KUALA LUMPUR: The American Malaysian Chamber of Commerce (AmCham) has raised concerns over Bank Negara Malaysia’s rulings on foreign exchange announced earlier this month.
In a December 13 letter to International Trade and Industry Minister Datuk Seri Mustapa Mohamed, the trade body said the central bank measures might have implications beyond the immediate intended impact, namely casting “a negative pall on the business environment in Malaysia”.
“Malaysia is an important part of the global supply chain for many of our members. We seek to ensure that the country continues to be so and benefit from such an important role,” said AmCham executive director Siobhan Das in the letter.
AmCham comprises nearly 800 members representing more than 350 American, Malaysian and other international companies.
Das said 70 AmCham members met with Bank Negara officials on December 7 to present key issues and proposals.
“AmCham highlighted to Bank Negara that most transactions for exporters are predominantly in US dollar and up to 90 per cent of receivables in foreign currencies are kept in foreign banks. AmCham believes that restrictive policies should be applied to speculators and not long-term exporters who have invested in Malaysia for decades,” she said.
Since the meeting, Bank Negara has announced some adjustments to the measures to facilitate this transition.
However, issues that remain include exposure to possible litigation and sharp spike in compliance costs on the part of companies and financial institutions.
“AmCham seeks an exemption of the electrical and electronics industry and for those in the export zones supporting what constitutes a sector that represents 44.4 per cent of total manufactured exports, contributing around 18 per cent to Malaysia’s gross domestic product,” said Das.
Describing the United States multinationals’ reaction to the measures as “still anxious”, she said AmCham wished for Malaysia to continue to be a place that businesses were attracted to and where investments had a long-term future.
“However, the many questions that remain unanswered that pertain to the longevity of such policy and the impact to businesses from increased risk of litigation, increased costs to implement and complex administration upheaval are impacting the confidence of international investors on Malaysia’s regulatory environment.”
Amcham is seeking the minister’s support to foster greater consultation for businesses to air their concerns ahead of such policy announcements.
It also suggests that sufficient provision be made for multinational corporations to comply.
“Providing more time to comply prevents shocks to the system, projects more reliability and allows Malaysia to be more attractive strategically in the global context,” added Das.
Proposals submitted to central bank
Issue 1: Export proceeds and foreign currency accounts
American Malaysian Chamber of Commerce (AmCham) proposes that 100 per cent of export proceeds be retained in foreign currency and exporters be allowed to maintain offshore foreign currency accounts with overseas banks.
Issue 2: Payment in foreign currencies between residents
AmCham proposes all sales and payment between export zone companies be allowed in foreign currency, and companies be allowed to honour contractual obligations and avoid litigation.
Issue 3: Hedging without documentary evidence and hedging flexibilities, and prudential threshold at 25 per cent
AmCham proposes that hedging limit for export zones be equal to value of annual sales without need for further documentation. Dynamic hedging should be equal to annual sales, not limited to RM6 million. It also proposes a longer time frame for hedging, up to two years, which will enable favourable investment decisions to be made. It also calls for existing forward positions to continue even above 25 per cent.
Issue 4: Trade and Investment foreign currency account
AmCham proposes minimising inefficiencies in maintaining two accounts and exempting bank guarantees and corporate credit card from being considered as a borrowing.