Bankers bullish about economy


ONCE again our CEO Outlook 2004 for today focuses on the bankers, people who are best positioned to feel the pulse of the economy. 

They are Dr Rozali Mohamed Ali of Bumiputra-Commerce Bank Bhd (BCB), Zarir J. Cama of HSBC Bank Malaysia Bhd, and Shayne Nelson of Standard Chartered Bank Malaysia Bhd. 

Unassuming to the point of being slightly self-deprecating, Rozali, a professional banker, has steered the BCB group to greater heights and respectability. The group made a shrewd move by buying majority control of a medium-sized Indonesian bank, PT Bank Niaga, giving it a strategic foothold in a neighbouring country whose economic potential is hardly realised. 

Rozali wants to remove the general perception of BCB being a Malay bank. Getting away from stereotypes is what the current BCB TV ads are all about. He wants the bank to be a leader in consumer and SMI lending. 

Easy-going, but at times impatient for results, Cama is a lover of heritage, arts and culture. He is strong into conservation and books. He is a strong promoter of Islamic banking. 

Nelson, a West Australian, has been in banking for the past 25 years and comes to StanChart Malaysia from Hong Kong where he was chief risk officer for wholesale banking, a job which involved travelling to over 50 countries. He is a strong believer in feng shui

Cama and Nelson represent the two largest foreign banks in the country and both are bullish about the economic outlook. 

“The Malaysian economy is in good hands and things have started to look up,'' says Cama. 

Adds Nelson: “I believe Malaysia has the potential to be one of South-East Asia's star performers in the coming decade.” 

DR ROZALI MOHAMED ALI 

Chief executive officer/managing director  

Bumiputra-Commerce Bank Bhd

 

 

Challenges and prospects for Malaysia's economy in 2004? 

A major challenge that the economy will face in the coming year is how to compete effectively in the changing economic landscape, given the increasing liberalisation of trade and services. Within the region, the number of bilateral free trade agreements signed by individual countries with their major trading partners has been on the rise. 

To further strengthen the position of the economy and ensure long-term sustainable growth, foreign direct investment (FDI) remains important. Efforts must continue to be directed towards enhancing efficiency and improving corporate governance. 

Internally, concerted efforts need to be made to strengthen domestic capability and increase efficiency of both public and private sectors. Small- and medium-scale enterprises (SMEs) need to be strengthened and developed further to ensure that they can compete effectively in the internationally liberalised market environment. 

 

Outlook for the financial sector next year? 

The consolidation of the banking sector has put domestic banking institutions on a stronger footing in terms of capitalisation and asset size. Over the past few years, we have seen banking institutions undertake capability and capacity building measures and this is expected to continue as we advance into the second phase of the Financial Sector Masterplan, where we can expect stiffer competition from all players. 

Banks should benefit from the better prospects for the global and domestic economies in 2004. We expect the industry to be robust in terms of business opportunities and loan growth. We foresee good loan demand from the SME and consumer segments with a continuing low interest rate regime and higher confidence of both businesses and consumers. 

Notwithstanding the improving economic environment, banks must continue with their initiatives to improve cost efficiencies. We will expect to see positive results of the outsourcing programmes initiated previously. 

 

Focus of your company/group in 2004? 

With the better economic prospects for 2004, our focus is to continue to grow our businesses, especially in the growth and emerging sectors. The SME sector will continue to be a key focus area, as we foresee tremendous opportunities in this sector. We will continue to strengthen our consumer banking business as well, particularly in the mortgages, bancassurance and credit card areas. 

Most of the growth plans will be leveraging on the present infrastructure while fine-tuning the business processes as driven by a focus on customer service. 

 

Do you expect your company/group to do better or worse in 2004, compared with 2003? Why? 

We expect to perform better in 2004 in line with the growth of the economy. Apart from the positive economic outlook, we should be reaping the benefits of the investments made in technology and outsourcing programmes initiated earlier. 

Furthermore, our continued enhancement and streamlining of business processes, procedures and cost control would yield positive results, not only to us but to customers as well. 

Is China an important factor in the management of your operations? 

China is definitely the rising economic star in the Asian region. Malaysia is no longer attractive as a source of cheap labour. This means that we must offer new value-added propositions in the form of better skilled workforce and applying technology as we compete for FDI. 

In the same vein, our banking business is directly linked to our customers, in particular, the manufacturing concerns. Some of our customers have shifted their operations or business to China. Our domestic manufacturers, in particular, the SMEs may shift part if not all their production to China. 

All in all, it is clear that China is rapidly becoming an important business, investment and trading partner for Malaysians as the Asian economies continue to integrate. 

 

In your view, what should be the new Prime Minister's priorities? 

Datuk Seri Abdullah Ahmad Badawi has assumed the country’s leadership on a relatively firm foundation as both the global and domestic economies are on the way to recovery. I am sure that he will receive full support from the business community. 

Given the calmer geopolitical risks, the Prime Minister’s priority should be to focus on strengthening the domestic economy and ensuring a more balanced growth. So far, he has rightly focused on tackling the issue of corruption, which will help to improve public sector efficiency and also bolster the country’s international competitiveness. 

The Prime Minister should also make human resources development a priority, especially in enhancing the standard of education in English, mathematics and information technology. This will help address the issue of improving our skills and help the country in its transformation into a knowledge-based economy. 

Finally, it is imperative, as always, that policies are effectively and efficiently implemented. 

SHAYNE NELSON 

Chief executive officer/managing director 

Standard Chartered Bank Malaysia Bhd

 

Challenges and prospects for Malaysia's economy in 2004? 

In US dollar terms, Malaysia's economy has grown by a compounded annual growth rate (CAGR) of 6.4% for the past 10 years while per capita gross domestic product (GDP) has grown by 3.7%. During this time, exports have grown by a phenomenal 11.1% CAGR. By any comparison, these figures are impressive. 

I believe that Malaysia has the potential to be one of South-East Asia's star performers in the coming decade. Tun Dr Mahathir Mohamad, the former Prime Minister, has positioned Malaysia well not just in economic terms, but also in political terms. Let us address each in turn. 

Beyond the macro-economic performance already highlighted, Malaysia has done well at the micro-economic level. Naturally, the best example has been its ability to propel the electronics industry on to the global stage. 

And while the Multimedia Super Corridor's timing was inopportune, its vision speaks volumes for the country's intent to be a major player in the information technology (IT) revolution. But it is not just limited to this sector. The opening of the Port of Tanjung Pelepas in 2000 caused quite a stir as it started to win significant contracts. 

Of significant mention is Malaysia’s aim to become the hub for Islamic business and on top of the agenda in this regard is Malaysia's aim of being a leading provider of Islamic financial services. This is potentially a lucrative area given the amount of wealth that many Middle East countries generate through oil and trade. 

The health industry is comparable to Singapore's, and at a fraction of the cost may garner a higher share of intra- and inter-regional flows in the future. This could also benefit the tourism industry if families decide to travel with those being treated. 

Indeed, tourism has the potential to be a major GDP growth area. However, to maximise this growth, Malaysia needs to combat areas such as credit-card fraud so as to maximise the spending of visitors to this country. 

The education industry will also benefit from the country's repositioning, and the reintroduction of English as the main language for teaching science and mathematics given that this will be viewed positively. 

Prime Minister Datuk Seri Abdullah Ahmad Badawi’s continuation of the policy to attract foreign direct investment (FDI) augurs well for future investments in the country. While there has been an increased focus on domestic investment, the government is also pursuing foreign investment from international companies, which have significant technological expertise in certain sectors. Knowledge-based support services, for example, the Standard Chartered’s Global Shared Service Centre and Dell’s shared service centre, will not only propel Malaysia's economy to the next level but also create knowledge-based jobs for Malaysian graduates. 

 

Outlook for the financial sector in 2004? 

In accordance with Bank Negara’s Financial Sector Masterplan, we expect to see further consolidation in the domestic banking sector, particularly among the local players. 

In 2004, with brighter economic prospects, we expect the banking sector to perform better in terms of both profitability and credit quality. As the economy picks up, the number of default cases will correspondingly fall and this will help strengthen the overall balance sheet of the entire banking sector. 

Other major challenges I see for the industry are curtailing credit-card fraud, the capacity to sell repossessed properties (housing loans) within the current legal framework as well as risk price lending for small businesses given the current cap on interest rates. 

 

Focus of your company/group next year? 

As a group, we showed a strong developmental growth in consumer banking globally in 2003. We acquired a small equity shareholding in KorAm, which marked our first toehold into consumer banking in South Korea. 

We also acquired an Internet bank in South Africa, which also marked our strong re-entry into a market that we know quite well. In addition, we also opened an office in Afghanistan and are one of the consortiums to be awarded a trade banking licence in Iraq. 

While we aspire to be the best international bank, leading in Asia, Africa and the Middle East, this is fast becoming a reality, as we are already the biggest international bank in India, Africa and the Middle East. 

We have won several accolades, such as the recent Lafferty Awards, where we were voted the Best Retail Bank in Asia Pacific, and also voted the Most Respected Company in East Africa in an annual survey of over 240 CEOs conducted by PricewaterhhouseCoopers. 

In November, we also won two awards in this year’s FX Week global Best Bank Survey, that is, Best FX Bank in emerging Asian Currencies and Best FX Bank in emerging African/Middle East Currencies. 

In Malaysia, the exciting areas for us will be in capital markets, Islamic banking and SMI lending, consistent with the government’s policy, although we believe that SMI lending will remain a major challenge given the current cap on interest rates. 

On the trade front, we are seeing more and more intra-Asian trade happening and we are well positioned to bridge this area. With our 150 years of expertise on the ground and the extensive global network that we have, the bank is gearing itself to help Malaysian businesses define new markets and business opportunities. We believe that we are the right partner for companies with trade interests in Asia, Africa and the Middle East given our major presence in these geographies. 

 

Do you expect your company/group to do better or worse in 2004 compared with 2003? 

We are optimistic and excited about the future as we see many opportunities for growth. This growth will be underpinned by a robust economic growth in Malaysia. With a talented and energetic team in place, we are set to introduce new products and services for both consumer and wholesale banking and will continue to invest in our business in Malaysia. 

On IT alone, we are committed to invest RM100mil on enhancement features for our IT platform for the next three years. 

 

Is China an important factor in the management of your operations? 

China's economy is very influential and all the economies should think about how to compete and co-operate with China. For us as a bank, we can help Malaysian businesses and individuals in China. We are one of the largest international banks in China with seven branches and six representative offices. China, like other Asian countries, is also facing challenges with change taking place so rapidly. Asean countries should leverage on the change and work together to tap the opportunities created by such changes. Malaysia, with its historical affinity to China is in the right position to tap this potential. 

We also believe that apart from China, the growth of the Indian market should not be ignored. The Indian market is also significant and I believe that Malaysian companies should leverage on the current strong political ties that we have with India to forge strong trade and investment links. 

 

What should Prime Minister Datuk Seri Abdullah Badawi’s priorities be? 

I believe that Datuk Seri Abdullah Badawi’s first priority will be to secure a majority victory for Umno in the parliamentary elections, which I think, will be held early next year. Other priorities, I think, will be to ensure that investor confidence is maintained in spite of the changeover in leadership. And on this, the Prime Minister has done well in reassuring the international community that key economic policies like the ringgit peg will remain, and that his government is pro-business. 

Certainly, the Prime Minister’s war on corruption and his efforts to deliver an efficient civil service, will go a long way towards attracting foreign direct investments. 

ZARIR J. CAMA 

Deputy chairman and CEO 

HSBC Bank (M) Bhd

 

Challenges and prospects for Malaysia's economy in 2004? 

Malaysia's economy is in good hands and things have started to look up. The message is quite clear, with both consumer and business confidence on the upside. However, we feel that there is a need to generate more growth from the strong domestic sector, which will be expected to drive the economy despite a still volatile external environment. 

At the same time, external demand is improving, albeit gradually. Malaysia, like much of the rest of Asia, is faced with a relatively weak external demand outlook, whereby the sluggish US/EU demand is being offset by China’s growth. The combination of the government’s supportive yet overall prudent fiscal policy direction, buoyant consumer demand and being a net exporter of key commodities (especially crude oil and palm oil) have helped to sustain positive quarterly gross domestic product growth in the last 18 months. 

The key is in sustaining strong domestic demand apart from public spending which will be the major challenge. 

At the same time, increasing competitiveness of exports is also important, not just in price, but also going up the value chain in terms of improving product quality and sophistication. 

 

Outlook for the financial sector next year? 

The restructuring of the local domestic banking scene has certainly been accomplished with great success, transforming the once fragmented banking sector into a stronger, consolidated industry. Local banks are now poised to offer a much wider range of banking products and yet, at the same time, we see that competition will remain intense but still rational. As to whether there will be another round of consolidation, we believe that it will be influenced by market needs. 

The results show that the parallel development of Islamic financing comprising banking, insurance (takaful) and Islamic capital markets has been highly successful. We foresee more onshore players coming into the picture. Going forward, we see more emphasis on Islamic banking products for both individuals and corporates, as well as more depth and reach of Islamic finance. The government will continue to lead the way in setting new benchmarks and new financial structures for the capital market on the Islamic side. 

We hope there will be a broader pick-up in demand for credit, especially from the small- and medium-scale enterprise (SME) sector, which is one of our key focus areas. Benign inflation and ample liquidity in the system will likely point to a stable interest rate outlook which will remain positive for consumption, investments and overall credit demand. 

 

Focus of your company/ group in 2004? 

The HSBC group will focus on organic growth in key customer segments: personal financial services, commercial banking, corporate and institutional banking, private banking and consumer finance. Likewise, here in Malaysia our plan will be to continue to build on our solid base, especially in the consumer sector and, at the same time, expand our footprint particularly in the commercial and corporate banking arena. 

There will be a strong thrust into Islamic finance as it is a core business for the group. In Malaysia, we will enhance our expertise by working more closely with our Amanah Finance colleagues globally to leverage and gear up on our product development and product innovation. 

As always, management of costs is crucial to our business and we will need to ensure that we have a proper handle on this issue. Efficiency will be key to our efforts and resources will be put in where required to enhance our delivery capability. 

 

Do you expect your company/group to do better or worse in 2004, compared with 2003? Why? 

We have a robust platform for growth, excellent market perception of us and our brand awareness is strong. We will leverage these fully to our advantage and continue investing in our businesses to optimise profit. The restructuring process has been positive for the banking industry, and obviously it will be more competitive in the near future. We look forward to this competition. 

We will continue to maintain good loan growth from the corporate sector, personal financial services and a stronger thrust to our credit card business in line with our group strategy. 

 

Is China an important factor in the management of your operations? 

China is both a target market and an export-processing centre. With a fast-developing heavily populated economy, China is seen as an attractive end-market for the products of some of our customers. Also, China has become the 'final assembly' export point for a lot of products manufactured by our customers. We want to leverage on the HSBC group's expertise in China to support our customers to play a part in their success in China in both scenarios. 

At the macro level, we believe Malaysia has been able to maintain its share of exports to major markets, when one takes into account the export into China as well. 

Given that China effectively replaces the region as key exporter to the major economies, it is important to assess how well the Asian economies fare in terms of trade with China. For example, almost every Asian country lost market share to China in terms of exports into the major economies (such as United States, European Union and Japan), but among non-China Asian countries, some countries (Malaysia included) did much better than the rest in terms of market share of exports to China. 

 

In your view, what should be the new Prime Minister's priorities? 

First of all, we are very positive on what the Prime Minister has said and done so far. 

In particular, we like his emphasis on promoting the need for an efficient and clean civil service, and also eliminating bureaucratic red tape. Ultimately, this means an effective reduction in cost of doing business in Malaysia. His swift action to 'normalise' the government's payment cycle to contractors/suppliers, whereby RM3.6bil of 'overdue payments' were settled promptly, is one such example, and which will have a positive, wider impact on the economy also. 

His emphasis on a more transparent government and increasing meritocracy is also well received. From a macro point of view, this should optimise the efficient allocation of resources within the country, which is ever more important in an increasingly globalised world. 

In short, we strongly believe that his determination to carry out these subtle, yet significant changes in 'work culture' and emphasis on meritocracy will enhance the public's confidence and trust in government. We believe investor confidence, both domestic and foreign, will return very quickly and naturally. 

Electronics giants home in on lifestyle: Jiro Tomotani of Panasonic (M) Sdn Bhd, Rajah Kumar of Philips (M) Sdn Bhd, and Kazuo Suyama of Sony (M) Sdn Bhd

Views from CEOs of port operators: Tan Sri G. Gnanalingam of Westport Malaysia, Basheer Hassan Abdul Kader of Northport (M) Bhd, Datuk Mohd Sidik Shaik Osman of Pelabuhan Tanjong Pelepas, and Datuk Ahmad Ibnihajar of Penang Port Sdn Bhd.

Views from scions of prominent families: Datuk Nazir Razak of CIMB, Datuk Lee Oi Han of Kuala Lumpur Kepong Bhd (KLK) and Carl Bek-Nielsen of United Plantations Bhd.

Views from property CEOs: Tan Sri Mustapha Kamal of MK Land Bhd, Datuk Seri Liew Kee Sin of S.P. Setia Bhd and Datuk Jeffrey Ng of Asia Pacific.

Views from banking CEOs: Tan Sri Teh Hong Piow, chairman of Public Bank Bhd, Datuk Amirsham A. Aziz, president and CEO of Maybank group, and Piyush Gupta, head of Citigroup in Malaysia.

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