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Country Commercial Guides FY 1999: Malaysia

CHAPTER VIII: TRADE AND PROJECT FINANCING

The government has taken a number of preemptive measures to
strengthen Malaysia's banking system, which has come under increasing
stress since the onset of the regional financial crisis in mid-1997.
As of late 1997, the banking sector included 35 commercial banks,
39 finance companies, 13 merchant banks and 7 discount houses.
Total banking system assets were US$279 billion, and the banking
system remains the largest financial intermediary in the country,
accounting for almost 73% of total assets of the financial system.
Three U.S. banks have operations in Malaysia: Bank of America,
Citibank, and Chase Manhattan. Citibank operates branches in both
Kuala Lumpur and Penang. Malaysia also has an offshore banking
center on the island of Labuan where 51 offshore banks maintained
offices as of mid-1997. Most Malaysian banks have correspondent
relationships with banks in the United States. A list of major
Malaysian commercial banks can be found in Chapter XI of this report.

Exports to Malaysia may be financed through letters of credit
issued to importers by banks in Malaysia.

Finance is readily available on the domestic market to Malaysian
importers. There are no foreign exchange controls which would
impede trade. The Malaysian Ringgit is freely convertible except
for Israeli, Serbian and Montenegran currency. All payments to
nonresidents for any purpose are freely permitted, subject only
to the completion of a simple form for remittances of more than RM
10,000 (US$2500). No permission is required from the Controller
of the Currency for a company to maintain inter-company accounts
with associate companies, branches, or other companies outside
Malaysia.

In addition to the Malaysian banking sector, exports to Malaysia
can be supported by the U.S. ExportImport Bank (EXIMBANK), which
can provide direct or intermediary loans, loan guarantees to enable
a foreign buyer to secure private credit, loan guarantees to a
private creditor to provide working capital to an exporter, and
insurance policies for exporters to eliminate both political and
commercial risk of repayment by foreign purchasers.

Export financing is also available through the U.S. Small
Business Administration, which provides regular business loans,
a revolving export line of credit, joint guarantees with the
EXIMBANK, investment company financing, long-term asset financing,
and international trade loans to compete, export, and develop
export markets. For exporters of agricultural products, the U.S.
Department of Agriculture Market Promotion Program has been used
to promote export market development efforts in Malaysia.

While EXIM and SBA financing has not been used extensively
in the past, this is due to change as the financial crisis in
Southeast Asia persists.

In the past, major infrastructure projects have been funded
by a variety of means, including Malaysian government funds, the
domestic capital markets, banks and investment funds like the
Employee Provident Fund, international consortia, and supplier
credits. In the case of the new Kuala Lumpur International Airport
(KLIA), for example, the Japanese Government made available a
long term soft loan of US$600 million through the Overseas Economic
Cooperation Fund. However, given the current credit crunch and
depressed stock market, major projects are likely to be funded
through alternative means in the future, e.g., foreign direct
investment, various debt and/or equity instruments, asset sales
and securitization, etc.

[end of document]

Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title 17, United States Code.

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