THE DEVELOPMENT OF THE ISLAMIC FINANCE INDUSTRY

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  • The Business Magazine of the Malaysian-German Chamber of Commerce and Industry

    malaysia.ahk.de July/August 2015

    Vol 21, No.4 KDN PP 8818/3/2013

    Islamic Banking in Malaysia: Industry at Crossroads

    KT Bank AG The First Islamic Bank in Germany

    The 4Cs ofSustainability in Asia

    THE DEVELOPMENT OF THE ISLAMIC FINANCE INDUSTRY TOWARDS BUSINESS GROWTH AND NEW GEOGRAPHICAL HORIZONS

  • ECONOMICS

    FOCUS

    KT BANK AG THE FIRST ISLAMIC BANK IN GERMANY

    7FEATURE

    12

    EDUCATION AND TRAINING

    EVENTS

    GERMAN INSTITUTIONS

    MEMBERS

    TRADE FAIRS

    32363846484254

    MGCC PERSPECTIVESis published six times p. a. by theMalaysian-German Chamberof Commerce and Industry.

    PUBLISHERDatuk Muhammad Feisol bin Haji Hassan.

    It is distributed free of charge tomembers and qualified non-membersin Malaysia and abroad.

    MALAYSIAN-GERMAN CHAMBEROF COMMERCE AND INDUSTRY (171131-U)Supported by the Federal Ministry of Economic Affairs and Energy based on a resolution of the German Bundestag.

    Suite 47.1, Level 47, Menara AmbankNo. 8, Jalan Yap Kwan Seng50450 Kuala Lumpur, MalaysiaTel: 603-9235 1800Fax: 603-2072 1198homepage: malaysia.ahk.deemail: info@malaysia.ahk.de

    *All opinions expressed in articles do notnecessarily reflect the views of MGCC.

    EDITORIAL TEAMSabine FranzeCheryl Sim

    DESIGNED BYETC CREATIVE Sdn BhdA-11-07, Tower A, Menara PrimaJalan PJU 1/39, Dataran Prima47301 Petaling JayaSelangor, Malaysia

    PRINTED BYPercetakan Zanders Sdn BhdNo. 16, Jalan BK 1/11, Bandar Kinrara 147180 Puchong, Selangor

    CONTENTS

    The Corporate Leviathan by Jayanthi Desan

    TOWARDS BUSINESS GROWTH AND NEW GEOGRAPHICAL HORIZONS

    ISLAMIC BANKING IN MALAYSIA: INDUSTRY AT CROSSROADS

    THE JOURNEY OF MALAYSIAS ISLAMIC FINANCE INDUSTRYSOCIAL MARKET ECONOMY & DEMOCRACY WORLDWIDE THE CASE OF MUSLIM DOMINATED COUNTRIES

    THE PRINCIPAL HUB INCENTIVE, MALAYSIA

    CSR COLUMN22 THE 4CS OF SUSTAINABILITY IN ASIA

    THE DEVELOPMENT OF THE ISLAMIC FINANCE INDUSTRY

    24LEGAL & INVESTMENT

    MEETING TODAYS SUPPLY CHAIN TRENDS AND CHALLENGES PT. 2

    A BRIEF CONVERSATION WITH RAVINDRAN ADVOCATES & SOLICITORSMALAYSIAN INSOLVENCY LAW

  • No Room for LegaciesAbout Dynamics and Moving Forward

    EDITORIAL

    BOARD OF DIRECTORS

    THOMAS ZIMMERLEPresident

    P. KANDIAHTreasurer

    DATO ROBERT TEO KENG TUANVice President

    ALEXANDER STEDTFELDExecutive Director

    DATUK MUHAMMAD FEISOL HJ. HASSAN

    FRANCIS LEE

    IR. LEE SWEE ENG

    LIM KHIANG HUA

    MARTIN METZGER

    PETER LENHARDT

    PETER ZUBER

    PHILIPP KERSTING

    ROLAND FOLGER

    WENDY LAU

    WOLFGANG LAABS

    4

    Over the past years, the Chamber has continuously expanded the range of services in response to the growing interest of German companies in the Southeast Asian market. We are now able to serve the enterprises during the complete timeline of their commitment in Malaysia with our experienced and motivated team, especially companies from the so called German Mittelstand (small and medium sized enterprises).

    In addition, MGCC has established itself in the past few years in some strategic areas. These include corporate social responsibility (CSR), environmental technologies, renewable energies and energy efficiency as well as vocational training. The engagement is based on business opportunities as well as on improvements of framework conditions for international supply chains or the development of talents. My personal highlight is the development of a dual vocational training in accordance with German standards in industrial and logistics management which went into its second year in June 2015. With a similar programme in mechatronics set to start in August/September 2015, we will extend our engagement in the technical area. Special thanks go out to the companies, which pioneer the programme, as well as to the Malaysian government, whose support we are enjoying, and the training institutes willing to adapt their training concepts to the dual approach.

    Looking towards the future, we are encouraged by the long-standing attractiveness of Malaysia as a business location for German companies. Next year Behn Meyer will celebrate their 125th anniversary in the country. Many other companies can look back upon many decades of successful engagement in Malaysia. Among them are a large number of small and medium-sized companies. Over the past 10 years we have observed a trend where low-cost manufacturing strategies were replaced by policies to establish a market-access base in South-East Asia, acknowledging the dynamics and opportunities of the region and complementing it by building up service, innovation and training capacities.

    To fully unlock the potential is, however, not solely in the hands of the private sector. Open markets require political decisions and drivers. The ten member states of the Association of South-East Asian Nations have laid down their intentions in the framework of the ASEAN Economic Community (AEC) 2015 coming into force at the end of this year. We are very much aware that AEC 2015 is work in progress and that we cannot expect a fully integrated market on 1 January 2016. With regard to the free movement of goods the AEC 2015 is well on the way towards a single market. However, the harmonisation of standards, norms and administrative procedures, the mutual recognition of registrations and licenses or the free choice of the country of employment at least for skilled workers and university graduates still require considerable efforts.

    The Chamber will continue its dialogue with the Malaysian government on continuously improving the framework for doing business here and advise our members and clients on business opportunities and how to take advantage of them. The choice of topic for this issue also reflects our sensitivity for business areas, which might not easily come to the mind of a German entrepreneur and which extends beyond Islamic banking to all aspects of halal.

    For me it is now time to say farewell. When you are reading these lines I will have taken up a new assignment at the Federal Ministry of Economic Affairs and Energy in Berlin. I do so with the good feeling that the dynamics of the Chamber is ensured by an able and engaged team which will move things forward under the helm and in the good hands of my successor, Mr Daniel Bernbeck.

    Terima kasih and Auf Wiedersehen.

    YBHG TAN SRI DATO G.S. GILL

    Alexander StedtfeldExecutive Director,

    Malaysian-German Chamber of Commerce and Industry

  • Mr Alexander StedtfeldWe greatly value your commitment and contribution

    to the Chamber for the past 7 years. We wish you best of luck and

    success in your future endeavours and a good start in Berlin!

    Suitable for the occasion, in their weekly Business Leader Column where readers get a rare opportunity

    to get some insight into the life and experiences of a business leader on a more personal level, SUNBIZ recently

    published an interview featuring the views and thoughts of our Alexander Stedtfeld.

    ThomasLee Huang

    SabinePeck Fah

    VeeniMichelle

    SurayahSaparinSherena

    SharifudinMiriamKatja

    ShekilaFairuzSelina

    PatriciaJohannaCarmen

    VictoriaRavannia

    JaclynMageswary

    YasminCheryl

    WiphaJennyJosef

    CathrinIvy

    Heartfelt appreciation from all of us at MGCC:

    Thank you!

  • 7FOCUSFOCUS

    The Development of the Islamic Finance Industry

    In the past five years, the global Islamic finance industry has undergone solid growth, recording a 17.3% Compounded Annual Growth Rate (CAGR) between 2009 and 20141. Today, total global financial assets of the Islamic financial industry is estimated to be more than USD2tln2. Beyond these headline numbers, the industry has experienced transformative changes, which supports the overarching goal of Islamic finance as a more inclusive and equitable financial system. The evolution of regulations related to Islamic finance and the ensuing product innovation have boosted Islamic financial institutions (IFIs) ability to serve the economy through Shariah-compliant instruments.

    Several key themes that have emerged at global level aspire greater drive for the industry to expand its frontiers and tap into new business and geographical horizons. Of importance, the growth in Islamic finance has attracted the attention of the conventional banking industry and non-OIC countries to tap into this growing market. The interest of conventional institutions in Islamic finance is part of its testament on its universal appeal and propositions, especially to tap wider investor and consumer base. Furthermore, ongoing efforts are being intensified at improving and harmonising standards on regulatory, prudential, accounting, legal and human capital matters setting the stage for a more cohesive and sustainable Islamic financial industry in the future.

    MARKET BREADTH AND DEPTH: EVOLUTION AND PERFORMANCEThese IFIs were mainly home-grown and were supported by localised demand for Islamic finance, and mostly regulated under laws which had been designed for the conventional finance industry. Meanwhile, regulations governing the IFIs were conducted on needed basis, and geared towards domestic institutions only; most institutions dealing with cross-border or global Islamic finance standards only started to gain traction in the late 1990s onwards.

    Heartfelt appreciation from all of us at MGCC: Having begun as a nascent sector in the 1970s that predominantly focused on Shariah-compliant banking systems, today Islamic finance is a complete financial system of its own that includes capital market products and services such as Isl