Zeti: Interest rate level still apt

  • Business
  • Tuesday, 29 Jan 2008

KUALA LUMPUR: Malaysia's interest rate is still at an appropriate level and supportive of the economy, says Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz. 

The government “is not unduly concerned about the current global economic situation as it has wide ranging policy measures to put in place if needed”, she said. 

Datuk Azizan Abdul Rahman

Zeti said as the country was in a stronger position, it had better capacity to deal with slower growth in the external environment. 

“If the large economies were to slip into a severe recession, the global economy will be affected. 

“But we believe Asian economies in particular have a high degree of resilience because we are now experiencing favourable growth for quite an extended period of time,” she said after unveiling the rebranding of Labuan International Offshore Financial Centre to Labuan International Business and Financial Centre (Labuan IBFC) yesterday. 

While the central bank feels the interest rate of 3.5% is appropriate, the monetary policy meeting today will decide if the rate will be maintained. 

Zeti said it would take into account the underlying trend and outlook. 

“We are not having any major issues except rising prices that mainly emanate from rising cost and this is something we have to address, perhaps not by interest rates but other policies. 

“So, we have to look very carefully at how we address the issue of rising costs and there are several measures that can be taken. The government has set up a committee, Bank Negara is part of it and we will examine all this,” she added. 

Meanwhile, Labuan IBFC intends to shore up its presence among countries in the Asia-Pacific region. 

Labuan Offshore Financial Services Authority (Lofsa) director-general Datuk Azizan Abdul Rahman said Labuan IBFC would take on a larger and broader role and was looking at areas such as marketing, tax structure, legal framework and structure promotion to make Labuan visible. 

“In each of these areas, we have various recommendations,” he said. 

Azizan added that Lofsa was targeting to attract companies from China, India and Middle East. 

Moving forward, a number of programmes would be initiated, said Zeti, who is also Lofsa chairman. 

“Labuan IBFC aspires to be the 'gold standard for holding company jurisdiction', which has been identified as a business driver. 

“Malaysia's extensive tax treaty network with over 63 countries and the introduction of a more flexible tax framework supports this initiative,” she said. 

Zeti said revision of pricing structure pertaining to incorporation and maintenance fee charges would further enhance Labuan IBFC's competitiveness. 

“It will also leverage on the Malaysian Islamic Financial Centre strategy by promoting syariah-compliant trusts and foundation, which will complement Islamic financial products and services already available in Kuala Lumpur. 

“Efforts will also be taken to develop Labuan's captive insurance business, which has enjoyed commendable growth over the years,” she added.

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