer a similar ate i internationalized is not

without merits.

Currency market/oreign exchange market

is not like any other markets. It is the largest,

most liquid and dynamic market in the world

with USD4 trillion (RM12.4 trillion) in daily

transactions. It is indeed a market that is

prone to excessive movements (volatility) and

overshooting. It has been reported that owso global capital are currently making its way

into emerging economies or higher yielding

returns. This scenario was triggered by the

quantitative easing plans by the Federal

Reserve o USA to help revive its economy.

The Fed announced in early November 2010

the urther easing through its USD600 billion

(RM1.86 trillion) bond-buying programme.

From the perspective o emerging economies,

short-term capital lows could lead to an

appreciation o their currencies which will

negatively aect their competitiveness.

Such phenomena could also result in

speculative attacks, asset bubbles and

inationary pressures. Thailand and

South Korea have recently made

it public that they are notdiscounting possible eorts

towards warding o short-

term capital inlows that

could be detrimental to

their economies. Other

countries have either

imposed controls or are

in the process o doing

so to rein in short-term

investments.

Are We Ready?

Bank Negara Malaysia (BNM) is

condent that having managed to ride

through the crises and learning the lessons

well, Malaysia is well-placed and ready to

ward o risks o short-term hot money

ows. This is mainly attributable to the strong

reserves accumulation o USD110.4 billion (as

o March 2011) compared to USD20 billion

during the 1997/98 nancial crisis. Malaysia

has also adopted bold capital controls to lay

the groundwork or a recovery programme.

BNM has since then developed a surveillance

system to deter inows o short-term hot

money or speculative purposes. The million

dollar question is: Are businesses and nancial

institutions ready to reap beneits o an

internationalized ringgit?

Since the de-pegging o ringgit against the

US dollar in July 2005, there have been talks

amongst the policymakers in Malaysia on

the revival o oshore trading o the ringgit.

In September 2010, policymakers have aired

their commitment to deliberate on the

easibility o the ringgits internationalization.

However, no time rame has been set or the

ull implementation o the internationalization

o the ringgit although it has been said that

such moves will be carried out gradually

in phases. In an interview with CNBC last

September, the Prime Minister o Malaysia,

Dato Sri Najib Razak, said that Malaysia was

quite adaptive and was open to the idea

o reviving oshore trading o the ringgit

should the policy be deemed helpul or the

health o the Malaysian economy. According

to Tan Sri Zeti Akhtar Aziz, Governor o BNM,

some o the pre-conditions needed to

internationalize the ringgit are already in place

as the nancial markets are more developedwhile inancial institutions have increased

their capacity. However, she reiterated that

the internationalization o the ringgit could

be done in phases but the central bank is

in no rush as yet to put the ringgit on the

global mart.

When global capital becomes ootloose,

it can go out as quickly as it comes in. The

depreciating ringgit in the 1997/98 crisis has

hurt many companies and businesses but

the situation has somewhat changed. Mostcompanies have onshore nancing and the

growth o Islamic inance and particularly

in the issuance o sukuk have allowed local

investors to take part in nancing domestic

businesses. There are now more hedging tools

available in the market to protect companies

against any strengthening or weakening o

currency and o late even Islamic nance has

come out with its alternative Islamic hedging

mechanisms such as Islamic orex orwards

and Islamic currency and prot rate swaps.

With Islamic hedging, these tools are used or

hedging purposes only where there is proo o

risk exposure and not or speculative purposes

unrelated to real activities. Thus a greater use

o shariah compliant products could i done

well reduce speculative activities.

A currency that does become an international

currency is a reection o both the politics

and the economics o the country. The

decision to get ringgit ully convertible is not

only an economic decision but a political

one. Whether the ringgit will eventually get

accepted as one o the major international

currencies in the world depends very much

on the role and contribution o the Malaysian

economy in the global market in uture

years. Besides policy makers who make the

important policy decisions, a lot depends on

the perormance o Malaysian companies,

banks, nancial institutions as well as the

behavior o ordinary consumers like you and

me and those abroad.

Dr Saad iah Mohamad is a P roes s or

o Economics at Arshad Ayub GraduateBusiness School, Universiti Teknologi MARA,

Malaysia.


16/32

Asian Link16

The Asian Institute o Finance (AIF) has developed

the Learning Programme Assessment and

Accreditation Framework (LPAAF) with the

aim o promoting world standard Learning

Programmes in the inancial services

industry (FSI). The ramework was developed

rom the outset on the recommendations

made by Bank Negara Malaysia (BNM)

and Securities Commission Malaysia

(SC) consistent with the indings

published in the concept paper on

Transforming the Financial Services

Industry Training Landscape. The LPAAF

is one o AIFs initiatives towards

meeting the demand o the inancial

services industry or high quality and

efcient learning interventions.

The LPAAF is a comprehensive qual ity

assurance ramework with a certication

and accreditation system that aims at

raising the quality o the workorce

and the training providers in the FSI inMalaysia. The ramework is developed

LearningProgrammeAssessment

By Sarala J Marimuthu

andAccreditation

FrameworkFinancial ServicesIndustry

for the

Assurance & Accreditation


17/32

17 Asian Link

mechanism

towards ensuring the provision o high quality

Learn ing Programmes according to the

requirements o the FSI in Malaysia.

The LPAAF standardises Learning Programme

development, assessment and accreditation. This

will enable global recognition o learning and

qualications oered by the FSI training providers.

It provides an approach or inancial services

industry personnel to transer credits between

Learning Programmes conducted by the FSI as well

as institutions o higher learning. The LPAAF will

also lead to the development o exible pathways

which assist people to move more easily between

the education and training sectors and between

these sectors and the labour market by providing

the basis or recognition o prior learning (RPL),

including advanced standing and experience.

High quality learning programmes are a strategic

priority in order to develop talent with world

class competencies to direct FSI growth and

development. The LPAAF with the strong support

and commitment rom the FSI stakeholders will

contribute towards creating talented workorces

or the FSI.

Sarala J Marimuthu is the General Manager o theQuality Assurance Division, AIF.

based on international good practices, ater extensive

research and study o adult learning and higher

education quality models adopted by the institutions

in Australia, Hong Kong, Singapore, United Kingdom

and Malaysia. The three-pronged objectives o LPAAF

include setting national standards or Learning

Programmes in the inancial services industry,

standardising Learning Programme development,

assessment and accreditation and enabling global

recognition o learning and qualications.

Inputs on the needs o the policy makers, the FSI

training providers, the FSI and its personnel were

sought through dialogues conducted in collaboration

with AIFs Afliated Institutes (AIs) as well as through

industry wide training needs analysis. The outcomes

and requirements identied through these activities

were streamlined and integrated in the development

o the LPAAF.

The LPAAF will enhance the Learning Programmesoered by FSI training providers by providing clear

guidelines to ensure that the Learning Programmes

conorm to one single, world standard, thereby

enhancing the condence o policy makers, nancial

services industry and the public in the standards and

systems o the Learning Programmes.

It is on the basis o this Framework that essential quality

assurance standards, termed Learning Programme

Standards (LPS) are developed or all registered

nancial services industry training providers providinginancial training services to the FSI personnel in

Malaysia. The Framework and Standards serve as a

Assurance & Accreditation


18/32

Asian Link18

Symposium 2011

AIF International

Symposium 2011By Wan Nursoza Wan Azmi

From let: Puan Nor Shamsiah Mohd Yunus, Deputy Governor o Bank Negara Malaysia; YB. Datuk Dr. S. Subramaniam, Minister o Human Resources;

YBhg. Tan Sri Zarinah Anwar, Chairman o Securities Commission Malaysia and Mr. Daniel P. Viets, Executive Director and CEO o Asian Institute

o Finance.


19/32

19 Asian Link

The Asian Inst itute o Finance (AIF) had successully

organised its inaugural AIF International Symposium

rom the 7th to 8th o April 2011 in Kuala Lumpur.

The event was a collaborative eort between its our

afliated institutes Institute o Bankers Malaysia (IBBM),

Islamic Banking and Finance Institute Malaysia (IBFIM),

Malaysian Insurance Institute (MII) and Securities Industry

Development Corporation (SIDC).

The two-day sympos ium whi ch car ried the the me

Talent Development: The New Paradigm was ofciated

by the Human Resources Minister YBhg Datuk Dr S.

Subramaniam. In his opening speech, Datuk Dr Subramaniam stressed the

importance o developing talents in the nancial industry that are grounded with

a strong sense o ethics and morality. He also emphasised the need to create a

generation o nance proessionals who are driven by the desire to raise high

standards o ethics and integrity. In our desire to develop, retain and attract good

talent, we have to look at the entire eco-system o business to ensure that such

good talent can be developed and retrained, he added. Datuk Dr Subramanian

pointed out that talent development encompasses not only issues in skills and

knowledge development, but also on the ability o the enterprise and institutions

to provide a career path which is sufciently attractive to retain the best.

In his welcoming remarks, Daniel Viets, Executive Director and CEO o AIF, said that

such a symposium is signicant as productive exchanges o views are essential at

a time o dramatic changes in the global nancial landscape. He urther added

that understanding how these changes will impact upon the demand or talent is

critical when addressing the global dynamics driving human capital development.

Mr Viets encouraged more collaborative eorts between industry and government

to address proessional development and training needs to meet changing market

demands.

YBhg Tan Sri Dr Zeti Akhtar Aziz, AIF Chairman and Bank Negara Malaysia Governor,

in the special address during the opening ceremony, highlighted the crucial need

or Asian countries to invest in human capital as the region emerges as a centre

o global economic growth. Investment in talent development, according toTan Sri Dr Zeti, will be the dening actor in the capacity o the nancial industry

to reinvent and transorm. She urged inancial institutions to develop clear

strategies in narrowing talent gaps particularly in the areas o regulatory standards,

communications, management skills and risk management.

The economic costs o a ailure to arrest talent shortages are strategically signicant

and include low productivity, the slow pace o innovation and lost opportunities,

she added. She advocated that talent development should be approached in a

holistic manner and across the spectrum o the nancial industry. Since most o

the initiatives towards this end are multi-disciplinary and multi-layered, Tan Sri Dr

Zeti pointed out that shared commitment in creating a talented workorce must

be based on a comprehensive, coordinated and collaborative approach.

The symposium which eatured prominent speakers and personalities sharing their

views and thought leadership on the spectrum o human capital development

in the nancial industry attracted over 380 delegates rom 16 countries across 4

regions (Asia Pacic, Middle East, Europe and North America).

With the aim o the symposium being to provide a platorm or industry players and

those concerned with providing investments in creating talent to discuss human

capital development o the nancial services industry, each o the plenary sessions

was organised around a particular theme. The ve themes were:


20/32

Asian Link20

Human Capital and Talent

Development in the

Financial Sector: The New

Paradigm.

The Changing Financia l

Landscape View on the

Future.

B u i l d i n g a N a t i o n a l

Training Programme.

Current Issues in Raising

Standards or Human

Capital.

Technological Revolution

in Training Delivery.

Some o the main points

highlighted during keynote

p r e s e n t a t i o n s a n d b y

discussant-panels during the

plenary sessions included:

By 2050, the economic

centres o the worldwil l gravitate around

I n d i a - C h i n a . H e n c e ,

the inancial landscape

is expected to change

in line with the strong

economic prospects in

Asia. Such strong growth

prospects in the long term

continue to attract capital

investments into the

region and thus, provide

tremendous opportunity

in wholesale banking in

Asia. However, there is

a need to develop new

talent strategies to t the

changing realities acing

the nancial industry and

the greater role that Asia

is envisaged to play in the

global industry.

Part o the changes in the uture

inancial landscape is the change

in attitude among the generations

o workers with the majority o the

workorce being rom Generation Y. This

younger generation o workers have

vastly dierent expectations, needs

and patterns o behaviour that dier

markedly rom prior generations. As the

baby boomers ease into retirement age,

employers must learn to understand the

motivations and desires o the younger

generation o workers taking over their

place. Hence, developing eectivestrategies to attract, retain and motivate

Generation Y employees is an important

approach in talent development.

Although the deinition o talent

development has not changed, its

context may already have. Prospering

in the present business and economic

environment requires organisations

to adopt a new talent equation which

ocuses on engaging employees in

the organisations business strategy.

Employees role, environment and

development characterise employee

engagement and are the critical keys to

motivating employees.

The war or ta lent in th e i nanc ia l

industry is intensiying dramatically

as organisations engage in ierce

competition to attract, hire and retainthe very best people at a time when

supply is shrinking and demand is

increasing. A number o ar-reaching

trends are uelling the talent war. The

most undamental driver is the changing

workorce demographics - the work

orce is aging, and it is growing at a

much slower rate. The result is a much

broader range o ages in all proessions

with generational diversity as a new

condition that organisations have to

ace.

Symposium 2011

Dato Seri Nazir Razak presenting his keynote speech

Dr. Yeah Kim Leng and Pro. Dr. Abbas Mirakhor


21/32

21 Asian Link

Symposium 2011

The ree rider issue in emerging markets

especially in nancial organisations had

led to brain drain problems. While this

ree-rider approach may be benecial

in the short term or institutions, it will

in the long term drive up costs as they

continue to depend on external sources

or skilled proessionals. Skill shortage

was also ound to be the number one

challenge in Asia as market expansion

in these emerging economies requires

skilled workorces to drive and sustain

their economic growth. The current

talent gaps between the supply and

demand or highly skilled proessionals is

expected to widen urther as emerging

economies advance their global

competitiveness and compete more

strongly with the global powerhouses

o the West.

Multimedia platorms and technology

are changing the training landscape

and has thus, created a new paradigm

in talent development. This revolution in

training has made it possible to reduce

the costs associated with delivering

training, increase the eectiveness o the

learning environment and aid training

in contributing to the organisations

business goals. It has also transormed

organisations into responsive and

efcient learning organisations that can

readily adapt to changing environment

and needs.

The plenary sessions were ensued by our

concurrent industry workshops on the

second day o the symposium whereby a

panel o industry experts representing each

o the our sectors in the nancial industry

(conventional banking, insurance, capitalmarkets and Islamic nance) discussed and

answered questions rom the delegates

on the uture trends and training needs o

each sector. The workshops were structured

around building opportunities to share ideas

and improve upon the sectoral approach to

knowledge and skills development in the

nancial industrial arena.

In a spec ia l h igh l ight on R isks and

opportunities in a multi-polar world presented

by Andrew Tessler o Oxord Economics, it was

explained that the new global economic

landscape is characterised by multiple centres

o economic power and activity which bring

with it multiple risks and opportunities. During

the session, he discussed the impact o the

Eurozone debt crisis, emerging overheating

and the MENA crisis on emerging markets in

Asia, particularly in Malaysia.

The clos in g re ma rk s by Tan Sr i Za ri nah

Anwar, Vice Chairman o AIF and Chairman o

Securities Commission Malaysia marked the

closing o a successul symposium. On the new

paradigm in talent development, she called

or a holistic approach to building capacity

where technical skills and knowledge o the

workorce are complemented by a strong base

o values, ethics and morality. Tan Sri Zarinah

highlighted that the one common trait

shared by organisations that produce qualitytalent is the CEOs assiduous involvement

in talent management. According to her, a

considerable investment in time and eorts

o the CEO to develop and manage talent is

indeed a complex endeavour.

H u m a n c a p i t a l d e v e l o p m e n t a n d

management is a critical part o a companys

business strategies, she said. Thereore, an

analysis o a business perormance and itsrisk prole should include an analysis o the

companys talent strategies. In concluding her

remarks, she stated The inrastructure or the

development o human capital management

will become an increasingly important

element in deining the potential or the

uture. The CEOs and senior management

need to embrace these changes.

Dr Wan Nursoiza Wan Azmi is the SeniorResearch Fellow o the Applied Finance

Research and Publication Centre, AIF.

Dato' Dr. Adnan Alias, Mr. Hashim Harun,

Mr. Tay Kay Luan and Mr. Allen Blewitt

The organizing committee members


22/32

Asian Link22

Symposium 2011

AIF International Symposium 2011

EVENT ROUNDUP


23/32

23 Asian Link

Symposium 2011


24/32

Asian Link24

ASIA

Reappointment o TanSri Dr. Zeti Akhtar Aziz asGovernor

Bank Negara Malaysia is pleased to announce

that His Majesty the Yang di-Pertuan Agong

has agreed to the reappointment o Tan Sri Dr.

Zeti Akhtar Aziz as Governor o Bank Negara

Malaysia or a term o 5 years aective rom

1 May 2011. Dr Zeti has held the position

o Governor o the Central Bank since May

2000.

Source: Bank Negara Malaysia, 20 April 2011

Tan Sri Zarinah named as

Top 25 most inuentialwomen in assetmanagement

AsianInvestor recently announced their list

o the 25 most inuential women in asset

management in Asia-Paciic. The editorial

sta o AsianInvestor conducted the selection

process or AsianInvestors top 25. They

received nominations rom Asia-Pacic, in

addition to their own ideas about who should

be eatured. Their short list ended up with

over 80 candidates. Besides Tan Sri Zarinah

Anwar, some o the others in the Top 25

are: Ho Ching (Chie Executive o Temasek

Holdings), Deborah Ho (Chie Executive o

DBS Asset Management), Jane Kim Yung-

youn (CEO o Daol Fund Management) and

Alexa Lam (Deputy CEO o Securities and

Futures Commission Hong Kong).

Source: The Editors, 14 March 2011

Bringing them back home

Datuk Seri Najib Tun Razak announced

returning Malaysian proessionals were now

eligible or a at rate o 15% income tax or

5 years as an incentive to lure them rom

abroad. Datuk Seri Najib also mentioned

that the Talent Corp would now take the

lead on the Returning Experts Programme

(REP). Qualiying criteria now placed a greateremphasis on relevant work experience as

opposed to qualiications which required

applicants to have a degree in a relevant

eld. Diploma holders with a minimum o 10

years o overseas work experience can qualiy

or the REP i they have relevant industryexperience in sectors under the National Key

Economic Areas (NKEA).

Source: Bernama, 12 April 2011

Increase in the Statutory

Reserve Requirement (SRR)Ratio

Bank Negara Malaysia recently announced the

increase in the Statutory Reserve Requirement

(SRR) Ratio rom 2.00% to 3.00%, eective

rom 16 May 2011 as a pre-emptive measure

to manage the signicant build-up o liquidity,

which may result in nancial imbalances and

create risks to nancial stability.

The SRR is an instrument to manage liquidity

and is not a signal on the stance o monetary

policy. The Overnight Policy Rate (OPR) is the

sole indicator used to signal the stance o

monetary policy, and is announced through

the Monetary Policy Statement released atereach Monetary Policy Committee meeting.

Source: Bank Negara Malaysia, 5 May 2011

Health insurance costs toincrease by more than 10%in 2011According to a Towers Watsons survey o 170

health insurers in 37 countries throughout

Asia, Arica, Europe and the Americas, the cost

o health insurance provided by employersin Asia Pacic is expected to rise in 2011 by

more than 10%. The survey also indicated

that 79% o the respondents in Asia Pacic

expected health costs to increase over the

next ve years. Taiwan is projected to lead the

rate o increase in 2011 at 17.3% compared

to Indonesias projected rate o 14.2% and

Malaysias projected rate o 9.6%. The two

leading actors cited globally or increase in

medical costs are higher costs due to new

medical technologies and overuse o care

through medical practitioners recommendingtoo many services.

Source: Towers Watson, 20 January 2011

Tremendous growth

or Islamic banking in

IndonesiaIndonesias central bank reported that Islamic

banking in Indonesia is expected to surge by

55% to IDR 155 trilion (USD17.4 billion) this

year. Mulya Siregar, Bank Indonesias Director

o Shariah nance said the orecast was based

on total assets which stood at IDR 100.26

trillion (USD11 billion) in 2010, an increase

o 47% rom the previous year. Indonesias

Islamic banks now have more than six million

customers and employ over 20,000 workers.

Islamic banking currently only accounts or

about 3.5% o the total nance sector.

Source: Islamic Finance Asia, March 2011

Malaysia aims to be the

worlds leading Islamicnance education hub

Under the Economic Transormation

Programme (ETP), the International Islamic

University Malaysia will lead an initiative to

develop and position Malaysia as one o the

worlds leading Islamic inance education

hub. The Islamic Finance and Banking

Education Cluster will pilot eorts to make the

Association or Islamic Finance Advancement

(AIFA) the main accreditation body or Islamic

nance programmes worldwide and ensure

the quality, industry relevance and global

recognition o Islamic nance education and

its related areas. The budgeted investment is

RM3.17 million with a GNI impact o RM1.2

Billion by 2020.

Source: PEMANDU, 19 April 2011

Malaysia Economic Monitor- April 2011: Brain Drain

According to the 2011 edition o the Malaysia

Economic Monitor released by the World Bank,

Malaysias economy staged a strong recovery

in 2010, with near-term growth expected to

develop avorably at 5.3 % or 2011 and 5.5

% in 2012. To succeed in becoming a high

income country, however, the report stressed

that Malaysia must accelerate structuralreorms, and promote skill-intensive growth

by developing, attracting and retaining

Market Alerts


25/32

25 Asian Link

Market Alerts

talent. To generate lasting growth, the

Monitor cautioned that Malaysia needs

aster implementation o structural reorms.

It emphasized that concrete progress has

been made in public service delivery and

project-based investment, but added that

urther eorts are needed to address thecross-cutting structural bottlenecks in the

economy with comprehensive policies.

The urgency to whole-heartedly tackle

the deep-rooted bottlenecks is real, says

Philip Schellekens, the World Banks Senior

Economist or Malaysia and lead author o the

report. Regional competition or talent, trade

and FDI has intensied. Other countries are

orging ahead with policy reorms similar to

Malaysias New Economic Model, so progress

will be measured in relative terms.

Malaysias journey to high income will also

depend on how it handles brain drainthe

emigration o high-skill human capital. The

report estimates the Malaysian diaspora

in 2010 at 1 million, with brain drain at a

third o this. By boosting productivity and

strengthening inclusiveness, Malaysia can

address the brain drain comprehensively,

says the Monitor. It recommends a revamp

o the education system, an overhaul o the

innovation eco-system, and a reorientation

o inclusiveness policies towards merit and

needpolicy thrusts that are well reected in

Malaysias transormation programmes.

Policy approaches that target the low o

talent across borders directly can complement

these comprehensive approaches, but cannot

substitute or them, the report said. Once

the enabling actors o productivity and

inclusiveness are addressed, Malaysia willneed to proactively participate in the global

competition or talent. Recent initiatives by

the Talent Corporation, such as the Residence

Pass and the Returning Experts Programme,

are welcome in this respect. Malaysia can also

engage more deeply with the diaspora. One

immediate example is to seek the diasporas

input on how to deal with brain drain.

Source: World Bank Malaysia Economic Monitor,

28 April 2011

GLOBAL

70% o worlds GDP rom

emerging markets by 2030

According to Citis Global Growth Generators

2011 report, emerging markets will represent

70% o the worlds $180 trillion GDP by 2030

compared to 52% o $73 trillion in 2010. The

report stated that strong growth is expected

in the world economy until 2050, withaverage real GDP growth rates o 4.6% pa

until 2030 and 3.8% pa between 2030 and

2050 as a result, world GDP should rise in

real PPP-adjusted terms rom 72 trillion USD

in 2010 to 380 trillion USD in 2050.

Bangladesh, China, Egypt, India, Indonesia,

Iraq, Mongolia, Nigeria, Philippines, Sri Lanka

and Vietnam have the most promising (per

capita) growth prospects these are the Global

Growth Generators (3G) countries. Malaysia

was categorized as a Hot country whereby

conditions are right or serious growth with

projected GDP growth o 5.3%, actual FDI

o $1,381 million and competitiveness score

o 4.88.0

Human capital as indicated in Citis report is

another key ingredient or generating growth.

The Programme or International Student

Assessment (PISA) 2009 results show that

Korea and Finland topped the rankings in the

survey o education perormance by country,

ollowed by Hong Kong, Singapore, Canada,

New Zealand and Japan. The municipality o

Shanghai topped the rankings once cities

are included. Besides education, relevant

indicators o human capital includes health,

ertility, and the age distribution o thepopulation.

Source: Citigroup Global Markets Inc, 21 February

2011

Uganda & Nigeria to

launch Islamic banking

Both Uganda and Nigeria is set to launch

Islamic banking operations by early 2012 and

late 2011 respectively. The Deputy Director

o commercial banking at Bank o Uganda,Grace Stuart Ndyareeba said that banks have

the option o either acquiring a local bank or

set up a new Islamic bank. Uganda, which is

changing its banking rules to allow lenders to

operate under Islamic law, is hoping to pass

the amendments by early 2012.

Central Bank o Nigeria Deputy Director,

Kingsley Moghalu, said that two or three

conventional banks have already expressed

interest in opening Islamic banks. Nigeria,

home to 75 million Muslims, has a huge

market potential.

Source: Islamic Finance Asia, March 2011


26/32

Asian Link26

Market Alerts

Qatar Central Bank toclose Islamic branches

o conventional(commercial) banks

Qatar Central Bank has recently issued specic

directives to each o the conventional banks

that have Islamic branches, directing them

to stop opening new Islamic branches,

accepting Islamic deposits and dispensing

new Islamic nance operations. As or the

Islamic branches current assets and liabilities

including deposits and nance operations,

Qatar Central Bank has given a time rame up

to December 31, 2011 to manage these assets

and liabilities by collecting the balances, inaccordance with the conditions and maturity

dates agreed upon and by paying Islamic

deposits upon maturity save with regard to

nance operations.

Ater December 31, 2011, the conventional

bank will continue to manage the remaining

Islamic assets in a special portolio, through

its inancial position, with the possibility

o transerring some o these assets to the

Islamic banks. The conventional bank can

use the premises o the Islamic branches,upon the end o the specied period, to open

conventional branches i need be.

Islamic Finance Asia reported that the aected

banks has reportedly engage in a dialogue

with Qatar Central Bank and present their

proposals to merge their Islamic units.

Three other poss ible solu tions have also

been identied. These include applying or

licenses to operate under the Qatar Financial

Centre Authority, to apply individual licenses

allowing the banks to set up standalone

instit

Asian Link Issue 3

Documents

Transcript of Asian Link Issue 3