Tun Razak Exchange will broaden and deepen Malaysia's capital markets
FINANCIAL hubs are a focal point not just for raising capital, but for the creation of quality jobs and expertise. They are, thus, attractive and necessary propositions for boosting the economy. Singapore, for example, serves the Southeast Asian region. Nevertheless, as a city state, its size could become a limiting factor. Based on a recent survey in the McKinsey Quarterly, financial institutions expect cities to be able to primarily deliver on "a rational legal-regulatory framework; an attractive, sustainable local economy; and, a stable political environment". Secondarily, local attributes attracting investors include a "highly developed infrastructure; a strategic geographic location; and, a good quality of life". Granted, the island nation satisfies most of the criteria. But its hinterland economies will eventually grow large and sophisticated enough to be able to develop their own capital markets and no longer require that financial services be obtained offshore.
If there are still detractors for the development of the Kuala Lumpur International Financial District (KLIFD), now called the Tun Razak Exchange (TRX), therefore, they had best rethink their negativity. For, there are several factors that make Malaysia a potentially bigger and more significant regional financial centre, which must then be exploited as part of the Economic Transformation Programme focused on driving the economy to high-income status by 2020. Indeed, the government of Datuk Seri Najib Razak is intent on ensuring the success of TRX, which is expected to leverage on an expanding conventional and Islamic financial services industry. Today, the Islamic sector is valued globally at US$1 trillion (RM3.1 trillion). Other financial centres, such as London and Singapore, have got in on the act. Being a market leader with first-mover advantage in the sector, Malaysia can hope to increase its share currently standing at US$400 billion exponentially with the support of TRX.
While the technology infrastructure is designed to cope with future advances, what will be equally valuable is the ecological friendliness that will characterise the 28.3ha development fronting Jalan Tun Razak lying broadly on Jalan Imbi. A truly garden city, where cars are scarce and promenades dominate, KLIFD will be the futuristic city combining commerce, information and communication technology, and beauty: the three basics of good modern living. Furthermore, as the Swiss model of secret bank accounts is no longer acceptable banking practice, the rules governing conduct in KLIFD must surely rest on transparency and free capital flows, two fundamental must-haves for a financial centre. Another is the continuing prudential regulation that had kept Malaysia honest and the lack of which had caused today's financial mess in many developed countries.