[13804]
August 3, 2001
TO: INTERNATIONAL COMMITTEE No. 48-01
RE: MALAYSIA ANNOUNCES INTENDED LIBERALIZATION OF ASSET
MANAGEMENT INDUSTRY
Earlier this year, the Malaysian Securities Commission published its “Capital Markets
Masterplan.” The CMM sets forth six key objectives and 152 specific recommendations
intended to liberalize and improve the Malaysian capital markets.
The CMM includes 18 recommendations relating to investment management, three of
which may be particularly relevant to Institute members:
• Recommendation 93: The management of investment funds should be further
deregulated to allow for greater international portfolio diversification. Malaysian
unit trusts (mutual funds) have been permitted since 1997 to invest a portion of their
assets in non-Malaysian securities. This recommendation, among other things,
would permit funds that invest primarily outside Malaysia to be offered to Malaysian
investors.
• Recommendation 100: Restrictions on the management of funds by foreign fund
management companies (FFMCs) will be liberalized. In particular, Recommendation
100 would allow all FFMCs, whether joint ventures with Malaysian firms or wholly-
foreign owned, to manage Malaysia’s Employees Pension Fund assets.1 This would
be a significant change, since under the current regime, only joint venture FFMCs are
permitted to manage locally-sourced assets. The liberalization of the restrictions on
FFMCs managing assets sourced in Malaysia has been an Institute priority for some
time.2
• Recommendation 101: Foreign ownership requirements will be liberalized to allow
foreign majority ownership of unit trust management companies (UTMCs) from
2003. Currently, foreign ownership of UTMCs cannot exceed 30%.
1 The EPF is Malaysia’s state-supported pension scheme. As of the end of 1999, the EPF had assets of approximately
157 billion ringgit ($41.32 billion). By comparison, the asset management and unit trust companies managed about 49
billion ringgit ($12.9 billion) as of the end of 1999.
2 See Memorandum to International Committee No. 21-00, dated July 7, 2000.
2The CMM also includes a number of recommendations relating to the improvement of
corporate governance in Malaysia, including measures to bolster minority shareholder rights3
and the availability and integrity of corporate disclosure.4
The full text of the CMM is available on the Security Commission’s web site,
www.sc.com.my. The recommendations can be found in Chapter 4 of the CMM.
Robert C. Grohowski
Associate Counsel
3 See Recommendations 110 and 111.
4 See Recommendations 111 and 114-117.