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 MALAYSIA’S 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 TODAY’S 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 Islamic securitised assets (sukuk), Islamic equities, Islamic investment funds, and also Islamic insurance services (takaful). Apart from existing key Islamic financial markets in the likes of Malaysia and the GCC, the industry’s growth gained stronger footing in parts of Asia such as Turkey, Pakistan and Bangladesh; and African countries namely Kenya, South Africa and Nigeria. Furthermore, advanced economies such as the UK, Hong Kong, Singapore and Germany have seen increased activity in Islamic finance in recent years. At present, the top Islamic finance jurisdictions by assets are Malaysia and Saudi Arabia. Other important markets include the UAE, Kuwait and Qatar, as well as the highly-populous domicile of Indonesia. In Islamic funds, key financial centres such Jersey, Luxembourg and the US are home to a significant share of funds. More recently, the industry has transformed into a more cohesive and competitive system. Of significance, the rapid growth of Islamic finance between 2009 and 2014 (post crisis period) has been characterized by a deeper and more comprehensive industry, a widening investor and issuer base, improving industry infrastructure (including regulatory developments) and more cross-border activity. The global Islamic finance industry is gradually emerging as an important component supporting international economic and financial linkages. Islamic financing facilities are increasingly being used to fund various transactions including cross-border trade financing, national infrastructural and developmental projects, supporting the international halal trade industry and also facilitating foreign direct and portfolio investments.

1 KFH Research, February 20152 KFH Research, February 2015

– Towards Business Growth and New Geographical Horizons

a greater role in the mobilisation of funds for environment friendly projects and infrastructure projects while addressing industry needs for better liquidity management and capitalisation of IFIs.

The global primary sukuk market has witnessed several new and innovative sukuk in recent times. Amongst these are sukuk with perpetual tenures and Basel III-compliant sukuk. The increasing popularity of perpetual sukuk reflects confidence in the sukuk market as a long-term source of funds for key economic projects.To date, sukuk with indefinite tenures have been issued by the financial sector in the UAE, and the transportation and real estate sectors in Malaysia. On another note, more Islamic banks are turning towards issuing Basel III compliant sukuk instruments in order to satisfy the revised capital standards. Since the issuance of the world’s first Basel III compliant sukuk in November 2012, Islamic banks in countries including the United Arab Emirates (UAE), Saudi Arabia and Malaysia have issued such innovative sukuk instruments. Overall, the global sukuk market is rapidly expanding its horizons, and sukuk are increasingly becoming an attractive source of alternative fund raising instruments. To date, a total of 30 jurisdictions have issued sukuk instruments (excluding offshore jurisdictions), and this number is expected to grow further based on recent success in new markets including South Africa, Senegal, Hong Kong and Luxembourg.

Meanwhile, the size of the global sukuk outstanding in the market has more than doubled in the past five years, from USD123.2bln in 2009 to USD300.9bln as at end-20143. A robust secondary market enables more trading activity for secondary sukuk, and the greater tradability of sukuk will further improve the cost competitiveness of the instrument as a means to raise financing. Malaysia continued to lead the secondary sukuk market, with USD172.8bln outstanding amount as at end-2014, followed by Saudi Arabia at USD50.4 bln. In terms of growth, Qatar and Indonesia recorded CAGRs of 55.6% and 41.2% (from a relatively modest base) in sukuk outstanding in the past five years4, supported mainly sovereign issuers and issuances of infrastructure-related sukuk.

A DEEPER AND MORE COMPREHENSIVE INDUSTRYThe Islamic banking market has reached greater depth, as evidenced by rapidly growing market share vis-à-vis conventional institutions. In some of the more advanced Islamic finance jurisdictions, Islamic banking is set to gradually take the lead as the main banking sector such as Saudi Arabia (where it represents 52% of the domestic system’s banking assets) and Kuwait (45%). Similarly, Islamic banking is rapidly gaining market share Bangladesh, Malaysia and Qatar (17%, 22% and 25% respectively). These figures are encouraging, and suggest that in countries with a large Muslim population, solid Islamic finance infrastructure and intensifying competition amongst IFIs, Islamic finance is likely to increase its market share in the domestic financial system. In countries with predominantly non-Muslim populations, Islamic finance offers opportunities for corporates and SMEs, in part due to its ethical value propositions.

Product innovation in Islamic banking has been steadily progressing since the 1970s. In the early days, the Shariah-compliant banking sector offered mainly “plain vanilla” products such as basic deposit and financing services for retail clients. In the 1990s, Islamic banking expanded into more retail products while serving the corporate sector as well. The turning point for Islamic banking occurred sometime in the 2000s, when the existence of bigger banks and clearer regulations supported its expansion into wealth management, trade financing, structured products, and many other new products. Similarly, other key Islamic finance segments such as sukuk, funds and takaful had also expanded significantly in this decade. In recent years, Islamic finance, including banking, has played

Source: KHF Research database.

Source: Central banks, annual reports, KFH Research.*DFI assets are included for Malaysia’s Islamic banking share

Source: MIFC Insights on “Innovations Drive Expansion of Global Islamic Finance Industry”.

Total Islamic Finance Assets (2009 – 2018E)

Top Islamic Banking Jurisdictions:Assets* (LHS) and Market Share (RHS)(end-2013)

Total global financial assets of the Islamic financial industry is estimated to be more than USD2tln and characterised by:i. Deeper and more comprehensive industry;ii. Widening investor and issuer base;iii. Increased cross-border activity; andiv. Improving industry infrastructure (including regulatory development).

2,500

300

Assets (LHS) Share of domestic banking system (RHS)

60.0%

1970/1980s• Introduction of Islamic banks offering basic deposit and financing services.

1990s• Improvements in banking services to expand into newer retail and corporate banking segments.• Introduction of Islamic capital markets with listing of Islamic equity indices, introduction of Islamic funds and the issuance of first corporate sukuk in Malaysia by Shell.

2000s• Expansion of Islamic banking into various areas including wealth management, trade financing structured products, investment banking, hedging instruments and corporate financial solutions.• A full-array of Islamic capital market instruments in place including equities, Islamic bonds and asset management.• Takaful sector increasingly becoming focus of regulators to spur growth and innovation in the segment.

2010s• Islamic finance as an ethical financial system bridging the gap with the real sector and potentially contributing towards global financial stability.• Islamic finance new growth opportunities in: – Environment-Friendly Projects – Shariah-Complaint Risk Management – Addressing Liquidity and Capitalisation of IFIs – Infrastructure Projects

250 50.0%

1,500

150 30.0%

2,000

200 40.0%

USD

(bln

s)U

SD (b

lns)

% s

hare

1,000

100 20.0%

500

50 10.0%

0

0 0.0%

2009 2010 2011 2012 2013 2014E

2,124Sa

udi A

rabi

a

Kuw

ait

Qat

ar

Bahr

ain

Indo

nesia

Bang

lade

sh

Paki

stan

Turk

ey

Mal

aysia

UA

E

51.7%

25.6%

17.8%

45.5%

23.9%

5.7%12.1%

4.9%

19.0%9.6%

3 KFH Research, February 20154 KFH Research, February 2015

8 FOCUS

Islamic Finance Innovations and Developments(1970s - present)

Africa, Nigeria, Turkey and Maldives. The debut issuances by these domiciles are mainly from sovereign issuers, who set a benchmark to pave the way for future issuers from government-related entities and the private sector.

Apart from a more diversified country base, the sukuk market has seen more issuers from different sectors, especially in the leading markets of Malaysia and Saudi Arabia. Globally, the main issuer of sukuk are sovereigns as well as large infrastructure-building companies in power and utilities, telecommunications and transportation. The Malaysian market has also attracted issuers from smaller but important sectors such as healthcare and education. In Saudi Arabia, a USD133.3mln sukuk issued by retail conglomerate Fawaz Alhokair Group marked a significant foray by the sector into the sukuk market. Similarly, halal food producer Al Marai of Saudi Arabi has also been active in the sukuk market – the halal market represents a relatively untapped opportunity as sukuk issuances would support end-to-end Shariah compliance of the budding industry’s operations.

On another note, the sukuk market has attracted a wider investor base for key sukuk issuances, especially for those denominated in key global currencies such as the USD, and for sukuk issued by established and highly-rated entities which are new to the sukuk market such as the debut sukuk by Hong Kong. GCC issuers tend to issue large infrastructure-related sukuk in USD, listed in major financial exchanges such as in London, Ireland and Luxembourg – allowing greater access to international investors. Elsewhere, the Hong Kong sukuk had attracted almost 20% of investors from the US and Europe.

INCREASED CROSS-BORDER ACTIVITYInternational transactions in Islamic finance have intensified in recent years, supported by clearer regulations, established IFIs venturing abroad, multilateral support and the attractiveness of key Islamic finance jurisdictions. In the Islamic banking sector, for example, several large GCC IFIs such as Al-Rajhi Bank of Saudi Arabia and Kuwait Finance House of Kuwait have set up operations in Malaysia, Turkey and Pakistan. An Islamic bank of Bahrain has established a presence in many countries including Jordan, Tunisia, Sudan, Turkey, Bahrain, Egypt, Algeria, Pakistan, South Africa, Lebanon, Syria, Iraq and Saudi Arabia8. The proliferation of large and international IFIs in these domiciles creates healthy competition amid greater transfers of expertise. In this regard, support from multilaterals such as the IFSB has been imperative to allow more cross-border transactions to take place; for example, the work of IFSB takes into account Islamic finance operations dual-banking system, which is the norm for these jurisdictions.

9FOCUSFOCUS

5 Towers Watson6 KFH Research, February 20157 Swiss Re, KFH Research, February 20158 Bank’s website

Source: IFIS, Zawya, Bloomberg, KFH Research.

Source: IFIS, Zawya, Bloomberg, KFH Research.

Source: IFIS, Zawya, Bloomberg, KFH Research.

Global Sukuk Outstanding (2009 – 2014)

Sukuk Outstanding in Seleted Jurisdictions (2009 and 2014)

Sukuk Issuance by Country (2014)

350.00

200

300.00

180

200.00

140

250.00

160

USD

(bln

)U

SD (b

ln)

150.00

120

100.00

100

50.00

80

60

40

20

–

0

2009

Malaysia Saudi Arabia Indonesia Qatar UAE

123.16

300.89

2010 2011 2012 2013 2014

In the Islamic fund management industry, an ongoing innovation include mechanism to improve returns through the introduction of Shariah-compliant “Smart Beta” strategies. The Smart Beta strategy became popular in the past three years, spurred by a desire to diversify investment strategies in a challenging post-crisis environment. Broadly, it involves weighting the investment portfolio against fundamental business metrics such as sales, earning, book value and other indicators, as opposed to weights based on market capitalization5. These performance-based weights are seen as a better gauge of returns, and is in line with one of the main tenets of Islamic finance – which is to support real activity. For investors, the diversification of investment strategies is likely to support better returns.

Meanwhile, total gross takaful contributions are expected to increase around USD26bln at end-20156. In the takaful sector, Waqf-based takaful models have become more commonplace, involving the utilization of a redistributive instrument to operate a profit-sharing entity. This model is a workable example that may resolve certain Shariah issues in pure Mudharabah and Wakalah arrangements (for example, those concerning ownership); and has been applied successfully in Malaysia, Pakistan and South Africa7. In Pakistan, for example, all takaful companies operate on the basis of a Wakalah-Waqf hybrid model. Participants’ contributions to the Waqf fund are invested in safe Shariah-compliant investments and returns are used for the benefit of the participants.

A WIDENING ISSUER AND INVESTOR BASEThe growth of Islamic finance activity has been supported by increasing participation from a wide range of investors. This is particularly evident in the sukuk market, where sukuk issuances in 2014 were from 19 different countries. This represents a doubling of the sukuk issuer base by country, as only 10 countries had issued sukuk in 2009. New entrants to the sukuk market in the past five years include the UK, Hong Kong, Senegal, Luxembourg, South

2009 2014

Bahrain5.3%

Brunei65.6%

Gambia3.5%

Hong Kong9.9%

Indonesia3.5%

Luxembourg4.8%

Malaysia2.0%

Mauritius4.5%

Maldives0.8%

10 FOCUS

Recent developments in key European financial markets represent promising potentials for the Islamic finance industry to gain deeper traction in Europe. Historically, Islamic finance has progressed gradually in Europe since its initiation in the early 1980s. The momentum has picked up post global financial crisis in view of Islamic finance’s sustained growth and increasing global traction. The development of Islamic finance has been beneficial for multiple stakeholders, both within and outside of the region. As such the offering of Islamic banking products and services in Europe has made it possible for the Muslim population and the halal sector in the region to resort to Shariah-compliant financial services.

Although the overall magnitude of Islamic finance is still limited and fragmented, Islamic banking and Islamic funds sectors have made considerable progress in the region. Particularly, in recent years, Islamic funds have been gaining greater interest, and several European financial centres have taken a number of steps to facilitate the sector. The sukuk market has also stepped into the limelight recently owing to debut sovereign issuances by the UK – which earned the spot of the first non-Islamic sovereign sukuk issuer in the world – and Luxembourg. The sukuks by these countries have been welcomed by the global Islamic finance community.

The share of Europe as a region in global Islamic finance assets remains marginal. As of 1H14, the regional Islamic banking assets (excluding those under Islamic non-banking institutions) accounted for just 0.5% of the global Islamic total11. Islamic funds domiciled in European jurisdictions fared slightly better, cumulatively holding USD14.4bln in assets as of 15 December 2014 and accounting for 20% of the Shariah-compliant assets under management worldwide12. On another more positive note, last year was notable for the European sukuk scene, with the debut sovereign sukuk issuances from the United Kingdom (UK) and Luxembourg.

ISLAMIC FUNDS IN EUROPE: STEADY GROWTHIslamic funds domiciled in Europe held approximately USD14.4bln in assets under management (AuM) as at 15 December 201413. This accounted for about 20% of the global aggregate Shariah-compliant AuM, up from 12% in 2012. Generally, the appeal of European domiciles for fund managers lies in the attractive combination of tax benefits, regulatory sophistication and operational efficiency. For the benefit of Islamic fund managers, the financial regulators in a number of European states – from Ireland to France to Malta – have also issued guidelines facilitating the registration of Shariah-compliant investment schemes in their territories.

The formation of the International Islamic Liquidity Management Corporation (IILM) aimed to facilitate effective cross-border Islamic liquidity management. The sukuk launched by the IILM are considered important milestones in facilitating cross-border finance flows amongst jurisdictions where Islamic banks operate. Collectively, the various coordinated efforts and expanding bilateral relationships between Islamic finance practising countries are serving as a catalyst for expanding the outreach and growth of the Islamic finance sector.

EUROPE: A RISING OPPORTUNITY FOR ISLAMIC FINANCEIn Europe, interest in Islamic finance has been reignited following monumental sovereign sukuk issuances by the UK and Luxembourg in 2014. The Islamic financial sector in Europe, although small in size, has promising potentials to gain traction given the fast expanding bilateral ties between European countries and Islamic financial hubs of the GCC and Malaysia. Of particular interest is the symbiotic relationship between Malaysia and the UK. In year 2012, the countries agreed to double bilateral trade to GBP8bln (MYR43bln) by 20169, and investors from both sides are keen to continue exploring economic and financial opportunities. The UK’s growing interest in Islamic finance is expected to significantly complement the two jurisdictions’ existing economic and financial linkages including facilitating business transactions through Shariah-compliant means.

The prospects of the Islamic finance industry in Europe are broadly positive and expected to be reinforced partly by a modest economic recovery of the Eurozone and the greater European Union (EU). Reduction in fiscal drag, accommodative monetary policy and improving lending conditions may help sustain recent gains in the European economic recovery process. Recent data prints have allowed the GDP growth forecast for 2016 to rise slightly. Greatly reduced tail risks have buoyed financial markets, with marked compression in sovereign yield spreads in some economies. Domestic demand in the Eurozone has stabilised, with net exports also contributing positively. The EU is estimated to have expanded 1.3% in 2014, while the Eurozone might have grown 0.8%10. For 2016, the EU and the Eurozone are projected to expand 2.1% and 1.9% respectively.

Cross-border Activity in Islamic Finance

Source: KFH Research, February 2015.

Source: European Commission.

Source: Zawya, Bloomberg, Eurekahedge, KFH Research.

Europe: Real GDP Growth (2013 - 2016F)

European Islamic Fund Assets by Domicile(15 December 2014)

European Union Eurozone Germany ItalyIreland LuxembourgFrance UK9 Office of The Prime Minister of Malaysia10 European Commission11 KFH Research12 KFH Research13 KFH Research

y-o-

y, %

11FOCUSFOCUS

THE ROAD AHEADIslamic finance has come a long way from its beginnings in the 1960s. The industry has recorded double digit growth rates in all four segments, and has expanded to several geographical regions – including in the non-OIC countries. More importantly, the recent expansion of the industry in the last five years have been more meaningful, and marks the transformation of Islamic finance into a more competitive and resilient industry. Reflecting the growth and depth of the industry, Islamic finance has attracted a widening investor and issuer base, as well as more cross-border financial transactions. These development were well-supported by improvements in the industry’s infrastructure, as regulatory developments continued to keep pace with industry and market demands.

Going forward, the industry is expected to expand beyond the USD3tln mark by 201815 and continue to evolve as an increasingly significant part of the global financial system. The growing participation of non-traditional Islamic finance domiciles in the US, Europe and East Asia will spur greater interest and innovation in Shariah-compliant financial services. The next five years will likely be marked by continued transformation of Islamic finance to better serve real economic activity in the global sphere.

SUKUK MARKET IN EUROPE: GROWING INTERESTEurope’s very first sukuk programme was launched in 2004, through a German federal state of Saxony-Anhalt. The following year, the UK issued the region’s first corporate sukuk. In 2010, Europe’s second corporate sukuk also came from the UK. The successive corporate issuances of sukuk in Europe originated from France, Germany, the UK and Luxembourg. In 2014, the UK and Luxembourg entered the Islamic capital market with highly anticipated debut sovereign sukuk issuances. These took the outstanding sukuk amount 112.2% up from end-2013 to USD719.9mln as of 3Q2014, which accounted for approximately 0.24% of the global sukuk outstanding figure14. We expect a gradual growth in the number of sukuk issuances coming out of Europe in the next few years, especially from European corporates that may follow in the footsteps of sovereign issuers and also because of European investors’ rising appetite for alternative investment opportunities.

ISLAMIC FINANCE OUTLOOK IN EUROPE: OPPORTUNITIES FOR MALAYSIA AND EUROPEOverall, the economic and financial characteristics of the European region enable several key growth areas for Islamic financial players across the region, including: (1) growing trade and financial linkages between the EU and the Organisation of Islamic Cooperation (OIC) countries; (2) increasing preferences for ethical financial solutions in the EU; (3) growing interest in developing the halal food business sector in Europe; (4) need for an alternative pool of liquid funds in the aftermath of the economic difficulties in the conventional finance markets in recent years; and (5) increasing governmental support for the Islamic financial sector in various European jurisdictions. Since the inception of the Islamic finance industry, a number of countries across the European continent have implemented initiatives aimed at facilitating the inroad of the alternative Shariah- compliant financial activities. Several regulatory authorities in Europe have also forged linkages via cooperation agreements with key Islamic finance jurisdictions such as Bahrain, Malaysia, Qatar and the United Arab Emirates. Aside from regulators, private sector organisations, including industry associations and professional training institutions, have started exploring Islamic financial business opportunities, including cross border ventures.

Following London’s hosting of the World Islamic Economic Forum (WIEF) in October 2013, the Global Islamic Finance and Investment Group (GIFIG) was established, with the aim of identifying key global opportunities and challenges facing Islamic finance and using its knowledge and expertise to create a global Islamic finance market that supports growth and prosperity. The group includes ministers, central bank governors, regulators and heads of major Islamic financial institutions. The GIFIG’s inaugural meeting was held in London in March 2014 and most recently in Kuala Lumpur in February 2015. The structure of the EU single market system is capable of spurring the future expansion of Islamic finance businesses.

Source: Malaysia International Islamic Financial Centre (2015). The Sustainable Financial System – An Evolutionary Journey (accessed via http://www.mifc.com/).

Malaysia International Islamic Financial Centre (2015). Europe: A Rising Opportunity for Islamic Finance (accessed via http://www.mifc.com/).

Mudzaffar Abu Bakar, Bank Islam (2010). Seminar on Islamic Finance, Broad Distinction between Islamic and Conventional Banking (accessed via http://www.bankislam.com.my/en/Documents/shariah/BroadDistinctionBetweenIslamicConventional.pdf ).

14KFH Research15KFH Research, February 2015

Source: IFIS, Zawya, KFH Research.

Europe: Historical Trend of Sukuk Issuances

700

600

400

500

USD

mln

300

200

100

02004

123

9.97 31.59 46.5

632.02

257.6

2005 2010 2012 2013 3Q14

Islamic Banks VS Conventional BanksIslamic Banks Conventional Banks

The functions and operating modes of Islamic banks are based on the principles of Islamic Shariah.

1

2

3

4

5

6

7

8

9

11

12

10

It promotes risk sharing between provider of capital (investor) and the user of funds (entrepreneur).

In the modern Islamic banking system, it has become one of the service-oriented functions of the Islamic banks to be a Zakat Collection Centre and they also pay out their Zakat.

Participation in partnership business is the fundamental function of the Islamic banks. Understanding the venture is therefore essential. Embedded know-your-customer orientation.

Islamic banks have no provision to charge any extra money from the defaulters except for compensation (typically such proceeds is given to charity). Rebates early settlement at the Bank’s discretion.

Due importance to the public interest/ maslahah. Its ultimate aim is to ensure growth with equity.

Since it shares profit and loss, the Islamic banks pay greater attention to developing project appraisal and evaluations.

Greater emphasis on the viability of the projects.

The status of Islamic bank in relation to its clients is that of partners, investors and trader, buyer and seller.

Islamic bank can only guarantee deposits for deposit account, which is based on the principle of al-wadiah, thus the depositors are guaranteed repayment of their funds, however if the account is based on the mudharabah concept, client have to share in a loss position.

For the Islamic banks, it must be based on a Shariah approved underlying transaction.

It also aims at maximizing profit but subject to Shariah restrictions.

The functions and operating modes of conventional banks are based on fully manmade principles (largely capitalism theory).

The investor/lender is guaranteed of a predetermined rate of interest or returns.

It does not deal with Zakat.

Lending money and getting it back with compounding interest is the fundamental function of the conventional banks. Money is a commodity and the motivation.

It can charge additional money (penalty and compounded interest) in case of defaulters.

Often, lenders/banks interest become the forefront. It makes no effort to ensure growth with equity.

Since income from the advances/loans is fixed, it gives little importance to developing expertise in project appraisal and evaluations. Risks are transferable at a price (and sometimes incremental).

The conventional banks give greater emphasis on creditworthiness of the clients where credit equals to ‘commodity pricing’.

Relationship is often defined as that of creditor-debtor.

A conventional bank has to guarantee all its deposits.

For interest-based commercial banks, borrowing from the money market is relatively easier.

Unrestricted profit maximisation illustrated by derivatives trading.

Islamic Banking in Malaysia: Industry at Crossroadsby Prof Emeritus Datuk Dr Mohamed Ariff, INCEIF

As is well known, Islamic banking operations are driven by the shari’ah which defines the nature and character of the deposits mobilised and financing provided. Islam prohibits interest (riba) and permits trade (tijara). Accordingly, profits in Islamic banking operations are derived from the contract of trade (al-bai’), unlike the conventional banks’ profits which are derived largely from interest-bearing loans. In Islam, it is business risk taking, and not financial risk taking, that forms the basis for profits. The al-bai’ principle is manifested by an exchange of money with an underlying asset, whereas a contract of interest-bearing loan entails an exchange of money for more money.

What legitimises profit in Islam is risk taking (ghorm), effort (kasb) and responsibility (daman). The shari’ah objective (maqasid al-shari’ah) plays a critical role in determining the legality of Islamic transactions, as it insists that all transactions must have positive impacts on general welfare. Seen in this context, there is much more to Islamic banking than the prohibition of riba. Other prohibitions include ambiguity (gharar), gambling (maisir), and bribery (rishwa). All transactions must be transparent based on mutual consent with offer and acceptance (ijab and qabul) being free from duress (ikroh).

Put in a nutshell, real sector connectivity and risk sharing distinguish Islamic banking from conventional banking. In Islamic banking, all financial transactions must relate to the real economy with no space for ‘financialisation’ or financing for the sake of financing. In the Islamic paradigm, the financial sector is inextricably linked to the real sector of the economy, which means that the financial sector would not exist on its own. In other words, in the Islamic order, the financial sector primarily functions as the facilitator for the real sector.

While Islamic banks have demonstrated that they are indeed different from their conventional counterparts, there are

tensions between theory and practice of Islamic banking. This may be attributed to the perception that the Islamic products are no different from the conventional ones, going not only by the strong resemblence between the two but also by the prices charged for the products. According to the Law of One Price, two products bearing the same risk profile must assume the same pricing.

The crux of the problem lies in the fact that Islamic bank products are modelled after existing conventional bank products. For every conventional product there is a corresponding Islamic substitute with shari’ah compliance. Islamic banks offer ‘differentiated’ products by simply adopting conventional risk and return profile, subject to shari’ah constraints. Thus, the products offered by Islamic banks, in the first stage of evolution, are very similar but not identical to that of conventional banks.

It is envisaged that Islamic banks, in the second stage, would move away from ‘differentiated’ (shari’ah-compliant) to distinctly ‘different’ or ‘dissimilar’ (shari’ah-based) products that will have no bearings on the current conventional products. The third stage is a visionary one that would unveil innovative ‘home grown’ products based on research and development (R&D)

Malaysia is playing an iconic role in Islamic banking, having been a pioneer in the beginning and a frontrunner in the global arena at present. Malaysia has come a long way since the first Islamic bank was established in the country in 1983. There are now five wholesome Islamic banks, local and foreign, and eleven Islamic subsidiary banks owned by conventional banks, local and foreign.

12 FEATURE

13FEATURE

efforts. To embrace this mature stage, Islamic banks will have to leap into a new development trajectory, with risk and reward sharing modes of financing in sync with the lofty Islamic ideals.

It took several centuries for conventional banking to evolve into what it is today. Islamic banking has a long way to go before it can reach its pinnacle. For now, even after four decades, Islamic banking is still in the initial stage of product differentiation. All indications are that Islamic banks are likely to remain stuck in this infant stage for a much longer period than previously thought, given the current trends in the banking industry.

The history of Islamic banking in Malaysia is chequered with several development phases. It started off with a single wholesome Islamic bank enjoying an enviable ‘monopoly’ position devoid of competitive pressures. The second phase witnessed the emergence of Islamic ‘windows’ in many conventional banks, amidst concerns that funds might get mixed up in ‘common kitchens’. In the third phase, more wholesome Islamic banks, both domestic and foreign, appeared on the scene. Finally, in the fourth phase, conventional banks’ Islamic windows were replaced by full-blown Islamic subsidiaries, both local and foreign, rendering the ‘common kitchen’ concern a non-issue, although one may still argue that the sharing of facilities by conventional parents and their Islamic subsidiaries is tantamount to using ‘common utensils’.

The banking industry in the country is currently dominated by conventional banks, with Islamic banks accounting for roughly one-fifith. Islamic banks established as subsidiaries of conventional banks outnumber wholesome Islamic banks. Clearly, there has been no level playing field. For conventional banks could do what Islamic banks could (through their Islamic subsidiaries or windows), while Islamic banks understandably cannot do what conventional banks can (by design). For instance, it is unimaginable for a wholesome Islamic bank to own conventional subsidiaries or windows.

Conventional banks continue to play a predominant role in the Malaysian economy, despite losing some market share to Islamic banks. The share of conventional banking in total deposits has declined from 92.5% in 2007 to 80.4% in 2012, while its share of total financing has also fallen from 93.4% to 78.0% between 2007 and 2012. But, their

Islamic subsidiaries have taken up much of the slack, as the latter’s share of the Islamic banking industry assets has grown from 48.7% in 2007 to 79.5% in 2012. Islamic subsidiaries of conventional banks accounted for 77.2% of Islamic deposits and 83.1% of Islamic financing in 2012.

The share of Islamic subsidiaries of conventional banks in total bank deposits has risen sharply from 3.8% in 2007 to 16.4% in 2012, while that of wholesome Islamic banks has increased only marginally from 3.8% to 4.8%. Likewise, the latter’s share in total bank financing/loans has risen only incerementally from 3.2% to 3.7% between 2007 and 2012, while that of the Islamic subsidiaries of conventional banks has jumped from 3.4% to 23.7% during the same period.

Evidently, the wholesome Islamic banks pale in comparison. Their market share of the Islamic banking business has declined steadily over the years. Their share of total Islamic deposits has fallen from 53.4% to 22.8% between 2007 and 2012, while their share of Islamic financing has also shrunk from 48.9% to 16.9%. In terms of total Islamic banking assets, the share of wholesome Islamic banks has also fallen from 51.8% in 2007 to 20.3% in 2012.

With conventional banks having an overwhelming stronghold as stakeholders in the Islamic banking industry, the chances are that Islamic banks owned by conventional banks will continute to copy their prarents’ products with shari’ah compliance. The wholesome Islamic banks, which compete with the conventional banks and their Islamic subsidiaries, are likely to simply follow suit. While there may be nothing objectionable about all this from the shari’ah point of view, the ensuing fixation on shari’ah compliance is likely to scuttle the industry’s commitments to climb up the value-added chain. All this means that Islamic banks may stay focused on producing ‘shari’ah-compliant’ products rather than ‘shari’ah-based’ products.

Nonetheless, one would still wonder if the Islamic banks owned by conventional banks are as zealous or passionate about Islamic principles as the wholesome Islamic banks. It is a moot question who would take the lead in propelling the Islamic banking industry to the next levels: the former or the latter? They can do it together only if they equally share the zeal. If not, the onus will fall squarely on wholesome Islamic banks, but the pertinent question then would be whether they can call the shots when they are hugely outnumbered.

That said, one must not lose sight of the huge contributions conventional banks have made to the development of Islamic banking industry. In the mid-eighties, when the outreach of Bank Islam Malaysia was limited by its small branch network, the conventional banks’ Islamic windows were able to take the Islamic banking facility to every nook and corner of the country, thanks to their extensive branch networks. The conventional banks’ interest in Islamic banking, for whatever reasons, was then a boon to the fledging Islamic banking industry. Going foward, one may wonder if the strong involvement of conventional banks in the Islamic banking industry would constrain its advancement.

As mentioned earlier, real sector connenctivity and risk sharing are the hallmarks of Islamic banking. The current Islamic banking products are mirror images of conventional products, shari’ah compliance being the main differentiator. While real sector connenctivity is manifest in all these products, there is much controversy over tawarruq munazam, a substitute for the conventional personal loan facility, as its real sector connectivity is dubious, where commodities are bought and sold on the spot, not for profit but for the sole purpose of securing a bank loan.

There is very little risk-sharing activity going on currently in the Islamic banking fraternity as Islamic banks have been acting in a risk-averting manner. Contrary to the notion that risk sharing forms the bedrock of Islamic finance, musharakah (profit and loss sharing) plays an extremely insignificant role in the portfolio of Islamic banks. The problem lies on both supply and demand sides. On the supply side, Islamic banks are wary of high risks associated with the musharakah mode, while credible clients on the demand side find musharakah a costlier option as the cost of equity capital is much higher than that of borrowed capital, and hence the preference for bank loans instead.

To be sure, the productsof Islamic subsidiaries of

conventional banks are no less ‘Islamic’ than that of wholesome

Islamic banks, as all of them adhere to the stringent shari’ah

requirements and they are all subject to uncompromising

oversights.

would meet customer needs at competitive prices, and this will empover them to distance themselves from conventional banking.

If Islamic banks can sell a ‘better’ product, there is no reason why they should not charge a ‘higher’ price, as the customers would not mind paying a bit more for a better product, what more if these banks can sell better products at lower prices. We will not be able to see the best of Islamic finance unless and until Islamic banks are able to leapfrog from a compliance mode to an innovative one.

At the same time, if they can cut costs through efficiency gains, they should also be able to share these with their clients in the form of better returns and lower costs. Conceivably, there may come a time when there will be Islamic banks with specialisations, such as Murabaha Banks, Mudarabah Banks, Musharakah Banks, etc. This way, Islamic banks may well create a ‘new’ market of their own without having to compete with their conventional counterparts. Under this scenario, competition with conventional banks, to say the least, would be indirect, not head-on.

Therefore, only high-risk firms with questionable credentials would seek musharakah arrangements, and hence the high risk premium associated with such systematic risks.

Islamic banks face an identity crisis. Nowadays, the term ‘lenders’ and ‘financiers’ are used interchangeably, although there is a difference: all lenders are financiers, but not all financiers are lenders. Islamic banks do not ‘lend’ but do provide ‘financing’. All this begs the question: if Islamic banks are not ‘lenders’, need they identify themselves as ‘banks’ in the first place? Viewed in this perspective, the term ‘Islamic bank’ is arguably a misnomer if not an oxymoron. By associating with the banking (i.e. lending) business, Islamic banks may have unwittingly boxed themselves into the conventional banking mindset.

The above identity has led unfortunately to unintended consequences. The perception that Islamic banks are not really different from conventional banks stems from the fact that (a) Islamic bank products closely resemble conventional bank products, (b) Islamic banks follow conventional bank benchmarks in product pricing and (c) Islamic banks behave like conventional banks with hardly any risk sharing. Notwithstanding the confusion all this may have caused among the clientele, Islamic banks in reality are very different from conventional banks.

The sceptic has doubts about the purity of some Islamic bank products but is willing to tag along, assuming that things will improve over time. The pragmatist is unsure of the purity of Islamic bank products but willing to give the benefit of the doubt on the ground that sin, if any, would fall on the financier and not the customer. The opportunist is either indifferent or agnostic, subscribing to the view that riba refers to usury and not bank interest, and would switch freely from one to the other depending on costs and returns.

One would expect that there will be more and more ‘loyalists’ and fewer and fewer ‘sceptics’ as Islamic banks transcend to the next level and beyond. The fact that Islamic banking is stuck in the first stage of product differentiation for four decades suggests that Islamic banks are either complacent or caught in what may be dubbed as the ‘shari’ah compliance trap’. To break out of the impasse, Islamic banks should first cease to be under the shadow of conventional banking, which means that they must set their own standards, norms, best practices and benchmarks instead of following the conventional peers’.

Anecdotal evidence suggests that Islamic banks are competing with conventional banks rather than among themselves. This ‘head-on competition’ with conventional banks may have led Islamic banks to concentrate on Islamic substitutes (with shari’ah compliance) for conventional products and follow the conventional benchmarks in product pricing. Thus, the returns on deposits and financing costs of Islamic banks are strikingly similar to that of conventional banks.

The ‘head-on’ strategy would enable Islamic banks to target at wider audiences, comprising both Muslim and non-Muslim, while it forces them to be on par with conventional banks in terms of ease of access, product mix and competitive pricing. This option, however, places Islamic banks at a huge scale disadvantage vis-a-vis their conventional couterparts in terms of economies of scale and scope and at the risk of being boxed into the ‘shari’ah compliance’ mould.

In contrast, the ‘niche market’ strategy would take Islamic banks closer to meeting specific Islamic needs by targeting primarily customers who care most about shari’ah rulings. The focus of Islamic banks would then be squarely on the Muslim clientele, meeting their basic banking needs and venturing into sophisticated areas, such as asset development and wealth management. The niche market approach can still be inclusive enough to appeal to the non-Muslims who care for the ethical content.

The niche market strategy implies that Islamic banks will compete less and less with conventional banks and more and more among themselves. This reorientation will compel them to come up with innovative shari’ah-based products that

Prof Emeritus Datuk Dr Mohamed Ariff

Abdul Kareem is Professor of Economics and

Governance at INCEIF. He is also Distinguished

Fellow at Malaysian Institute of Economic

Research (MIER) where he was Executive

Director between 1997 and 2009. He received

his PhD in International Economics from

University of Lancaster, UK (1970).

14 FEATURE

The Islamic banking clientelemay be classified, based on casual empiricism, into four categories:

the loyalists, the sceptics, the pragmatists and the opportunists. The loyalist accepts Islamic bank

products with no questions or qualms.

15FEATURE 15

KT Bank AG – The First Islamic Bank in Germany

Q: KT Bank AG is the first fully operational Islamic Bank in Germany since the 1st of July 2015. What drove KT Bank AG to set up an Islamic Bank in Germany?There is huge potential for Islamic banking

in the Eurozone. We decided to start

operations in Germany, as with a population

of 4.3 million Muslims, Germany is potentially

Islamic banking model in Germany and in

the Eurozone. The KT Bank AG is thus a

deposit credit institution according to

German law and member of the

„Entschädigungseinrichtung deutscher

Banken GmbH (EdB)“ which secures

deposits up to EUR 100,000. In July 2015, KT

Bank AG started transactions and fully-

fledged banking services in its Mannheim/

Frankfurt and Berlin branches with a start-up

capital of 45 million Euro, targeting a

potential customer base of more than 4

million Muslims and millions of clients

interested in ethical banking.

Q: According to a news report, Islamic Banking is growing faster in Britain and France than in many Islamic countries in the Middle East and Asia. What will drive demand for Islamic Banking in Germany? How does Islamic Banking benefit businesses in comparison with conventional banking?Only 5% of Muslims in Germany use Islamic

Banking products yet. In total, we estimate a

potential client base of 200,000 households.

Any country in the Eurozone is a potential

market for Islamic Banking, as our interest-

free Islamic banking model is a valuable

enhancement of the conventional banking

industry. An Islamic bank like the KT Bank AG

is perceived that its products and services

are targeted to Muslims only; yet we cater

for all religions and to every customer. We

appreciate customers from all religions,

backgrounds or nationalities as long as they

can identify themselves with our Islamic

value system, which is represented in our

banking approach. The bank operates like a

trader that buys goods and sells them with a

profit margin, participates in projects and

their success. We create real values through

our asset-backed investment approach. Our

mission is based on an ethical business

model with Islamic values. Our ethical

criteria for exclusion are, among others: the

prohibition of investing in the production of

alcohol and its distribution, in prostitution,

the biggest market for Islamic Finance in

Europe, commercial and retail. Net incomes

of Muslim households are currently less

than the income of German households but

estimated to rise in the future, and Muslims

also have a remarkable savings rate of

nearly double the national average – 18%

compared to 10%. The majority of Muslims

in Germany are comparatively young, three

out of four are between 14 and 49 years old.

Besides, 41% of the Turkish Muslims in

Germany consider themselves to be very

religious which makes them a potential

target group for Islamic Finance products.

Q: The Islamic Banking sector is considered the fastest growing segment in the global financial system. Britain and France opened their doors to Islamic Bank years back. Why did KT Bank AG choose to start now in Germany?We are not completely new in the German

market – we did our research on the market

potential in Germany since many years. We

are now starting our fully-fledged banking

services after years of pioneering work in the

German market. In fact, in 2004, our mother

company Kuveyt Türk Katılım Bankası A.Ş.

opened our German operation with a

representation office in Mannheim. Ever

since, the bank has been pioneering in

informing the German market about the

ethical and socially responsible Islamic

banking system. In 2010, a successful market

entry in Germany was accomplished after

acquiring the third-state deposit mediation

license. In October 2012, Kuveyt Türk Katılım

Bankası A.Ş. applied at the BaFin, the Federal

Financial Supervisory Authority, for a full

banking license. In March 2015, Kuveyt Türk

obtained its license to provide fully-fledged

banking services in Germany according to

the interest-free Islamic banking principles

and under the name of KT Bank AG. KT Bank

AG is the first Islamic bank that has been

fully licensed to operate its deposit and loan

business in Germany. With this license, KT

Bank AG is the pioneer that introduced the

Mr Kemal Ozan, Chairman of the Management Board of KT Bank AG.

Although the Islamic finance industry has been growing rapidly around the globe, it has been slow to gain a foothold in Europe. In March this year, Kuveyt Türk, the largest bank in Turkey has successfully obtained its license to provide full-fledged banking services in Germany and become the pioneer that introduces interest-free banking model in Germany. KT Bank AG, the wholly owned subsidiary of Kuveyt Türk with headquarters in Frankfurt am Main has started its operation since 1st of July 2015. We invited Mr Kemal Ozan, Chairman of the Management Board of KT Bank AG to share the journey of the bank to set its foot in the second largest Muslim community in Europe.

16 FEATURE

in the tobacco industry, in pornography, in

the arms industry as well as in the pork

meat industry. We don’t speculate and

don’t invest in overindebted companies.

Our non-Muslim customers are attracted

by the SRI (Socially Responsible Investment)

edge that we as an Islamic bank provide.

Also, in the case of our German market

entry, there were no regulatory provisions

which would prohibit or intentionally

prevent Islamic financing products. It took

us a long, pioneering time to establish our

business model within the existing

regulatory framework. We have assumed a

pioneering role in providing information

about the ethical and socially responsible

Islamic banking system in the German

market and we were very well supported by

the relevant authorities in Germany. It was a

joint, sustainable effort and very challenging

throughout all these years.

Q: How do you see the future of Islamic Banking Industry in Germany? Will you consider opening more branches in other European countries as well? We started our operations in 3 German

cities: in Mannheim, in Berlin and in

Frankfurt. All 3 cities have strong Muslim

communities. Berlin is the capital and

Frankfurt is the financial capital of

Germany, so it made total sense to start

our operations from these 3 bases. This

year, we also plan to open a branch in

Cologne, as North-Rhine Westfalia also

has a huge Muslim population. We are

also planning for branches in 8 - 10 major

German cities in total and a network of

regional corner branches with 1 - 2 service

staff and cutting-edge service terminals.

After stabilising our German expansion, we

plan to move into other highly interesting

markets in the Eurozone, like the Netherlands

and France.

Q: Islamic banking is considered new for the German community. What are the strategies to promote Islamic Banking services in Germany?When we announced that we have been

licensed by the Federal Financial Supervisory

Authority (BaFin) to offer full-scale banking

services in Germany in March 2015, the

media feedback was massive. It became clear

that the ethical components of Islamic

banking carrying Islamic values, which are

universal values, hit the nerve of the German

public immensely. As Islamic bank, we are

thus one of the ethical banks which are

coming into focus of the general European

public more and more. Our message is:

We are very client-focused, service-oriented,

technology-savvy and offer a comprehensive

portfolio of very interesting products.

17FEATURE 17

The Journey of Malaysia’s Islamic Finance Industry

Malaysia’s Islamic financial industry has been in existence for more than 30 years.

It all began in 1963 when an institution called Perbadanan Wang Simpanan Bakal-

Since then, it has grown to become the market leader. The industry itself has grown tremendously well and has reached a compound annual growth rate of 10 to 15 percent.

We are now the largest Islamic bank in not just Malaysia but also in the ASEAN region, with the largest distribution network. Currently, Malaysia has a significant number of full-fledged Islamic banks including several foreign owned entities, conventional institutions who have established Islamic subsidiaries and also entities who are conducting foreign currency business. All financial institutions are given permission to conduct both ringgit and non-ringgit businesses.

Islamic finance in Malaysia has seen rapid growth thanks to the clear and conducive environment the authorities have put in place. This has resulted in a robust product innovation, a diverse group of financial institutions from across the world, a broad range of innovative Islamic investment instruments, a comprehensive financial infrastructure which adopts global regulatory and legal best practices.

Malaysia has also placed a strong emphasis on human capital development alongside the development of the Islamic financial industry to ensure the availability of Islamic finance talent. All of these value propositions have transformed Malaysia into one of the most developed Islamic banking markets in the world.

Rapid liberalisation in the Islamic finance industry, coupled with a facilitative business environment, has encouraged foreign financial institutions to make Malaysia their destination of choice to conduct Islamic banking business. This has created a diverse and growing community of local and international financial institutions.

Bakal Haji was established for Muslims going for their Hajj (pilgrimage to Mecca) to save their money for their expenses during the pilgrimage. This institution was later merged with Pejabat Urusan Haji to form Lembaga Urusan dan Tabung Haji, now known as Lembaga Tabung Haji (Haji Fund Board).

In 1983, the first Islamic bank in Malaysia was established. A decade later, commercial banks, merchant banks and finance companies were allowed to offer Islamic banking products and services under the Islamic Banking Scheme (IBS).

Maybank Group’s Islamic banking window, together with other commercial banks in the country made their debut in 1993 when the Interest Free Banking and Islamic Banking Window was launched.

Beginning 2004, the Islamic financial system in Malaysia was further liberalised and banking groups were advised to establish subsidiaries of Islamic commercial banks. This has resulted in the establishment of more Islamic financial institutions in the country, including foreign-based ones.

In 2014, the Islamic banking sector accounted for 25.6 percent of the total assets of the overall banking system, a growth of 12 per cent, at RM625.2 billion in 2014, almost doubled of RM351.2 billion in 2010.

Foreign currency assets in the sector also increased to RM27.7 billion, reflecting the growing importance of cross-border transactions in Islamic finance.

As for the Maybank Group, after operating our Islamic banking services through a window since 1993, the Group set up an Islamic banking subsidiary and Maybank Islamic Berhad commenced operations on 1 January 2008.

Mr Muzaffar Hisham, the CEO of Maybank Islamic Berhad and Head of Maybank Group Islamic Banking.

Islamic banks have been growing rapidly for years. The World Islamic Banking Competitiveness 2014 – 2015 report by E&Y shows that the assets of Islamic banks grew at an average of 17% per year between 2008 to 2012, which is two to three times faster than the rate conventional banks grew over the same period. According to Reuters, Malaysia has one of the world’s largest Islamic finance sectors and the authorities are keen to develop it further. Generally recognised as a pioneer in the Islamic banking industry, the first Islamic bank in Malaysia was established back in 1983. MGCC has conducted an interview with Mr Muzaffar Hisham, the CEO of Maybank Islamic Berhad and Head of Maybank Group Islamic Banking, to share his view of Malaysia’s Islamic finance industry.

Malaysia has put in place a great ecosystem and the international financial institutions should take advantage of this which can help propel the growth of this industry even more.

The strong growth of the Islamic bank assets was driven by a combination of both the demand and supply of the product and services Islamic Finance has to offer.

The commitment by policy makers with clear regulations has allowed the market to grow and evolve to where it is. This is in both the capital markets, eg. sukuk (Islamic bonds) and also the retail market especially the Small and Medium Enterprises (SME) market space.

The demand by the Muslim community is also rising as Islamic banking does not allow interest charges and require ethical investments. There is also a strong demand from the non-Muslims and Maybank Islamic for example is an epitome of this successful business. Half of our client base in Malaysia are non-Muslims.

As for us at Maybank Islamic, going forward, we are excited about the new Islamic Financial Service Act (IFSA) which is aimed at promoting financial stability, strengthening business conduct and fostering consumers’ interest and protection.

The development of clear guidelines from Bank Negara and the important conversations currently taking place throughout the spectrum of market actors are significant signs the industry is doing what is necessary to generate forward progress.

To this end, we have launched our Mudarabah Investment Account which is a compliance requirement arising from the IFSA and one that allows customers

the industry needs to invest in payment systems and build the infrastructure.

I also see inroad growth in other key markets like Singapore and Indonesia for Islamic Banking and Finance.

to a potentially higher and stable returns on their deposit accounts. In terms of competition, we always welcome it. Healthy competition brings out the best in us.

At Maybank Group, what we strive to do as a group is humanising financial services across Asia. Our four core values comprise providing convenient access of the banking services, fair terms and pricing to our customers, to advise based on their needs and our key differentiator, going to the heart of community. These might sound pretty straightforward but believe me, it is with these core values that have helped us to differentiate our services and products. I believe if we continue this, we can make a lot of differences in the market place.

With competition, of course, comes challenges. And looking at challenges from a wider perspective, promoting cross-border business is one of them.

In the ASEAN region, and even linking to Gulf Cooperation Council (GCC) countries, policymakers must emphasise the importance of reciprocal policy structures. For example, all regional Islamic banks should find clear rules if they want to establish their institution within another regional jurisdiction. ASEAN is the future, this is where our market will be, and a pragmatic approach to regional regulation will benefit all parties and foster the growth of Islamic Finance.

Additionally, in terms of Sharia-compliant cross-border payments, Islamic Finance is a young industry and there are challenges relating to the lack of infrastructure for these transactions. Established players, such as Maybank Islamic, can take advantage of our existing systems, but for new entrants the necessary capital investment can be quite high. Therefore,

18 FEATURE

Financial BackgroundFor the financial year ended December 31 2014, Maybank Islamic achieved a record pre-tax profit of RM1.6 billion, a commendable growth of 11.8 per cent year-on-year.

Total gross financing shows outstanding growth of 24.9% to RM108.5 billion. As a result, Maybank Islamic’s financing contribution to Maybank Group’s total Malaysia loan and financing has increased to 43.8%.

Maybank Islamic continues to sustain its leadership position, with leading market share in total assets, financing and deposits with 30.1%, 32.7% and 24.9% respectively.

On a consolidated basis, total income for Maybank Group Islamic Banking has increased to RM3.3 billion, an exceptional year-on-year growth of 16.4% with improved contribution from international markets.

20 FEATURE

Social Market Economy & Democracy Worldwide – The Case of Muslim Dominated Countriesby Thomas Volk, Konrad-Adenauer-Stiftung

The social market economy, as a specific economic and social order, is based on a conception of man which is determined by freedom and responsibility. Social market economy became a guarantor for economic development and social stability in Germany and thereby a main pillar of public welfare.

By enabling participation, the institutions of social market economy fulfill an important function for democracy: fair competition rules allow entrepreneurial activities, social security guarantees participation in society, and an educational system aiming equal opportunities provides social mobility.

The project “Social Market Economy and Democracy Worldwide – The Case of Muslim Dominated Countries” initiated by the German Konrad-Adenauer-Stiftung (KAS) examines central institutions of social market economy in Germany and in different Muslim dominated countries around the globe. It seeks to elaborate commonalities and differences in order to disclose links and to learn of each other.

In line with the project, end of August 2015 a workshop on Islamic Banking will take place in Malaysia in cooperation with the Malaysian-German Chamber of Commerce and Industry (MGCC). The objective of the workshop is to gain insights into the principles and concrete concepts of Islamic Banking. No other place would be more suitable to talk about Islamic Banking than Malaysia with its rich experience and expertise in this field. Next to a general introduction on the relevance of the banking and finance sector for a functioning of (social) market systems, the main aim is to learn more about Islamic Banking and to elaborate if this system would also be of interest for the German and/or European market.

The first workshop of the series took place in Senegal in February 2015 and dealt with questions of competitive order as an

Other countries, e.g. Malaysia, organise zakat on a federal level and collect this religious contribution by state institutions. Hence, a great variety of de facto practices exist with regards to the collection of the zakat charity tax.

Interestingly, social security is in most of the Muslim dominated countries mainly discussed in the field of pensions for employees. A reliable system of social security in the case of unemployment or care dependency does not exist in a number of countries. In that case, the collective – meaning the family or clan structures – gain higher importance.

In June 2015 the third workshop was organised in Tunisia, focusing on challenges and prospects for educational systems and bringing again to light how heterogeneous educational systems in the Muslim dominated world are.

One of the problems in several countries seems to be the fact that a certain culture of educating academics is higher than a culture of promoting vocational training. In general, many countries seem to be interested in specific German experiences with vocational training and the cooperation of scientific institutions, e.g. universities with enterprises and small- and medium sized companies.

Another important result of the workshop on educational systems is the fact that early child education in many countries still does not exist on an organised level. Most of the evaluated countries focus on early child education on a private basis – mostly conducted by the family – and do not offer a state-organised early child education system. Such a system, however, is according to a newest German research project of high importance in order to guarantee the greatest possible degree of future prospects and chances.

institution of the Social Market Economy. Experts from institutions like the German Competition Authority, the German Monopoly Commission and the European Central Bank were meeting counterparts from Muslim dominated countries from different continents such as from Djioubuti and Senegal in sub-Saharan Africa, Tunisia and Turkey in the MENA region as well as from Indonesia and Malaysia on the Asian continent and discussed about differences and commonalities in the concrete field of competitive order on an expert level. It became evident that more important than religiously or culturally inspired factors in different Muslim dominated countries are in the field of competitive order factors such as an independent judiciary, the principle of accountability, a fiscal discipline, checks and balances between the state institutions as well as a bureaucracy free of corruption.

Furthermore, a special emphasis was given to questions on social cohesion and social mobility. Repeatedly speakers highlighted the fact that speaking of social market economy as a finished concept would be counterproductive in many Muslim dominated countries; mainly because the foundations for such a concept are missing in many parts of the world. Whereas the concept of social market economy is based on individual freedoms and the free powers of the market first, in many countries (e.g. in Malaysia) the state is still too much involved in economic issues which eventually interferes in the unfolding of markets.

The second workshop in Turkey in April 2015 dealt with questions of social security and saw experts discussing the basics of social security institutions in Germany and different forms of social security systems in the Muslim dominated world. Of special importance was the debate regarding different organisational forms of the zakat institution.

As one of the five pillars of Islam, zakat is a religiously connoted charity tax which every believing Muslim should accomplish. However, the zakat contribution is organised differently within the Muslim world. Whereas in Tanzania zakat is collected on a local level by mosques and distributed to needy people, Bosnia-Herzegovina has its own Zakat authority which works independent of the state.

Thomas Volk is the Coordinator for Islam

and the Dialogue between Religions of

the Konrad-Adenauer-Stiftung. He studied

Islamic Studies, History and a German-

Turkish Masters Programme in Social Sciences

in Freiburg, Ankara, Berlin and Basel and

worked in the Headquarters of the Christian

Democratic Union of Germany (CDU).

From 25 – 26 August 2015 the Konrad-Adenauer-Stiftung (KAS) in cooperation with MGCC will be organizing a conference on Islamic Banking as part of the KAS project “Social Market Economy and Democracy Worldwide – The Case of Muslim Dominated Countries”.

KUALA LUMPUR, 7 May 2015 – Volkswagen Malaysia celebrated the launch of its Jetta Limited Edition at an exclusive Pop Up Party. To commemorate the launch, Volkswagen Malaysia engaged local photographer Paulius Staniunas of ‘All Is Amazing’ fame, to create photos that capture the boldness of the car. These photographs were exhibited all around the event and will be used throughout the campaign.

The Jetta Sport sat majestically in the middle of the party giving guests a close up of the updates. The Jetta Club Edition is equipped with window tint and a multimedia head unit with navigation. The Jetta Sport Edition on the other hand comes with genuine Volkswagen Zubehör Aerokit, which includes front under skirting, side under skirting, rear under skirting and rear boot spoiler, SILEX 17” Alloy wheels, window tint and a multimedia head unit with navigation.

Commenting about the launch of the Volkswagen Jetta Limited Edition, Mr. Armin Keller, Managing Director of Volkswagen Malaysia said, “The Jetta Limited Edition, which comes with 6 airbags and a complete makeover, proves to be a perfect blend of form and function. With the genuine Aerokit installed, the Limited Edition takes on a bold presence – undoubtedly enhancing the visual appearance.”

Only 500 units of the Jetta Club Edition and Jetta Sport Edition are available while stock lasts starting from May 2015. Malaysian customers can book this model, available in Candy White, Reflex Silver, Platinum Grey and Deep Black at the price starting from RM122,888 at selected Volkswagen authorized dealerships in the Klang Valley.

For more information, please visit www.volkswagen.com.my

Jetta Limited Edition Now Available in Malaysia from RM122,888

Stunning JettaFor the Bold and Stylish

22 CSR COLUMN

The Corporate Leviathan by Jayanthi Desan

The 4Cs of Sustainability in Asia

By treating sustainability as a goal today, early movers in Asia are developing competencies that rivals will be hard-pressed to match. That competitive advantage will stand them in good stead, because sustainability will always be an integral part of development. The quest for sustainability is transforming the competitive landscape which will force companies to change the way they think about products, technologies, process and business models.

CONTEXTCompanies in Asia have long realised that the basic ecosystem that is cheap today will be expensive tomorrow. Sustainability is not the burden on bottom lines that most business tend to believe. In fact, it is becoming a touchstone for innovation. It can provide a competitive advantage in terms of products, technologies and processes. There is a linkage between

geopolitical globalisation, connectivity, inclusive growth and profitabillty that Asian companies are coming to realise.

Indeed, the quest for sustainability has already transformed the competitive landscape in Asia. Industries at the start of the supply chain are paying more to harvest, extract and get access to primary products. All sectors will have to pay more to dispose waste. In many parts of Asia, water is already scarce and expensive. The natural buffers which reduce risks of flooding and other disasters will need to be replaced. These costs will be passed downstream and transform the operating context of business.

The rules of the game are changing. As ecosystem services decline, the framework conditions within which businesses operate, customer preferences, stockholder expectations, regulatory

regimes, governmental policies, employee well-being and the availability of finance and insurance-will change. New business opportunities emerge as demand grows for more efficient use of ecosystem services for meeting needs or mitigating impacts, especially in the new and emerging markets of the developing world where large populations are becoming consumers. If you add 7 billion people in the process of globalisation, it adds to the urgency to the argument. An illustration of the relevance and challenges of material issues, such as nutritional needs of low income consumers, the global water crisis, reduction in packaging material and sourcing of sustainable palm oil adds to the urgency of the situation.

Sustainability in Asia also assumes greater relevance in the context of innovation. While it is valid to discuss sustainability as an important driver in value creation,

23CSR COLUMN 23

differentiation of products and services will ultimately play a greater role in shaping a company’s prospects in the competitive consumer market. Increasingly, that differentiation is the product of sustainability-driven innovation.

In many cases, sustainability is then seen as a game changer in Asia.

CONNECTToday, sustainability driven innovation is going beyond designing green products and packaging solely on their inherent virtue. For example, housing developers tend to sell ‘green homes’ because it is what they think consumers want. However, this type of ‘eco bling’ is ending. Businesses in Asia are realising that sustainability entails improving business operations and processes to become more efficient, with a goal of dramatically reducing costs and waste. It is also about insulating a business from the risk of resource price shocks and shortages. Taken together, these enhancements can deliver business benefits that go far beyond the bottom line—whether it’s improving overall carbon footprint, enhancing brand image or engaging employees in a more profound way. The old paradigm for the Asian economies – focused on throughput of resources, consumption of products, limited measures of prosperity and under-pricing of externalities – is already being discarded; the “new normal” and the path set out to achieve it is defined by sustainability. Relative to industrialised countries, emerging markets have much less capital locked into a fossil-fuel-based economy. It’s often much cheaper to start from scratch without all that stranded capital.

The challenge is to integrate sustainability considerations in product and service innovations. This is because sustainability is not just about philosophy and practices. Each company has a unique profile in terms of specific market drivers that govern

its ability to be a sustainability high performer. There needs to be clear linkages between company strategy and CR initiatives which is dependent on change in attitudes, culture and leadership as well as the adoption and refinement of tools and methods. This also involves converting top down leadership into bottom up initiatives.

COLLABORATESustainability on a broad scale isn’t about scoring points or about star players. It’s a rewrite of the rules and essentially the end of any semblance of ‘coca-colonisation’ which refers to mono-cultural dominance. While there are strategically rewarding moves that individual companies can and often should make with regard to sustainability, sustainable production and consumption will not be achieved by the work of a single company. Rather, it will require many companies innovating and collaborating across value chains and engaging consumers in a redefinition of value.

This geography of collaboration will be right of up the alley of Asian companies. Progressive governments are increasingly recognising the role of sustainability in their national economies. In some countries this is principally a matter of securing future competitive advantage – in Singapore’s vision of a bio-economy for example, or in South Korea’s drive to develop its international position in clean tech, or in Malaysia’s decision to attempt to become a clean energy hub. In some cases it is a matter of survival, such as a means to overcoming extreme water shortages and associated food security challenges.

COMMITThere are various tools for companies to evidence and show commitment. Stakeholders are increasingly recognising that the value of an organisation goes far beyond its financial statements. As a result, sustainability reporting amongst listed companies in Asian markets is on the rise.

Sustainability reporting enables companies to measure and manage their CR indicators effectively as well as set targets for improvement. The Global Reporting Initiative (GRI) has recently revised its standards and the G4 is to date one of the most comprehensive reporting standards that takes into consideration issues of materiality and boundaries. It also provides clear linkages to various corporate responsibility standards like the ISO26000. GRI based report serve to provide a common language for stakeholders to evaluate companies, particularly investors. Yet, for CR to be truly embedded, GRI based reporting must be seen as a starting point in the corporate responsibility journey and not as an end game. To truly embody and articulate value, companies must be able to demonstrate that they have integrated sustainable strategies across environmental, social and governance aspect. There is a need to end the cycle of compliance reporting and focus on what is most relevant to the creation of value and the execution of business strategy.

Moving away from a compliance mindset is particularly important for Asian companies as sustainability provides a great opportunity to create value. In Malaysia for example, Islamic thinking is influencing how sustainability is integrated in a company, particularly through Islamic Finance.

For creation of value and for companies to actually benefit, a culture of CR needs to be embedded within the DNA of Asian companies.

Jayanthi is the Founder and Managing

Director of Synergio, one of Malaysia’s

leading sustainability strategy consultancies.

24 LEGAL & INVESTMENT

Meeting Today’s Supply Chain Trends and Challenges – Pt. 2by Daniel H. Goh, InvestKL

PREFACEIn the previous article, we covered how best-in-class companies are redesigning their supply chains to manage costs to protect shareholders value in a challenging economic climate. With increased mobility in today’s globalised world, the competitive landscape and environment is far more challenging. Thus, locating strategic supply chain functions in a cost and tax efficient jurisdictions location would provide a competitive edge for the company to undertake various value-add and growth activities across the region.

With an efficient supply chain in place where cost is managed well, this ensures future access to capital which will be required to drive future growth strategies. However cost is only one side of the equation. When economic growth rates are declining, the issue at hand is when and how to utilise one’s capital to invest in areas that will continue to deliver growth. Companies who have clear strategies to address this would be in a position to attract greater levels of investments.

As such, in this article we look into:• The next geographies for economic growth;• The channels that are dominating the distribution of goods; and• The supply chain strategies being employed by best-in-class companies to grow their market shares in new emerging markets

PART 2: STRATEGIES FOR DRIVING GROWTH IN EMERGING MARKETS

Growth Driven by Global Shift in FlowsIn a recent McKinsey’s Quarterly publication - Harnessing the Power of Shifting Global Flows, it forecasts a change in flow of trade and finances driven by increased consumption in emerging markets. While companies from advanced economies have expanded their markets globally, the major source of revenue is still derived from their home country and trade with other advanced economies. Only 19% of revenue is realised from emerging markets.

However, trade in developing economies is predicted to continue to swell and by 2025, it will represent 47% of global consumption. Best-in-class companies employ growth strategies to address this gap and position their supply chains to adequately address this opportunity.

Stefan M. Selig, UnderSecretary of Commerce and International Trade recently stated, “With 2.7 billion middle class consumers by 2030, the Asia-Pacific region is essential to economic growth.”

1For companies with headquarters in advanced economies largest 100 companies from the 2013 Fortune Global 500 list that reported revenue by geographic segment in that year and had revenue from overseas from overseas markets.

*Source: Mckinsey quarterly report – Harnessing the power of shifting global flows, Bughin, Lund & Manyika, 2015.

Share of overseas and domestic revenues for multinational corporations,1 2013, % of total

Multinational companies in advanced economies are missing out on the opportunities arising in emerging markets*.

Emergingmarkets

Overseas

Domestic

Advanced economies

Advancedeconomies

19

32

49

Supply Chain Priorities for GrowthGiven the growth potential that Asia Pacific and ASEAN would experience in the next 10 -15 years and also the untapped potential of digital commerce channels in the region, most companies would redesign their market penetration strategies and further develop their digital capabilities. The supply chain function is not just an effective avenue to manage overall delivered costs for a business but also a strategic tool which can be used to break into new markets and expand new channels. Let us look at the areas of interests these supply chain companies are investing in, to further their agenda in these new markets. In May 2015, the Economist Intelligence Unit gathered insights from 400 executives in eight emerging markets on the intention to strengthen their supply chains. Three out of the eight emerging market economies reside in ASEAN which includes Vietnam, Indonesia and Thailand.

One of the key questions was: In the next three years, where do you expect to see growth in your emerging market supply chains?

The result from that question showed five top areas these companies are focusing on growing, which are Product Development, Research & Development (R&D), Product Distribution & Logistics, Sourcing/Procurement and Manufacturing.

25LEGAL & INVESTMENT 25

The growth in emerging economies will be mainly driven by the Asia Pacific markets increased consumption where the forecasted growth of 571% will outpace projections for all other regions. Besides the usual suspects of China and India, the ASEAN economy of a US$ 2.5 trillion GDP, growing at a rate of 5 - 7% and a combined population of 633 million present a formidable market for companies seeking to expand globally.

The ASEAN economy is projected to strengthen further due to the progress made on ASEAN Economic Community (AEC) which aims to create an integrated regional economic hub. The AEC aspires to create a single market and production base across its 10-member countries by removing inter-region trade barriers. This creates future opportunities for multinational companies to establish their regional supply chain centres to manage activities from procurement right up to distribution and returns from one single location which will also be able to serve needs across the region.

Growth Driven by Digital ChannelsFrom the McKinsey quarterly report, cross border internet traffic has grown by nearly 1,600% since 2005 and could increase almost eight times further by 2025. In tandem with this growth, we see similar trends with the digital economy. According to eMarketer, worldwide business to consumer e-commerce sales will increase by 20.1% in 2014 to reach US$1.5 trillion and this growth will come primarily from the online and mobile users which are rapidly expanding in emerging markets. It also states that Asia Pacific will leapfrog North America to become the world’s largest regional e-commerce market with sales reaching US$525.2 billion in the region compared with US$482.6 billion in North America. The potential for the digital economy in Asia Pacific has yet to be fully realised although it accounts for 46% of digital buyers worldwide, with only 16.9% being the actual users out of the region’s population.

In the big six SEA countries – Indonesia, Singapore, Malaysia, Thailand, Vietnam and Philippines, the internet penetration and subsequent digital commerce reach is projected to grow from 114 million users in 2011 to 205 million users in 2016 according to Euromonitor#. What this means for businesses seeking to grow in ASEAN, especially in the consumer goods industry, is to incorporate digital channels into their overall growth and supply chain strategy.

^Source: Star Management- Under Secretary Selig: “With 2.7 billion middle class consumers by 2030, the Asia-Pacific region is essential to economic growth.”

Middle Class Consumer SpendingOuter Ring: 2030 in trillions, USD (projected)Inner Ring: 2009 in trillions, USD

$11.1

$0.4$1.5

$3.3

$4.9

$0.9

$2.2

$5.6Europe

$8.1

North America$5.5

Sub-SaharanAfrica$0.6

Asia Pacific$32.9

While increasing Chinese spendingtops the news, the East Asia Bureau of

Economic Research forecasts that spending in India and Indonesia

will grow at similar rates.

+571% GROWTH

Central/South America REGIONS

#Source: The ultimate guide to e-commerce statistics of Southeast Asia & Malaysia, Milo & Wong, 2013.

36m

43m

21m

21m

80m

22m

28m

11m

17m

36m

4m

In 2016, the Internet users in Southeast Asia will be...

Total 205m Internet Usersin “Big 6” SEA countries.

ΩSource: EIU, “Chain Reactions – How trade between emerging markets is shaping global supply chain”, pg 33, 2015.

Areas of growth in emerging markets supply chainΩ

Research & development

Product development

Sourcing/procurement including: RAW materials

– Intermediate goods and parts

Manufacturing including: Early and late stage

Assembly, including:Early and late stage – Packaging

Product distribution, including:Warehousing – Logistics

Customer service including:Customer relationship management (RM)

– Aftercare/repair

Support operations, including:HR – Finance & accounting

– IT/data management & analysis

0% 10% 20% 30% 40% 50%

The growth of middle class consumer spending by 2030^.

In what areas of your company’s supply chain(s) in emerging markets do you expect to see the most growth over the next three years?

It is not surprising that Product Development and R&D, which go hand in hand, topping the list. Breaking into the emerging markets consist of more than just establishing sales and business development functions in cities while relying on technologies and product specifications which work back in the home countries. Tastes and preferences change by region and are being influenced more and more by millennials in those regions. As such, to remain relevant, products and services would need to be tailored for the regional markets, hence companies are investing in regional R&D and product development outfits to cater for regional needs.

One of the key destinations for R&D activities in ASEAN is Malaysia. In a WorldBank report, Malaysia’s R&D spending as a percentage of GDP has risen steadily from 0.22% in 1996 to 1.07% in 2011π.

Global MNCs such as Panasonic, Sony, Shell Global, Ingress Katayama and Agilent Technologies are undertaking R&D activities in Malaysia, and Honda has recently announced to establish a R&D centre in Malaysia by end of 2015.

Product Distribution and Logistics, Sourcing, Procurement and Manufacturing came with almost equal emphasis. These are major cost drivers and will have a large impact on the profitability of the companies’ operations in ASEAN. These are some of the factors which we have covered in the first article of this series.

Since most countries in ASEAN are still developing, operational costs comprising of labour, utilities and raw materials are still competitive. As such it would make sense for MNCs to undertake both sourcing and/or manufacturing activities through subsequent distribution within the region and optimise their logistics costs by having all their key supply chain activities regionalised.

A case in point for regionalised location for supply chain activities is Malaysia where the strategically located country in ASEAN is home to several regional distribution centres such as Vale, Amway, BMW Parts, Xiaomi – managed by CEVA and Hoover Container Solutions.

26 LEGAL & INVESTMENT

KEY TAKEAWAYS• Emerging economies including ASEAN and Asia Pacific will represent 47% of global consumption by 2025. However, multinational companies from advanced nations which are leading the globalisation trend only generate 19% of their revenues from these markets today.

• The Asia Pacific region is projected to be the fastest growing consumer spending market with a forecast increment of 571% growth from 2009 through 2030.

• Asia Pacific will leapfrog North America to become the world’s largest e-commerce market but the potential is far realised as only 16.9% of the region’s population are digital buyers today.

• Best-in-class companies seeking to grow would consider redesigning their supply chains to capture the potential of Asia Pacific and ASEAN’s market and incorporate a digital commerce channel strategy.

• Best-in-class companies are increasing their supply chain scope to undertake key business functions such as Product Development, R&D, Procurement, Distribution and Manufacturing within the emerging markets they seek to grow in.

InvestKL, a special purpose investment promotion agency by the government of Malaysia, provides end-to-end facilitation services to multinational companies looking to establish regional headquarters in Greater Kuala Lumpur for the ASEAN market. InvestKL has facilitated many corporations to establish regional outfits in Greater Kuala Lumpur including Schlumberger, SC Johnson, Colas Rail, Oleon, Turner, International SOS and Epson.

Should you wish to explore establishing a footprint in ASEAN to grow your business, do get in touch with any of InvestKL’s Investor Relations directors or visit InvestKL’s website for further details on our services and testimonials from some of our clients.π Source: TheGlobalEconomy.com, Malaysia’s R&D expenditure.

R&D Expenditure to the percentage of GDP

1.2

0.9

0.6

0.3

0.01996

Malaysia

1997 1999 2001 2003 2005 2007 2009 20111998 2000 2002 2004 2006 2008 2010

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of any organisations. Examples of analysis performed within this article are only examples. The situation is different on case to case basis as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of any organisations in the region.

Daniel H. Goh, Senior Manager of Advisory in InvestKL has 15 years

of business management experience in various multinational firms

across various industries including Electronics, Medical Devices, Timber

and Banking.

Malaysia’s R&D spending has grown rapidly in recent yearsπ.

Discover Your Talent

Infineon Technologies (Malaysia) Sdn Bhd Free Trade Zone, Batu Berendam, 75350 Melaka Tel: +60 (6) 232 5266 www.infineon.com

28 LEGAL & INVESTMENT

A greater look at Malaysia as an investment and business hub in Southeast Asia.

During the last couple of decades more multinational companies (MNCs) have substantially increased their presence in Southeast Asia. With rising pressure on their domestic markets and the growing and consuming middle class in countries like Thailand and Malaysia, Southeast Asia has become interesting as both a manufacturer and market. Therefore companies have been reviewing business models and started streamlining their operations and functions, combining them in a regional headquarter – or Principal Hub.

As principal structures are of increasing importance for German and European MNCs when considering their approach for ASEAN and Asia-Pacific, we would like to introduce to you the new Malaysian principal hub incentive – and the rationales behind it: In April 2015 the Malaysian government announced a new customised incentive that would make Greater Kuala Lumpur (KL) and other major cities in Malaysia more compelling for such MNCs to locate their regional Principal Hub(s).

This incentive was developed in recognition of the evolving economic and business landscape of Malaysia. After establishing a successful manufacturing and operational base for MNCs in the 1980s to 2000s, the government recognised the importance of moving up the value chain, particularly by growing the services sector related to high technology, high value-add and knowledge based activities.

The incentive is intended to complement:

The evolving global business modelRegional headquarters and supply chain models are evolving globally, with more and more MNCs adopting the principal hub structure. This structure enables companies to optimise resources, build capacity and quicken decision making to deliver better customer service and shareholder value whilst maximising operational efficiencies.

ASEAN Economic Community (AEC) – ASEAN IntegrationThe implementation of AEC at the end of 2015 is expected to foster closer economic collaboration between the members of ASEAN, allowing companies to tap a market of US$2.5 trillion (GDP) in 2014, with a growing population of over 600 million people. Malaysia’s efforts will help in positioning the region from a competitive business standpoint whilst ensuring balanced and inclusive regional economic growth. Malaysia is well positioned to help companies spring board to the region’s burgeoning markets, with its well established regulatory framework, infrastructure and business networks. InvestKL initiated a review of Malaysia’s existing incentive schemes together with the Ministry of Finance (MOF) and the Malaysian Investment Development Board (MIDA). Together they developed a game changing enhancer, replacing the existing incentives, to ensure Malaysia attracts the best MNCs to expand and grow their operations in the region. This new incentive for the establishment of Principal Hubs will be implemented effective 1st May 2015. The Principal Hub incentive will replace the existing International Procurement Centre’s (IPC), Regional Distribution Centre’s (RDC) and Operational Headquarters (OHQ) incentive schemes, which will officially be phased out.

The Principal Hub Incentive, Malaysiaby Frances Po, PricewaterhouseCoopers Malaysia

Malaysia Economic Development Journey

Source: MIDA and PwC analysis.

How the Principal Hub worksBy definition the Principal Hub is a locally incorporated company that uses Malaysia as a base for its regional and global businesses and operations to manage, control and support its key functions. These include management of risks, decision making and strategic business activities such as trading, finance, management and human resource. The regional Principal Hub is structured such that MNCs can be closer to customers and supply chains to improve operational efficiency, and to promote product/service quality and speed to market at a lower cost. The Principal Hub structure also enables MNCs to better share resources and experiences among group companies, thus allowing better integration and harmonisation within the group structure to promote consistent products and service standards to their markets.

The following diagram depicts the inefficiencies of traditional business models that have evolved over the years to more centralised and efficient business models, with focus on minimising risks and costs while increasing profitability from a supply chain and operational efficiency perspective.

A Case StudyThe A Group of Companies (“A Group”) is primarily involved in the manufacturing of oleochemicals. Its presence in the Asia Pacific region (including Malaysia) was previously restricted to manufacturing bases and distribution centres.

“A Group” decided to establish a principal hub to expand its presence in the Asia Pacific region on a large scale. Malaysia was selected as the location for its principal hub, due to ready accessibility to a multilingual, educated workforce, ready infrastructure and competitive costs of doing business.

“A Group” retained its contract manufacturing base in Malaysia, and established a separate entity (i.e. “PH Company”) in Malaysia which performed the following activities:

• Branding and marketing;• Strategic decision making (business development and regional P&L management);• Research and development;

• Technical design;• Production control and inventory management;• Funding and liquidity management; and• Quality control and assurance.

To carry out the activities listed above, “PH Company” brought in talent from its European headquarters, including 15 expatriate employees across all divisions and recruited local talent, bringing its total headcount to 80 employees. As the controller of “A Group”s regional P&L, “PH Company” is required to assume the residual risk associated with the Group’s value chain in the Asia Pacific region. This necessitates a transfer of risks which was previously spread out across the Group’s distribution arm to “PH Company”.

The following diagrams illustrate this shift:

The Principle Hub Structure

Source: InvestKL, Principle Hub incentive: Guidelines and criteria.

Comparison between the Traditional Model vs the Principle Hub Model

Source: InvestKL, Principle Hub incentive: Guidelines and criteria.

Before “PH” Company

29LEGAL & INVESTMENT 29

30 LEGAL & INVESTMENT

After “PH” Company

3-tier corporate taxation rates

Incentive for the Principle Hub

Source: MITI, Implementation guidelines under the Malaysian Budget 2015.

* USD1 ~ RM3.60

Source: MITI, Implementation guidelines under the Malaysian Budget 2015.

With “PH Company”, “A Group” targets to achieve 100% growth within five years from its establishment in the Asia Pacific region, with a 150% increase in profit across the value chain due to business process improvements and efficiencies achieved in eliminating duplicative functions across its value chain and a centralised approach to expanding its business in the Asia Pacific.

Benefits to Investors• Fiscal benefits An approved Principal Hub company is eligible for a 3–tiered corporate taxation rate as follows:

• Non-fiscal benefits• Sharingofresources– services such as management, R&D, payroll, accounting, logistics and quality control and technology can be consolidated in one location.

• Streamlining the supply chain – by centralising strategic global and regional functions, logistics, risks and their associated revenue streams.

• Lower production and operation cost – companies can bring in raw materials, components or finished products with customs duty exemption into free industrial zones, licenced manufacturing warehouses (LMW), free commercial zones and bonded warehouses for production or repackaging, cargo consolidation and integration before distribution to their final consumers for goods-based companies.

• Exercisecontrol– no local equity/ownership condition.

• Recruit foreign talent– expatriate posts based on requirements of applicant’s business plan subject to the policies on expatriates at the time of application

• Improvecashflowandtreasurymanagement– foreign exchange administration flexibilities that will be accorded in support of business efficiency and competitiveness of companies under the Principal Hub

The takeawayThe Principal Hub incentive offers an opportunity for MNCs to use Malaysia as their base to expand their regional presence in Asia while improving their operational efficiency. Through the Principal Hub incentive, Malaysia hopes to position itself as playing a key role in the integrated global supply chain of MNCs particularly in areas where it has the competitive advantage.

Interested MNCs should start determining if it is appropriate for their Asian growth strategy.

Frances Po is a Senior Executive Director and

heads the international tax and M&A practice

at PwC Malaysia. Pauline Lum is an Executive

Director in Frances’ team. Jonas Bley is a

Senior Consultant in PwC’s Southeast Asian/

German Business Group. All three are based

in Kuala Lumpur. This article is a variation of

a booklet published by PwC Malaysia in

May 2015.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of any organisations. Examples of analysis performed within this article are only examples. The situation is different on case to case basis as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of any organisations in the region.

31LEGAL & INVESTMENT 31

Ravindran is a full-service legal firm providing legal solutions and support for its local and cross-border clients.

Litigation, family, IP, corporate and property matters are focal points of their practice. Ravindran lawyers also

work with various partners and alliances across the world to cater to the needs of working internationals.

Malaysian Insolvency Law – A Brief Conversation with Ravindran Advocates & Solicitors

Genevieve Tan Gaik May, Partner of Ravindran Advocates & Solicitors.

Q: What are the relevant local laws on which Malaysian insolvency rules are based?In Malaysia, insolvency practice is governed by the Bankruptcy Act 1967 and the Bankruptcy Rules 1969 for debts owing by individuals whilst the Companies Act 1965 and the Companies Winding-up Rules 1972 govern insolvency matters involving companies.

Q: Which person or company can be considered ‘insolvent’? When can insolvency or bankruptcy proceedings be filed?

Once an individual commits an act of bankruptcy for a personal debt not less than RM30,000, a bankruptcy petition may be presented to Court by the petitioning creditor. On the other hand, winding up proceedings may be initiated against a company if it is found to be unable to pay its debts of RM500.

Q: How does one initiate insolvency proceedings and who has the right to do so?Bankruptcy proceedings can be initiated by individuals and companies against another individual as bankruptcy laws involve personal debts. Winding up proceedings on the other hand involve a situation where a company is unable to pay debts to another company or an individual in the course of its business. Both have to be initiated by way of court proceedings. Once insolvency proceedings are initiated, an individual can be made bankrupt or a company can be wound up.

Q: What is the general procedure of an insolvency case and rough time estimate?Bankruptcy proceedings and winding up proceedings differ in its procedure and conduct. The estimation of time for completion is difficult to say as it may differ depending on whether the insolvency proceedings are contested.

Q: In Germany, an appointed ‘insolvency administrator’ handles all relevant matters in the insolvency proceedings of a company. Who is in charge in Malaysia? In Malaysia, insolvency matters fall under the purview of the Director General of Insolvency. The Director General of Insolvency is a government appointed official and he heads the Department of Insolvency, Malaysia.

Q: What are the different creditor categories and how are they satisfied?

There are secured creditors and unsecured creditors. A secured creditor is a person or institution holding a mortgage, charge or lien on the debtor’s property as a debt security. An unsecured creditor does not hold anything of the debtor as security for the money, loan or credit he provides. If you are an unsecured creditor you will have to institute legal proceedings to obtain a judgement in respect of your debt.

Q: How are the different creditors managed?All bankruptcy matters and its creditors are managed by the Insolvency Department whilst in a winding up proceedings, the Creditor may appoint a private liquidator to manage all affairs, failing which the Insolvency Department will handle all matters.

Q: Can insolvency proceedings be appealed and how so?All insolvency matters are appealable. Your legal counsel should be able to advise you on your prospects on appeal.

Q: In Germany, there are certain elements of an insolvency matter (such as undue delay in payment) where criminal liability can come into play. Is there an equivalent in Malaysian law?Insolvency laws in Malaysia are designed to assist creditors in enforcing their rights. However, there are specific provisions in the Penal Code, the Bankruptcy Act and the Companies Act that cover issues such as criminal breach of trust and fraudulent trading.

This has been an interesting topic to speak about. Thank you for this opportunity!Should you require further information on local regulations on insolvency and bankruptcy, you may contact the law firm directly. Should you wish to know more about German insolvency or bankruptcy proceedings, please contact MGCC Corporate Services Department: corporateservices@malaysia.ahk.de

If you are considering formally investing in Malaysia, for example by setting up a local company under the Companies Act 1965, insolvency rules and proceedings sometimes become relevant long before your decision is made. What do managers need to know about Malaysian insolvency law? In a brief conversation with our member law firm Ravindran Advocates & Solicitors, MGCC sought to find out. Here’s what partner Genevieve Tan Gaik May had to say.

32 ECONOMICS

Malaysias neuer Funfjahresplan soll Wachstum bringen

www.gtai.com

Wirtschaftswachstum, Business-Orientierung, sozialer Ausgleich und Umweltschutz lauten die Leitlinien / Von Rainer Jaensch

Kuala Lumpur (gtai) – Malaysias Fünfjahresplan 2016 – 2020 gibt mit 5 bis 6%

Wirtschaftswachstum ein ambitioniertes Tempo vor. Der Hauptantrieb soll vom

Privatsektor kommen. Aber auch die öffentliche Hand schiebt mit umfangreichen

Infrastrukturprojekten, vor allem auf der Transportschiene, das Wachstum an. Ziel ist es,

bis 2020 zu einem Hocheinkommensland zu werden und dabei die unteren

Einkommensschichten mitzunehmen. Hierbei sollen verstärkt Bildung und insbesondere

Berufsausbildung helfen.

Malaysias 11. Fünfjahresplan – Ende Mai 2015 vorgelegt und Anfang 2016 beginnend –

soll dem Land bis 2020 zum Status eines Hocheinkommenslandes verhelfen. Nach

mehreren Fünfjahresplänen gehe es nun darum, den Endspurt einzulegen, heißt es

ehrgeizig von Regierungsseite. Auch wenn der neue Plan wenige Überraschungen bietet,

so enthält er doch wesentliche Leitlinien für die kommenden fünf Jahre. Premierminister

Najib formulierte nach der Planverkündung die “fünf Philosophien” der Regierung mit den

Worten: Fur Wachstum, fur das Volk, fur “Business”, fur Umweltschutz und fur

Nationenbildung.

Von zentraler Bedeutung ist ein mittleres bis hohes Wirtschaftswachstum, das bei einem

realen Zuwachs des Bruttoinlandsprodukts von 5 bis 6% pro Jahr liegen soll. Nachdem der

obere Wert dieses Zielkorridors 2014 erreicht wurde, liegen die Prognosen für 2015 bei

höchstens 5%. Das Bruttonationaleinkommen pro Kopf soll am Ende der Zielperiode bei

54.100 RM liegen und damit Malaysia auf die Stufe eines Hocheinkommenslandes heben, so

der ambitionierte Plan der Regierung. 2014 lag das Pro-Kopf-Einkommen bei 35.949 RM.

Das Wirtschaftswachstum soll in Zukunft mit einer höheren Arbeitsproduktivität

einhergehen. Liegt diese nach offiziellen Schätzungen 2015 bei 77.100 Malaysischen

Ringgit (RM; fast 18.900 Euro; 1 RM = 0,245 Euro), soll sie bis 2020 auf 92.300 RM steigen.

Nachdem die Arbeitsproduktivität von 2011 bis 2014 um jahresdurchschnittlich 2,1%

zugenommen hat, legte sie 2014 um 3,5% zu.

Die öffentlichen Entwicklungsausgaben setzen die staatlichen Planer mit 260 Mrd. RM an

und damit 13% höher als im vorherigen Fünfjahresplan. Die Hälfte davon und damit 16%

mehr als zuvor sollen in Infrastrukturprojekte wie schnellere Breitbandnetze, Krankenhäuser

und die geplante Schnellzugverbindung von Kuala Lumpur nach Singapur fließen. Die

andere Hälfte des Budgets fokussiert vor allem die “weiche Infrastruktur” wie Bildung und

Berufsausbildung.

Kuala Lumpur (gtai) - Malaysia’s five years plan from 2016 to 2020 stimulates an ambitious rate with 5 to 6 % economic growth. The main drive should come from the private sector. However, the public sector pushes the growth with large infrastructure projects, especially on the rail track. The aim is to become a high-income country by 2020 and thereby take the lower income groups up as well. This shall be helped by reinforced education and particular vocational training.

von Rainer Jaensch

Das Volk wie auch die Umwelt sollen profitierenEin besonderes Augenmerk legt der 11. Malaysiaplan auf die unteren 40% der Haushalte. Deren durchschnittliches Einkommen soll sich bis 2020 auf mindestens 5.000 RM verdoppeln. Dazu werde vor allem Bildung beitragen, insbesondere technische und berufliche Ausbildung. Den unteren Einkommensschichten will der Staat auch zu bezahlbarem Wohnraum verhelfen. Mit Hilfe von Bauentwicklern sollen in dem Fünfjahreszeitraum über 650.000 solcher Wohneinheiten gebaut werden.

Des Weiteren verspricht der Plan 99% der Bevölkerung (2015: 94%) behandeltes und sauberes Wasser sowie zuverlässige Elektrizitätsversorgung. Auch sollen 95% der Wohngebiete Anschluss an das Breitbandnetz erhalten und dieses zu niedrigen Preisen nutzen können. Darüber hinaus will sich der Staat bemuhen, die Relation Ärzte pro Einwohner von 1:791 im Jahr 2011 auf 1:400 zu heben und fur 1.000 Einwohner 2,3 Krankenhausbetten (2011: 1,9) zur Verfugung zu stellen.

Die schwere Flutkatastrophe, die Ende 2014 große Teile des Landes betraf, sei eine wichtige Warnung in Richtung Umweltschutz, mahnte Najib. Um die Verbreitung von umweltfreundlichen Produkten und Technologien zu fördern, werden “grüne” Beschaffungskriterien der öffentlichen Hand eingeführt, umweltfreundliche Bauvorschriften angewandt und die Zertifizierung verstärkt. Auch soll der Anteil an erneuerbarer Energie erhöht und das Flutwarnsystem verstärkt werden. Zudem werden private Haushalte zur Mülltrennung ermutigt, um bis 2020 eine Recyclingrate von 22% zu erreichen.

Die Landwirtschaft, die vom Arbeitskräftemangel besonders betroffen ist, kann das anvisierte 3,5- prozentige reale Wachstum nur erreichen, wenn sie intelligente Agar- und Informationstechnologien einsetzt. Entsprechend werde die Regierung zur Nutzung IT-basierter mobiler Technik ermutigen.

Wachstumstreiber und Schwachstellen des neuen PlansAls wesentlichen Wachstumstreiber sieht die Regierung den Privatsektor. Dessen Investitionen und Konsum werden weiter die tragende Säule des Wirtschaftswachstums sein. Für die privaten Investitionen erwarten die staatlichen Planer pro Jahr ein durchschnittliches reales Wachstum von 9,4%. Dazu sollen nicht zuletzt ausländische Direktinvestitionen beitragen, die sich zunehmend auf höherwertige und wissensbasierte Tätigkeiten fokussieren.

Die öffentlichen Investitionen werden hingegen nach den staatlichen Plänen mit einem Zuwachs von 2,7% deutlich schwächer wachsen. Sie bringen aber immer noch 131 Mrd. RM andurchschnittlichen Ausgaben pro Jahr auf den Weg. Treibende Kraft werden hierbei staatlich angebundene Unternehmen sein. Einige große vom öffentlichen Sektor gestemmte Projekte sind der Pengerang Integrated Complex in Johor mit dem Rapid-Chemieprojekt, der Pan-Borneo-Highway und die Linie 2 der MRT-Stadtbahn im Großraum Kuala Lumpur.

Der Konsum der privaten Haushalte wird mit einem realen jährlichen Zuwachs von 6,4% der zweite wesentliche Wachstumsmotor sein. Angetrieben wird er vor allem von einem stabilen Arbeitsmarkt, hohen Einkommen und fortgesetzten staatlichen Unterstützungen für bestimmte Bevölkerungsgruppen.Der Staat will sich hingegen bei seinem Konsum auf eine jährliche Steigerung von 3,7% beschränken. Schließlich zielt er darauf ab, das 2014 bei 3,5% des BIP gelegene Budgetdefizit bis 2020 auf null zu drücken. Mit 31,4 Mrd. RM erwartet der Fiskus - unterstützt durch die Einführung einer allgemeinen Umsatzsteuer im April 2015 - doppelt so hohe Steuereinnahmen wie im vorherigen Fünfjahresplan. Die Abhängigkeit des Staatshaushaltes von den Öleinnahmen soll auf 15,5% gesenkt werden, nachdem sie 2013 und 2014 bei rund 30% lag.

Das Erreichen der von der Regierung gesetzten Ziele einschließlich eines Wirtschaftswachstums von 5 bis 6% erscheint unabhängigen Ökonomen ambitioniert. Zu den Schwachstellen zählen sie das niedrige Exportwachstum, den gesunkenen Ölpreis sowie einen

angespannten Arbeitsmarkt verbunden mit Fachkräftemangel. Der Wunsch der Regierung, den Anteil der ausländischen Arbeitskräfte bis 2020 auf 15% zu beschränken, scheint hierbei auch nicht hilfreich. Zweifel an der Erreichbarkeit der Wachstumsziele äußerte auch Malaysias früherer Premierminister Mahathir bei einer Veranstaltung des Foreign Correspondent Club of Malaysia. Die Fokussierung auf ein monetäres Ziel wie das Pro-Kopf-Einkommen sei hierbei zu kurz gegriffen.

33ECONOMICS 33

Makroökonomische Ziele des 11. Malaysia Plans 2016 bis 2020Reales Wirtschaftswachstum 5 bis 6%

Durchschnittliches reales Wachstum privater Investitionen 9,4%

Durchschnittliches reales Wachstum staatlicher Investitionen 2,7%

Durchschnittliches reales Wachstum des privaten Konsums 6,4%

Durchschnittliches reales Wachstum des staatlichen Konsums 3,7%

Durchschnittliches Wachstum des Exports 4,6%

Quellen: Eleventh Malaysia Plan 2016-2020; Economic Planning Unit, Prime Minister’s Department.

34 ECONOMICS

German Economy Returned to a Growth Path

In this setting, Bundesbank economists estimate that growth of 1.7% in Germany’s real gross domestic product (GDP) this year could be followed by a rise of 1.8% in 2016 and 1.5% in 2017. In calendar-adjusted terms, this would be equivalent to expansion rates of 1.5% in 2015 and 1.7% in both 2016 and 2017.

Surplus in public finances remainsAs Bundesbank economists see it, general government is set to continue posting surpluses of around 0.5% of GDP against this backdrop. However, the economic upturn and the ongoing decline in interest expenditure are thought to mask the generally expansionary stance of fiscal policy. Consumer price inflation is likely to accelerate, driven initially by the effect of the euro’s depreciation against other major

currencies, while the upward pressure on domestic costs should increasingly make itself felt later on. As measured by the Harmonised Index of Consumer Prices (HICP), Bundesbank economists estimate that inflation could rise from 0.5% this year to 1.8% next year and 2.2% in 2017. Excluding energy, HICP inflation would climb from 1.2% in 2015 to 2.2% in 2017.

Compared with the December 2014 projection, the Bundesbank has significantly raised its expectations for economic growth for the current year in particular, while the projection for inflation has been pared back considerably. Key factors included the plummeting crude oil prices and the depreciation of the euro.

New instruments for measuring inflation expectationsA further topic addressed in the Monthly Report is expectations about future developments in inflation, which are a key indicator in assessing the effectiveness and credibility of monetary policy. Inflation expectations can be derived from survey data or from financial market instruments, such as inflation-indexed bonds or inflation swaps. Bundesbank economists write that expectations determined in this way are often point forecasts and go on to outline inflation options – a relatively new type of financial market instrument which enable market participants to go one step further and derive risk-neutral or preference-weighted probability distributions.

Banks’ marketable financial instrumentsFurthermore, the Monthly Report focuses on the marketable financial instruments of banks. The launch of monetary union enabled a narrowing of the gap between banks’ market-based funding and traditional deposit business, a development that was

The German economy has recovered more quickly than expected from the cyclical lull in the middle of last year. In their June Monthly Report, Bundesbank economists write that the economy has returned to a growth path underpinned by domestic and foreign demand. They believe that domestic economic activity is benefiting from the favourable labour market situation and the substantial wage increases. Although foreign trade is currently being hampered by dampening global dynamics, it is simultaneously being buoyed by the euro’s depreciation and the strengthening economic recovery in the euro area. Moreover, Bundesbank economists state that the world economy is likely to regain momentum.

buoyed by measures designed to promote the financial markets as well as by the process of European integration, the Monthly Report states. Bundesbank economists see the Eurosystem’s willingness to accept many of banks’ marketable financial instruments as collateral for its refinancing operations as a hallmark of a monetary policy operating framework based on broad collateral eligibility and a wide access policy offering a large number of banks access to refinancing facilities in an effort to promote equal treatment among counterparties in the euro area.

They also believe that the refinancing operations conducted by the Eurosystem are essentially large-scale, short-term credit operations for which banks need to hold a sufficient stock of eligible assets as collateral. The Eurosystem’s broad collateral eligibility policy clearly sets it apart from many other central banks, say Bundesbank economists.

Growing impact of regulationSince the onset of the financial and sovereign debt crisis more than seven years ago, the Eurosystem has rolled out a wide variety of measures to support the markets for bank financial instruments. Its aim has been to avert severe impasses in the availability of collateral and their destabilising effects on the markets while simultaneously keeping its own risk control measures at a sufficiently elevated level. But no matter how much the Eurosystem influences the design and use of banks’ marketable financial instruments, there is no getting around the need for adjustments within the banking sector, emphasise the Bundesbank economists.

Source: Deutsche Bundesbank (accessed via http://www.bundesbank.de).

35ECONOMICS 35

The Malaysian economy registered a growth of 5.6% in the first quarter of 2015 (4Q 2014: 5.7%), underpinned mainly by the private sector demand. On the supply side, growth was supported by the major economic sectors. On a quarter-on-quarter seasonally-adjusted basis, the economy recorded a growth of 1.2% (4Q 2014: 1.8%).

Private sector activity remained the key driver of growth during the quarter. Private consumption expanded at a stronger pace of 8.8% (4Q 2014: 7.6%), supported by stable labour market conditions and higher wage growth. The strong private consumption growth was also contributed by the flood relief efforts early in the year, and the front-loading of household spending prior to the implementation of GST. Private investment recorded a growth of 11.7% (4Q 2014: 11.1%), underpinned by capital expenditure in the manufacturing and services sectors. Growth in public consumption improved in the first quarter (4.1%; 4Q 2014: 2.5%), due to higher growth in supplies and services amid moderate growth in emoluments. Public investment turned around to register a positive growth of 0.5% (4Q 2014: -1.9%) following higher capital spending by the Federal Government.

On the supply side, growth in the first quarter was supported by the major economic sectors. The services sector was underpinned by growth in all subsectors, particularly consumption-related sub-sectors. Growth in the manufacturing sector was supported by stronger performance in the export oriented industries, particularly the electronics and electrical (E&E) cluster. The construction sector was supported mainly by the non-residential and residential sub-sectors, while the mining sector continued to record stronger growth amid higher crude oil production. Meanwhile, the agriculture sector contracted as a result of lower palm oil production, arising from flood-related disruptions.

Inflation, as measured by the annual change in the Consumer Price Index (CPI), averaged significantly lower at 0.7% in the first quarter of 2015 (4Q 2014: 2.8%). The lower inflation was mainly attributable to the decline in prices in the transport category (-7.6%; 4Q 2014: 4.8%), following the downward

The Malaysian economy grew by 5.6% in the first quarter of 2015. The global economic activity expanded with divergent growth momentum across economies in the first quarter of 2015. While the US economy registered broader improvements, the economic recovery in the euro area and Japan progressed at a more gradual pace. In Asia, growth was sustained by the continued expansion in domestic demand.

revision of domestic fuel prices in January and February amid lower global oil prices.

The trade surplus amounted to RM21.3 billion in the first quarter of 2015 (4Q 2014: RM21.5 billion). Gross exports contracted by 2.5% (4Q 2014: +0.5%), reflecting mainly a decline in the growth of commodity exports and resource-based manufactured exports, amid lower commodity prices. Gross imports moderated to a marginal growth of 0.2% (4Q 2014: 4.6%).

The international reserves of BNM amounted to RM389.7 billion (equivalent to USD105.1 billion) as at 31 March 2015. This reserve level has taken into account the quarterly adjustment for foreign exchange revaluation changes.

As at 30 April 2015, the reserves position amounted to RM392.4 billion (equivalent to USD105.8 billion), sufficient to finance 8.0 months of retained imports and is 1.1 times the short-term external debt.

Economic and Financial Developments in Malaysia in the First Quarter of 2015

The economy expanded in the �rst quarter (at constant 2010 prices)

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 1Q2Q 3Q 4Q

RM billion Annual change (%)

6.3 6.55.6 5.7 5.6

0

1

2

3

4

5

6

7

0

50

100

150

200

250

300

2011 2012 2013 2014 2015

Source: Bank Negara Malaysia (accessed via www.bnm.gov.my).

EDUCATION & TRAINING36

INTERACTIVE WORKSHOP: THE 6 HABITS OF A STRATEGIC THINKER

The workshop “6 Habits of a Strategic Thinker” is designed to

explore a more profound understanding of being strategic. The

facilitator will delve into the conscious and sub-conscious mind

and demonstrate how this affects actions and creates the seeming

lack of strategic thinking. The interactive session will result in the

appreciation and understanding of new work habits.

Date: 20 August 2015, Thursday

Time: 10:00am – 5:00pm

Venue: Malaysian-German Chamber of Commerce and

Industry Office

Trainer: Ken Woo

Course Fee: RM300 per person

For more information, please contact:

Patricia Chin

Head of MGCC Training Academy

Tel: +60-3-9235 1800 Fax: +60-3-2072 1198

Email: fuiyean.chin@malaysia.ahk.de

* Course fees stated above are subject to 6% GST.

Upcoming Trainings by MGCC

MANAGING DIFFICULT (CUSTOMER) SITUATIONS: MASTER THE SERVICE SKILLS & MIND SET TO EXCEL IN CHALLENGING SITUATIONS

The Managing Difficult Customer Situations course that outshines

many others – with the insights, expertise, fun and mindset

change that you have come to expect. We begin our course with

discussions – not slides. What are your most difficult situations?

What made them difficult? How did you handle them? How did

you feel? We understand that managing difficult situations is

much more than a set of techniques, we know that there is

important human psychology involved as well. Learning about

human behaviours, classifying the different types of difficult

situations, when to use empathy or affirmation, how to say no in a

proper way, valid and invalid escalations – these and more are

what the participants will learn, with the aim of dealing not only

with customers, but with all other people around you.

Date: 26 August 2015, Wednesday

Time: 9.00am – 5.00pm

Venue: Suite 03.19, North Block, Level 3 AmpWalk, 218 Jalan

Ampang, 55000 Kuala Lumpur.

Trainer: Daniel Ord

Course Fee: RM1500 per person (HRDF Claimable)

38 EVENTS

MGCC Breakfast Talk on New Advertising StrategiesAdvertising strategy is a campaign or tool developed by a business to encourage the potential consumers to purchase their products or services. It is a very important tool to determine whether a business will succeed or fail in their sales. A breakfast talk on the topic of New Advertising Strategies was organised by MGCC on 4th June 2015 at the MGCC office. 14 participants from different companies attended the event, which aimed to introduce participants to global advertising and marketing in developing business activities at the international level.

The invited speaker was Ms Andrea Henao, the partner of 360° Agency Berlin. Topics that were presented during the Breakfast Talk included introduction and evolution of global advertising, review of semantic and codes used per sector in advertising, techniques and processes available in marketing to target potential consumers and processes to reach potential consumers on a global and regional level, as well as laws and regulations of Europe for trade and exports.

It was an engaging session where all participants were actively raising questions to the speaker, shared strategies with each other and discussed problems they faced when developing advertising strategies.

Ms Andrea Henao from 360° Agency Berlin.

Malaysia’s efforts in combatting corruption have gained momentum in recent months, as the local legislature is considering a revision of the Malaysian Anti-Corruption Commission Act 2009 (“MACCA”) to prosecute companies for corrupt actions of employees. In line with this, MGCC organised a business dialogue with Wong & Partners on the topic of “Corporate Compliance on Anti-corruption” on 11 June 2015 at the MGCC office. 10 participants from various companies attended the dialogue session.

Two speakers from Wong & Partners were invited to conduct the business dialogue. Various related topics were discussed, including existing corruption laws and the anticipated proposed changes, best practice in dealing with anti-corruption compliance under the new proposed regime imposing corporate liability, data privacy and some related subtopics.

The speaker for the first session Mr Eddie Chuah, Senior Associate of Wong & Partners.

Speaker for the second session, Ms Chen Hong Sze, Associate of Wong & Partners.

MGCC Business Dialogue with Wong & Partners

EVENTS 39

Optima Pressformen GmbH & Co.KG, Representative visit to Malaysia

Meeting the representative of Optima – from l. to r. Ms Victoria Chuah, MGCC Marketing Officer, Mr Thomas Brandt, MGCC General Manager and Mr Jens Borghoff, Sales Director from Optima.

Company and factory visit by representative of Optima - Mr Jens Borghoff.

MIAVIT AG – Partner Search in Malaysia

MGCC organised and facilitated several business matchings from 30 June to 3 July 2015 for Thomas Felske from MIAVIT Gmbh. MIAVIT GmbH is a manufacturer of specialty feedstuffs and feed additives for all major animal species – especially from poultry, cows and swines. The company produces its own vitamin E powder and choline chloride, and is the market leader for mineral and vitamin premixes on the German market. MIAVIT offers products both in powder form and as liquids for drinking water application. Their product range meets the needs of modern, environmentally friendly, economically viable animal nutrition, and to a large extent is targeted specifically for applications where preventive antibiotic use is either not desired or prohibited. Today MIAVIT AG exports 50% of its production to more than 70 countries worldwide.

Mr Thomas Felske (middle) of MIAVIT GmbH with MGCC staff, Ms Michelle Lim (left), Senior Marketing Officer and Ms Yasmin Markam (right), Marketing Officer.

Since September 2014 MGCC has been cooperating with Optima Pressformen GmbH & Co. KG on the Office-in-Office concept to have a permanent contact in Malaysia.

The sales director from Optima, Mr Jens Borghoff visited Malaysia at the end of June and MGCC arranged several business meetings with potential local customers, especially those in the poultry feed manufacturing industry.

Optima is a manufacturer of pellet dies, roller shells and other wear parts for all types of pellet mills. The company is a leader in various others fields including pellet and briquette machinery (i.e: sawing, milling machinery and related parts and components).

EVENTS40

Sundowner28 May 2015, Bridge Bar @ G Tower

From l. to r. Martin Metzger (Managing Director, YTL Power Services Sdn. Bhd., MGCC Board Member), Frederik Fabisch (Executive, C. Melchers GMBH & CO.), Sven Schneider (Head of Corporate Strategic Planning, SSIC Berhad).

From l. to r. Ramesh Supramaniam (Senior Manager, Sales & Key Account Management, Schenker Logistics), Patricia Chin (Head of MGCC Training Academy, MGCC), Lionel Tan (Director, Head of Sales & Key Account Management, Schenker Logistics).

From l. to r. Caroline Leong (Executive, Trade Fair & Student Travel, Corporate Information Travel Sdn. Bhd.), Vicky Yap (Project Manager, Malaysian Exhibition Services Sdn. Bhd.), Ezwan Effenddy B. Abdul Wahab (Senior Sales Manager, Malaysian Exhibition Services Sdn. Bhd.), Choi Chong Pau (Officer, Trade Fair & Student Travel, Corporate Information Travel Sdn. Bhd.).

From l. to r. Paurus Nekoo (General Manager, Malaysia Lufthansa German Airlines), Dr. Wolfram Spelten (Counsellor for Economic, Commercial and Environment Affairs, German Embassy Kuala Lumpur), Daniel Schmidt (Managing Director, CompuGroup Medical Malaysia Sdn. Bhd.).

From l. to r. Danny Wang (Business Development Executive, ISI Control Sdn. Bhd.), Bernhard Schütte (Chairman, Happy Water Sdn. Bhd.), Dr. Marco Tieman (Chief Executive Officer, LBB International), Oswin Pepels (Managing Director, Dachser Malaysia Sdn. Bhd.).

From l. to r. Dunia Stapmans (Managing Director, The European Taste Sdn. Bhd.), Klaus Stapmans (Managing Director (CFO), The European Taste Sdn. Bhd.).

From l. to r. Mohd Tarmizi (Chief Operating Officer, AAA Fix it Sdn. Bhd.), Gabriel Gan (Corporate Manager, Allied Pickfords).

From l. to r. Thomas Brandt (General Manager, MGCC), Lim Khiang Hua Lim Khiang Hua (Managing Director, SGL Group Malaysia, MGCC Board Member), Alexander Stedtfeld (Executive Director, MGCC).

EVENTS 41

German Maritime Delegation to Malaysia The Malaysian-German Chamber of Commerce and Industry with the support of the Federal Ministry for Economic Affairs and Energy (BMWi) and in partnership with the German Shipbuilding and Ocean Industries Association (VSM) and the Association of Marine Industries of Malaysia (AMIM) organised a German Maritime and Shipbuilding Industry Delegation to Malaysia from 22nd to 26th June 2015.

A total of 10 delegates from Germany participated in the delegation. The aim of the delegation was to further exchange knowledge and gain insights into the Malaysian maritime and shipbuilding industry, introduce the German know-how and expertise to the Malaysian maritime and shipbuilding industry and to explore business potential with Malaysian maritime and shipbuilding companies to foster strong business partnerships. Among the delegates were representatives of German shipyards as well as the representatives from the maritime supplies industry.

MGCC also organised a maritime roundtable and business matching session that was attended by 46 representatives from local companies in Kuala Lumpur. The highlight of the business delegation was the visit to Sibu and Miri for 4 days. A total of 67 business meetings were held in West Malaysia and the region of Sarawak in East Malaysia with companies were interested in the portfolio of the German Maritime leaders.

Maritime business matchings at Renaissance Hotel, Kuala Lumpur.

Site visit at Sibu Shipyard Industries.

Site visit at Muhibbah Marine Engineering Sdn Bhd.

Roundtable and business meetings with Miri Shipyard Association.

Delegates from the German maritime industry.

Maritime roundtable meeting with German delegates and the representatives from local companies. From l. to r. Mr Thomas Brandt, MGCC General Manager, Mr Nazery Khalid, Honorary Secretary-Association of Marine Industries of Malaysia (AMIM), Mr Alexander Stedtfeld, MGCC Executive Director, Ybhg Tan Sri Dato’ Seri Ahmad Ramli B. Hj. Mohd Nor, President of AMIM/Executive Deputy Chairman/Managing Director of Boustead Heavy Industries Corporation Berhad (BHIC), Mr Martin Krautkraemer, representative of Federal Ministry for Economic Affairs and Energy (BMWi), Malaysia/ASEAN-Member States.

First Worldwide AHK Meeting on Membership

DE-Regional Meeting of AHKs Asia

Against the background of strengthening the potential of the worldwide German chamber network and the cooperation among and between AHKs, AHK Argentina has developed the idea of organising the first global network meeting on the subject of membership. The hands-on seminar with interactive workshop

This year the DE-Regional Meeting of AHKs in the Asia region took place in Manila from 4 to 6 June. The AHK in Manila is now one of the chambers under AHKs network which consists of 130 AHK in 90 countries. During the meeting, the DE-Service team leaders exchanged ideas of service portfolios, increase in over-the-border

modules took place from 24 – 27 June 2015 at DIHK in Berlin and covered the topics of member acquisition and retention, membership administration, sponsorship and events. Ms Sabine Franze, Head of Communications and Ms Surayah Mohd Salleh, Membership Officer, represented AHK Malaysia at the meeting.

AHK cooperation and shared their experience in handling projects. The two-day event was also aimed at strengthening the network among the DE-Services units of the AHKs in the region. Mr Thomas Brandt, the General Manager and Head of DE-International represented AHK Malaysia at the meeting.

Mr Benjamin Leipold, Division Head of AHK worldwide – DEinternational, International Projects, DIHK e.V. (centre, front row) with participants from all around the globe.

Group photo of DE-Service team leaders from the Asia Pacific Region.

EVENTS42

EVENTS 43

MGCC’s 24th Annual General Meeting

At MGCC’s 24th Annual General Meeting which took place on 16 June 2015 at The Majestic Hotel Kuala Lumpur, Mr Thomas Zimmerle, CFO of Infineon Technologies (M) Sdn Bhd was elected to succeed Mr Lim Khiang Hua, Managing Director of SGL Group Malaysia as the President of the Malaysian-German Chamber of Commerce and Industry (MGCC) for the term 2015 – 2017. Dato’ Robert Teo Keng Tuan, the Managing Partner of RSM Robert Teo, Kuan & Co. was elected as Vice President succeeding Wolfgang Laabs, the Managing Director of Schenker Logistics (M) Sdn Bhd. The President and Vice President will change office at the AGM 2016.

During the AGM, members were informed about the Chamber’s past activities and future plans by the Executive Director, Alexander Stedtfeld and the chamber’s financial report was presented by Dato’ Robert Teo, the Chamber’s Treasurer.

It was the Chamber’s pleasure to have Dr Wolfram Spelten, the Counsellor for Economic, Commercial and Environmental Affairs of German Embassy Kuala Lumpur to speak on the current economy conditions in Malaysia and Germany. He also shared some input on the topic of ASEAN Economic Community.

Dr Wolfram Spelten, the Counsellor for Economic, Commercial and Environmental Affairs of German Embassy Kuala Lumpur as the keynote speaker for MGCC’s AGM 2015.

Before the AGM starts…

Voting session in progress.

EVENTS44 EVENTS 44

Media Briefing AnnouncesResults of ASEAN Business Climate Survey 2015

The ASEAN Business Climate Survey was established in 2012 by seven German Chambers of Commerce and Industry in the ASEAN region that formed the German-ASEAN Chamber Network (GACN). Since then, the survey is conducted every year among the respective member companies in Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. The objective is to gain an overview of the business confidence, growth expectations and investment in the ASEAN region.

On 29 July 2015, the Malaysian-German Chamber of Commerce and Industry announced the survey results during a media briefing held at MGCC’s office, which was attended by representatives from the local print and broadcast media. The media briefing began with a presentation on the overall results of the business situation and outlook of the ASEAN region by the chamber’s Executive Director, Alexander Stedtfeld, followed by the corporate perspective, highlighted by Thomas Zimmerle, the chamber’s president.

German businesses in the ASEAN region judge the current overall economic situation as satisfactory. In the run-up to the ASEAN Economic Community (AEC) 2015, German businesses – especially small and medium-sized enterprises – are increasing their engagement in the region. Notwithstanding certain cautiousness, the results of the survey reflect that ASEAN is currently considered one of the most dynamic economic regions in the world.

The majority of the respondents are satisfied with their company’s overall present situation. The assessment by the companies of the developments of the past year combined with the expectations for the next 12 months show a strong market position. Around

40% have done better compared to last year and expect to continue this strong run, especially on the sales side where 57% of the respondents forecast an increase over the next 12 months. The perceptions of companies based in Malaysia in general correspond with those in the other six ASEAN countries. Although as compared to 2014, the overall company situation is seen weaker, in general German companies in Malaysia are still mostly satisfied with the economic and company situation in Malaysia.

Reporters and cameramen in action. From l. to r.: Mr Thomas Zimmerle, President of MGCC and CFO of Infineon Technologies (M) Sdn. Bhd., Mr Alexander Stedtfeld, outgoing Executive Director of MGCC.

More questions were raised by the media representatives after the press conference, especially on Malaysian-German bilateral trade relations and investments of German MNCs in Malaysia.

EVENTS 45

Farewell Sundowner28 July 2015, Marini’s on 57

From l. to r. Cheng Yaw Goh (Director of Business Development Asia, DSC Software AG), Hew Wee Chong (Director & Team Leader of Investor Relations, Invest KL Corporation), Eddy Cheah (Director, SSCS Global (M) Sdn Bhd).

From l. to r. Dato’ Robert Teo Keng Tuan (Managing Partner, RSM Robert Teo, Kuan & Co., Vice President of MGCC), P. Kandiah (Founder & Director, KASS International Sdn Bhd, Treasurer of MGCC).

From l. to r. Katia Oetterich (Manager, Rödl & Partner), Dr. Dirk Oetterich (Head of Office, Rödl & Partner).

From l. to r. Ernst Geyer (Managing Director, MAN Diesel & Turbo Malaysia Sdn Bhd), K. Hermann Nagel (Managing Director, Aviocon Aviation Consultancy), Alexander Stedtfeld (Outgoing Executive Director, MGCC), Rainer Jaensch (Representative of Malaysia, Singapore & Brunei, Germany Trade and Invest GmbH).

From l. to r. Martin Metzger (Managing Director, YTL Power Services Sdn Bhd, MGCC Board Member), Wendy Lau (Managing Director, Transearch Wendy Lau, MGCC Board Member), Wolfgang Laabs (Managing Director, Schenker Logistics (M) Sdn Bhd, MGCC Board Member), Thomas Zimmerle (CFO, Infineon Technologies (M) Sdn Bhd, President of MGCC), Peter Lenhardt (Managing Director, A. & H. Meyer Sdn Bhd, MGCC Board Member), Choo Soong Loon (Liaison Officer, Corporate Services & Accounting, Luther Corporate Services Sdn Bhd).

From l. to r. Wiphaphan Khunkitti (Liaison Officer Bilateral Trade & Invest, MGCC), Calvin Chan Guan Li (Manager – Global Business Development, TMF Group), Celine Chan (Managing Director, TMF Group), Yap Wai Bing (Managing Director, TMF Trust Labuan Limited), Daniel Bernbeck (Incoming Executive Director, MGCC).

Tobias Amann (Managing Director, IKA Works (Asia) Sdn Bhd), Kamarul Zaman bin Datuk Haji Abdul Aziz (Senior Director Corporate Affairs & Business Development, Volkswagen Group Malaysia), Mohamed Aslam (Senior Manager Corporate Affairs & Business Development, Volkswagen Group Malaysia).

From l. to r. Jaclyn Chan (Accounts Officer, MGCC), Sherena Wong (Trade Fair Officer, MGCC), Heng Lee Huang (Head of Administration, MGCC), Lionel Tan (Director, Head of Sales & Key Account Management, Schenker Logistics), Sven Schneider (Head of Corporate Strategic Planning, SSIC Berhad), Ramesh Supramaniam (Senior Manager, Sales & Key Account Management, Schenker Logistics), Datuk Muhammad Feisol Hassan (Chairman, LCTH Corporation Berhad, MGCC Board Member).

46 GERMAN INSTITUTIONS

Doctorate in GermanyAll over the world German higher education institutions enjoy an excellent reputation. German degrees carry great prestige while teaching and research provide key impulses for innovation and progress. If you plan to do a doctorate in Germany, you can choose between two different approaches: Individual doctorate or structured doctorate programme. In the framework of the individual PhD, you will do your research individually under one German supervisor. The most important task is to find a German professor who agrees to be your PhD-supervisor. For contacting a German professor, you would need a short sketch of what you want to do as your PhD-research topic. For a structured PhD programme, research is done in a research “team” and under the supervision of more than one Professor. Structured PhD programmes are offered by universities and research organisations.

Doctoral candidates can apply for the following DAAD PhD scholarships:

Research Grants• Doctoral Programmes in Germany • Bi-nationally Supervised Doctoral Degrees (sandwich program)

Deadline for the grants is 15 October 2015. Please visit our website www.daadkl.org for more information on Doctorate in Germany and scholarship offers from DAAD.

Come meet us during the upcoming Post Graduate Education Fair 2015: 21 – 23 August 2015 (Friday – Sunday) MidValley Exhibition Centre, Kuala Lumpur.

A PhD student analyses his research data in the laboratory.

48 MEMBERS

BNP Paribas has announced the recent appointment of Philippe Aroyo as Head of Country for Malaysia and Chief Executive Officer of BNP Paribas Malaysia Berhad.

Philippe brings along with him a wealth of managerial experience and market knowledge. Prior to this, Philippe has been the Head of Country for BNP Paribas United Arab Emirates (UAE) since 2008. Philippe has been with the Group for 26 years. He first joined BNP Paribas’ head office in Paris as a senior economist. In 1994, he moved on to join Inspection Generale and was subsequently promoted to Head of Audit Teams. Philippe then held senior positions in India and Senegal before being appointed Head of Country for Kuwait in 2002. During his tenures as Head of Country in Kuwait and subsequently the UAE, Philippe also held the esteemed role of Chairman of the section of the French Trade Advisers for the respective countries.

BNP Paribas Appoints New Head of Country for Malaysia

On 22 June 2015 Allianz Malaysia held a press conference to share the Company’s insurance solutions for Persons with Disabilities (“PWDs”). CEO of Allianz Malaysia Berhad and Allianz General Insurance Company (Malaysia) Berhad (“Allianz General”), Zakri Khir and CEO of Allianz Life Insurance Malaysia Berhad (“Allianz Life”), Rangam Bir introduced three products to the media, several NGOs and employees alike at Aloft Hotel, Kuala Lumpur.

The first product, Allianz Ability Life is brand new and underwritten by Allianz Life. It is a yearly renewable life insurance plan. This product is designed exclusively for PWDs and comes with affordable premium rates.

The other two products, Allianz Care Individual and Allianz Individual PA are underwritten by Allianz General. These two products are existing products which are now extended to PWDs.

Celebrating 25 years of Bosch charity organisation Primavera, a Virtual Learning Environment (VLE) was created for Sekolah Kebangsaan Taman Senangan (SKTS). SKTS is the first national primary school in Penang to have a VLE and they aptly named it ‘21st Century Learning Space’. It was officially opened on 23 April 2015 by the Bosch Car Multimedia management team from Germany and Penang.

Bosch’s contribution of RM80,000 is for renovating and equipping the classroom with VLE facilities such as computer tablets and projector systems. This contribution supports the Malaysian Education Blueprint 2013 – 2025 to scale up the quality of learning across the country by leveraging on Information and Communications Technology. Having established a strong footprint in Penang, Bosch is pleased to be able to contribute to the local community, not only from the economic point of view but also in terms of social responsibility.

Insurance Solutions for Persons with Disabilities

Bosch Establishes First Virtual Learning Environment for National Primary School in Penang

From right: CEO of Allianz Malaysia Berhad Zakri Khir and CEO of Allianz Life Insurance Malaysia Berhad Rangam reveal the 3 products during the event.

Philippe Aroyo, Head of Country for Malaysia and Chief Executive Officer of BNP Paribas Malaysia Berhad.

SKTS students striking a pose with the Bosch Car Multimedia team in their 21st Century Classroom on April 23, 2015.

Lübeck-based company acquires GasSecure AS.

Eco Galleria.

MEMBERS 49

Dräger Expands Technology Portfolio

IKA®-Werke named “Top 100 Innovator” for Third Consecutive Year!

IKA-Group representatives (from left), Marcel Stiegelmann and Erhard Eble (right) accepts the “Top 100 Innovator” award from Mentor, Ranga Yogeshwar (centre).

Welcome to Eco Galleria – where high street meets the high life. Inspired by Europe’s fashion centres, Eco Galleria transposes the modern mall into a high street setting to offer a premier shopping, dining and entertainment experience in a modern yet nostalgic environment with strong British colonial echoes.

This integrated commercial development occupies 13.85 acres in EcoWorld’s flagship development of Eco Botanic and comprises retail, a hotel and boutique office suites. Key features include two grand drop-off areas; two 422-inch LED screens flanking the grand entrance; a charming English-style shopping arcade; 16,000 sq. ft Courtyard Atrium which offers a large, flexible space for a range of events and pedestrian-friendly environment with covered walkway, linkway and Festival Street connections.

Eco Galleria is located in Iskandar Malaysia, in the vicinity of key commercial, educational, medical centres and business parks. It also enjoys easy accessibility from Johor Bahru city centre and Singapore. A high concentration of discerning expatriates and high net-worth individuals provides pent-up demand for lifestyle shopping in this area.

Eco Galleria @ Eco Botanic– Your Very Own High Street in Iskandar Malaysia

“The purchase expands our portfolio to include a key technology with a promising future and strengthens the company’s strategic position, especially for customers in the oil, gas and chemical industries,” says Stefan Dräger, Chairman of the Executive Board of Drägerwerk Verwaltungs AG. The technical planning and installation of the system require significantly less time and effort than previous solutions. GasSecure’s wireless system can be used for more than one year without needing new batteries.

GasSecure AS will be integrated as a distinct subsidiary company of the Dräger Group. All employees will continue to work at the Oslo site. Their technological competence, expertise, entrepreneurial spirit and customer intimacy is an enrichment for the whole Dräger Group.

For more information, please visit http://www.gassecure.com/

Dräger will buy the Norwegian company GasSecure AS for a purchase price of between EUR 55 million and EUR 60 million. GasSecure has a fully wireless optical gas sensor for hydrocarbons and holds the corresponding intellectual property rights.

IKA® Works Asia’s parent company, IKA®-Werke GmbH & Co. KG was honoured as “Top 100 Innovator” and recognised as one of the most innovative companies in Germany. On June 26th, the honorary “Top 100” award seal of approval for IKA’s exemplary innovation processes was presented by Mentor, Ranga Yogeshwar. Repeating their winning trend again in 2015, IKA®-Werke’s entrepreneurial vision led the company to achieve second place in the Category for Companies With Over 250 employees. The President and Owner, Mr René Stiegelmann takes pride in the growing achievements of IKA Group. “Good ideas and its fast implementation are a key competitive factor for us. Therefore we invest a lot of time and money in our innovation management. As part of this, we rely on the wealth of ideas generated by all our employees. To them my special thanks for the achievement of the TOP 100 Award”, explained Mr Stiegelmann.

50 MEMBERS

The Infineon Week 2015 was a series of specially designed 3-day collaboration programmes for MMU Engineering & Information Technologies (IT) students which included Factory Visit, Career Talk & Alumni Sharing Session, Interview Session & Internship Application as well as Innovative Project Competition & Poster Presentation. This programme not only aimed at building collaborations with academic pioneers who will discover and drive the ways in which engineering and information technologies will enrich the human experience for generations to come and to be leaders but it also expands the industry knowledge base and attracts premier students to help innovate and transfer semiconductor technology to the commercial industry. Infineon week 2015 marked the 6th and 3rd year of collaboration with MMU and UTeM respectively.

Logwin organised an aid shipment to Nepal in May for which employees of Voith GmbH had collected tents, blankets and medicines for people in the quake-hit area. Logwin managed the logistics and is covering the entire costs of transportation. This aid project is not the first time that the technology group and the logistics service provider have collaborated – the companies have been business partners for many years. “It went without saying that we would support the project together with our customer,” says Werner Sander, Branch Manager at the Logwin Air + Ocean site in Stuttgart. “People in Nepal are more reliant on aid than ever before.” Logwin provided 14 x 100m² awnings since material is also needed for the construction of emergency shelters. “The awnings are intended to give people a temporary roof over their heads,” Werner Sander explains.

Stretching Intellectual Challenges through University Collaboration Program

After the Earthquake: Logwin and Voith Transport Relief Supplies to Nepal

A group picture with the students and management of Multimedia University.

From left: General Manager of International SOS Malaysia, Mr David Ng, Co-Founder and Group Chief Medical Director, Dr Pascal Rey-Herme. YB Dato’ Sri Mustapa Mohamed and Co-Founder, Chairman and Chief Executive Officer, Mr Arnaud Vaissié.

Tents, blankets and medicines – Logwin packed the relief supplies and organised transport to Nepal.

International SOS Malaysia is now operating from its new office located at KL Sentral. The premise is also home to its South and Southeast Asia (SSEA) Medical Services Operational Headquarters (OHQ), as well as its Global Corporate Shared Services (GCSS) Centre for Asia Pacific. The opening ceremony, held on 4 June 2015, was officiated by Malaysia’s Minister of International Trade and Industry, YB Dato’ Sri Mustapa Mohamed. The relocation of regional and global operations was compelled by the blend of Malaysia’s world-class infrastructure and talent availability, cost-competitiveness and ability to take the international best practices and apply it to its uniquely local market. International SOS has 11,000 employees across 92 countries serving 60 percent of the Fortune 500 companies as well as NGOs, governments and educational institutions around the world. Currently, International SOS staffs 400 employees in its Malaysian operations. The new office is located at B-15, Menara NU, KL Sentral, 50470 Kuala Lumpur.

International SOS Malaysia Operates in New Office Premise

MEMBERS 51

Malaysia Receives Its First DVB-T2 Signals from Rohde & Schwarz

R&S Transmitter system in Bukit Pelindong.

Rohde & Schwarz Malaysia has successfully put on-air for MYTV Broadcasting Sdn Bhd the first DVB-T2 digital television system in Malaysia – a major milestone in the country’s television history. MYTV Broadcasting Sdn Bhd is the current concession holder to operate National Digital Broadcasting project known as Common Integrated Infrastructure Project (CIIP). The first systems were put in place in the states of Pahang, Kelantan and Terengganu between April 27 and 29 this year. It is part of MYTV Broadcasting Sdn Bhd’s test phase currently underway in the three states. The scope of work for this trial transmission project included design engineering, procurement, installation, testing and commissioning of the R&S®THU9 Liquid-Cooled Transmitter as well as combiner systems from RFS, our partner in this project. With highly coordinated project and materials management, Rohde & Schwarz Malaysia and RFS delivered all project scopes within 7 days upon confirmation from MYTV Broadcasting Sdn Bhd.

Team STAEDTLER Malaysia at the prestigious Reader’s Digest Trusted Brand 2015 Award. Receiving the award is CEO of STAEDTLER Malaysia, Mr. Christopher Huehn (second from right).

STAEDTLER Malaysia has once again been named the recipient of the Reader’s Digest Trusted Brand Gold Award™ in the “Pencil” category in Malaysia for 2015. STAEDTLER was identified as one of the most trusted brands in Malaysia as voted by consumers. The award was presented at the renowned Reader’s Digest Trusted Brand Award gala which took place on June 16, 2015 in Mandarin Oriental, Kuala Lumpur. Receiving the Reader’s Digest Trusted Brand Gold Award™ in the “Pencil” category in Malaysia for 2015 was Christopher Huehn, the CEO of STAEDTLER Malaysia. STAEDTLER Malaysia also launched its latest exam pencil, the Noris® 2B Triangular GRED PEPERIKSAAN pencil which comes in four ‘lucky colours’ at one of the largest book fairs in the country, the Bookfest@Malaysia 2015 organised by POPULAR at the Kuala Lumpur Convention Centre from 11 – 19 July 2015.

STAEDTLER Recognised as One of the Most Trusted Brands in Malaysia As a partner of the global innovation platform CODE_n, initiated

by the GFT Group, TRUMPF represented at CeBIT this year for the first time. Under the umbrella of CODE_n, startups and their business models meet established industry and service businesses. Together, they open up new opportunities for the digitisation of the economy. Participation in Industry 4.0: An important part of the exhibition concept: keynote speeches and discussions by several TRUMPF representatives will speak on topics such as “How will Industry 4.0 change manufacturing systems engineering?” or “Manufacturing systems engineering goes cloud: hot or not?” At the TRUMPF booth in the CODE_n hall, visitors experienced Industry 4.0 live – and also be there when “bits and bytes” are transformed in real time into a customised product for visitor to take home.

TRUMPF at the CeBIT for the First Time

TRUMPF CeBIT live demo for the first time.

52 MEMBERS

Mr Thilo J. Westerhausen, Managing Director of Elektrisola (Malaysia) Sdn Bhd had officially launched and handedover the beautiful canteen to Headmaster Mr Radza Krisnan representing the S.J.K. (T) Bentong.

Elektrisola spent a significant amount on this canteen project because we are very much part of the local community since almost 25 years ago.

Together with Elektrisola’s long term business partners: Mr Ng Hoi Sang of Fah Sang Engineering Sdn Bhd, Mr Y. T Chong of Yin & Lan Construction Sdn Bhd and Mr Ho Ten Pen of Weng Sang Power Sdn Bhd, we made this project a success. They supported this project by providing construction materials and labour at cost only. We thanked them for their cooperation. This project was supervised on budget and on time by Elektrisola’s recently retired Senior Maintenance and Facility Manager, Mr Mohan Aroo.

Charity with Community: Official Launch of Sekolah Jenis Kebangsaan (Tamil) Bentong Canteen

Mr Thilo J Westerhausen cutting the ribbon and Mr Radza Krisnan standing beside him.

YOUR WORLD OF LOGISTICS

You know us from Europe …… and in over 40 locations in Asia.

Freight Logistics Contract Logistics Port Logistics

Rhenus-GroupTurnover at the Rhenus Group tops € 4,1 billion, making it one of the logistics service companies with global operations. Rhenus has business locations at more than 390 locations worldwide and employs 24,000 peo-ple. Our business areas contract logistics, freight logistics, port logistics and public transport stand for the management of complex supply chains and innovative value added services.

We accompany you throughout: No matter how far you go with your company, we will go with you on an expansion path and break new ground.

Your ContactsHolger Seehusen – Regional Director Rhenus Logistics Asia Pacific Pte Ltd

Email: holger.seehusen@ap.rhenus.com

Andreas Pistner – Regional Director Rhenus Logistics Asia Pacific Pte Ltd

Email: andreas.pistner@ap.rhenus.com

Our services

Airfreight

Ocean freight

Road transport

Warehousing

Transshipment

Value Added Services

Projects

High-Tech

Digital Archiving

Chemicals

Pharmaceuticals

Automotive

140902_AZ_AHK_ Malaysia_180x130.indd 1 02.09.14 20:34

MEMBERS 53

YOUR WORLD OF LOGISTICS

You know us from Europe …… and in over 40 locations in Asia.

Freight Logistics Contract Logistics Port Logistics

Rhenus-GroupTurnover at the Rhenus Group tops € 4,1 billion, making it one of the logistics service companies with global operations. Rhenus has business locations at more than 390 locations worldwide and employs 24,000 peo-ple. Our business areas contract logistics, freight logistics, port logistics and public transport stand for the management of complex supply chains and innovative value added services.

We accompany you throughout: No matter how far you go with your company, we will go with you on an expansion path and break new ground.

Your ContactsHolger Seehusen – Regional Director Rhenus Logistics Asia Pacific Pte Ltd

Email: holger.seehusen@ap.rhenus.com

Andreas Pistner – Regional Director Rhenus Logistics Asia Pacific Pte Ltd

Email: andreas.pistner@ap.rhenus.com

Our services

Airfreight

Ocean freight

Road transport

Warehousing

Transshipment

Value Added Services

Projects

High-Tech

Digital Archiving

Chemicals

Pharmaceuticals

Automotive

140902_AZ_AHK_ Malaysia_180x130.indd 1 02.09.14 20:34

MGCC Welcomes New Members

Mr Dave Ryan A. Buaron

DSC Software AG Dürr Technik GmbH & Co. KG

Fifteen years international working experience in the Philippines, Vietnam and Malaysia, with backgrounds in digital marketing and marketing communications, education management, training, workflow processes, external relations and liaison as well as social media strategy. Currently connected with Cempaka Schools Malaysia as a Special Projects Officer-Community Manager. I was instrumental in a more coherent digital media strategies through content creation, online reputation management, creation of corporate social media and email policies, community management, public relations as well as lecture on social media for students and teachers. I hold a Bachelor of Science in Business Administration (Major in Marketing) degree from the University of the Philippines, and expecting a Diploma in Digital Marketing from Chartered Institute of Marketing (United Kingdom). The main reason for joining MGCC is to reach out and engage a wider network of like-minded executives to exchange ideas and share opportunities.

Contact persons:

Mr Cheng Yaw GohDirectorBusiness Development ASIAContact No: +60 11 3527 8168, +49 17 6654 36880Email: ChengYaw.Goh@dscsag.com

Dipl. Wirtsch.-Ing. Prof. Dr.-Ing. Edwin HettesheimerStrategic Planning AdvisorContact No: +49 (0) 151 2280 7260Email: Edwin.Hettesheimer@dscsag.com

Contact persons:

Mr Karl WäschleSales Director

DSC Software AG lives up to its company slogan and spreads its enthusiasm further: with clever solutions for SAP PLM. For example with Engineering Control Center – ECTR – as an integration platform and intuitive SAP cockpit for development and design. With SAP Engineering Control Center interface to NX, or with Factory Control Center – FCTR – for SAP-integrated production planning and continuous CAD-CAM-DNC processes. DSC solutions are used in many industrial branches worldwide: from machine and plant engineering to the automotive industry, from aerospace to electrical and process engineering. For more than 30 years, manufacturers have been relying on the know-how of the Karlsruhe integration specialists. It is no coincidence that ECTR provides the basic technology for SAP Engineering Control Center, the new integration platform for development teams and systems engineering – as an essential component of the SAP strategy according to the principles of Industry 4.0.

Dürr Technik is a member of the DÜRR group companies with worldwide business partners and overseas offices. The head office is located in Bietigheim-Bissingen in one of the most innovative industrial regions in Germany. For over 50 years we have manufactured compressors and vacuum pumps. This long experience is offered to our customers today. An innovative development department, highly modern production and a quality certification, according to DIN EN ISO 9001, provide us with the ability to satisfy our customers high demands.Comprehensive consultation and continued cooperation with all our customers is the foundation of our business. Developing working partnerships with our customers ensures a perfect finished product. Dürr Technik specialise in the production of units for OEM applications. We develop and build complete systems on a cost effective basis - everything supplied from one source. From the modification of our standard units to the complete design and construction of special units – almost everything is possible. Design, function and performance are achieved in close co-operation with our customers. For different market segments Dürr Technik offer a wide standard range of small oil-free compressors and vacuum pumps. We also specialise in manufacturing tailor made products to meet individual customer requirements.

c/o Cempaka Schools MalaysiaPersiaran AwanaTaman Cheras Permata 243200 CherasSelangor

Tel : +60 3 9076 8400Mobile : +60 16 397 5625Email : ryan@cempaka.edu.my

Am Sandfeld 17D-76149 KarlsruheGermany

Tel : +49 721 9774 100 Fax : +49 721 9774 101Email : info@dscsag.com Web : www.dscsag.com

Pleidelsheimer Str. 30D-74321 Bietigheim-Bissingen Germany

Tel : +49 (0) 7142 90 22 0 Fax : +49 (0) 7142 90 22 99 Email : office@duerr-technik.deWeb : www.duerr-technik.eu

54 TRADE FAIRS

17 – 19 SEPTEMBER 2015: BALTIMORE USAAll Things Organic

BIOFACH AMERICA

From 17–19 September 2015, the Baltimore Convention and Exhibition Center will once again become the meeting place for the international organic products sector. Then, BIOFACH AMERICA – ALL THINGS ORGANIC, will be opening its doors. At the organic products trade show held parallel to the Natural Products Expo East, companies from all over the world will be presenting organic raw materials and products from the food and non-food sector. Over 1,200 companies are expected, around 150 of them specialising exclusively in organic products along with over 22,000 visitors. In terms of internationality too, BIOFACH AMERICA – ALL THINGS ORGANIC has a great deal to offer. For the first time, visitors can expect a Polish pavilion, while Argentina is represented with a pavilion once again. Applications from the Netherlands, Italy, France, Turkey as well as Great Britain have also been received. This healthy trend is a result of the positive performance by the American organic products market. According to the annual study conducted by the OTA (Organic Trade Association), sales of organic foodstuffs in 2014 reached around 39 billion US Dollars. That is 11% more than in 2013. Already held the day before the event, workshops and the communicative Harvest Festival will get people in the mood for the 3-day show.

Adam Andersen, Natural Products Group Show Director: “We are delighted to present the whole range of natural, ecological and healthy products once again in the fall. In my opinion, the unique mood at BIOFACH AMERICA – ALL THINGS ORGANIC is strongly

linked to the direct environment and surroundings of the event: Baltimore is not only a city with a rich culture and history. The inhabitants are also very hospitable and open-minded. Every year they look forward to the trade visitors from all over the world and put in a lot of effort to make the event an unforgettable experience for everyone.”

For years now we have been very pleased with the developments on the American organic products market. According to the Organic Industry Survey conducted by the OTA (Organic Trade Association), in 2014 Americans spent 39.1 billion US Dollars on organic food. That is a growth rate of 11.3% compared to 2013. At 14%, the largest increase in sales in the last six years was recorded by biological non-food products, such as eco-textiles, bio-degradable packaging and natural cosmetics. Here, the increase in organic sales is independent of income and size of household. 90% of all the Southern and West-American households surveyed purchase organic products at least from time to time. With sales of 13 billion US Dollars, in particular organic fruit and vegetables are very popular with the consumers. According to the OTA study, just as recently as 1997, organic products were regarded as niche articles. Today, eco products account for 5% of the USA’s food market worth a total of around 780 billion US Dollars. Katharina Neumann, Project Coordinator at BIOFACH AMERICA – ALL THINGS ORGANIC: “The OTA study once again confirms Americans’ increasing need for high-quality foodstuffs. Not only Argentina has returned with a pavilion. This

market trend is a giant opportunity, particularly for European organic products companies seeking to establish themselves in the USA. I am therefore particularly delighted at the first-time participation by Polish exhibitors. BIOFACH AMERICA – ALL THINGS ORGANIC is the ideal platform for the international organic exchange.”

This year the supporting conference programme will be covering the following theme sections: Natural in the Media, Ingredient Reform, the “Future of” Series, Non-GMO, Trends and Growth and Natural Economics. There is eager anticipation, among others, of the keynotes from best-seller author and system critic Dylan Ratigan and from agriculturalist and author Joel Salatin, who with his unmistakably humorous style, is actively supporting small farms and a regional food-supply system. The keynote from Michele Simon, by trade a lawyer in food law, will in turn pick up the theme of food marking and policy.

Already on the day before the fair opens, 16 September 2015, this will be complemented by diverse tours. One highlight is the Farm-to-Store Tour, in which the participants visit farms, processing companies and stores marketing regional products.

For more information, please contact:Ms Michelle LimMGCC Senior Marketing OfficerTel: +603-9235 1800 Fax: +603-2072 1198Email: michelle.lim@malaysia.ahk.de

20 – 23 OCTOBER 2015: MUNICH, GERMANYHotspot for the Ceramics Industry

CERAMITEC 2015

The international key trade show for the entire ceramics industry, from classic ceramics and raw materials through powder metallurgy and technical ceramics, will be held from 20 to 23 October 2015 on the exhibitions grounds of Messe München.

Just like its previous editions, ceramitec 2015 will be accompanied by a top-class supporting programme. The ceramitec Forum in hall B1 will once again serve as a platform for the transfer of knowledge and know-how, for research and development. Attendance at the specialist lectures and panel discussions will be free of charge. The lectures are offered with simultaneous translation in German and English.

The first day of the trade show, Tuesday 20 October 2015, will start with a panel discussion. The Powder Metallurgy Day is scheduled for Tuesday afternoon, followed by the Heavy Clay Day on Wednesday and the Technical Ceramics Day on Thursday.

The Career Day of the Network of Young Professionals will be integrated into ceramitec for the first time on Friday 23 October 2015. This is a joint initiative of the Koblenz University of Applied Sciences, the Expert Fachmedien GmbH, the Deutsche Keramische Gesellschaft (DKG) and ceramitec 2015. The aim is to foster the networking of companies from the ceramics industry with training and research centers as well as students, graduates and young professionals.

In addition, the Supporting Programme of ceramitec 2015 will once again be the platform for transferring knowledge and expertise for scientists and developers as well as for highly qualified professionals. On the “Day of Technical Ceramics” visitors will have the opportunity to gather information on aspects of Industry 4.0 in the ceramics sector and on the major materials groups in the field of technical ceramics. In lectures on additive manufacturing in ceramics and on innovations involving ceramics components in mechanical engineering, well-known experts will provide insights into the industry’s future. The range of products and services displayed at ceramitec includes literally all relevant areas. It shows state-of-the-art technologies from industry, research and development, making ceramitec the competence and technology center for the entire spectrum of ceramics applications.

In 2015, ceramitec will be characterized by a further enlargement of the segments of “Technical Ceramics” and “Powder Metallurgy”, even though the conventional segments covering raw materials, heavy clay ceramics, fine ceramics and refractory ceramics will continue to be in the limelight. In this way, the trade show offers its exhibitors and visitors a very wide range of products and services as can only be found at ceramitec.

For more information, please contact:Ms Sherena WongMGCC Trade Fair OfficerTel: +603-9235 1800 Fax: +603-2072 1198Email: sherena.wong@malaysia.ahk.de

TRADE FAIRS 55

56 TRADE FAIRS

fairs&moreGo Global with US

July – august 2015

For further information on Trade Fairs, please contact MGCCTel: (+60)3 9235 1800 Fax: (+60)3 2072 1198

E-mail: info@malaysia.ahk.de

The IT Security Conferenceand Corporate Networking

1 – 2 September 2015(Sao Paulo, Brasil)

European Trade Show for Packaging, Technology, Processing and Logistics

29 September – 1 October 2015(Nürnberg, Germany)

Where Beverage Meets Technology15 – 18 September 2015

(Chicago, USA)

The IT Security Expo and Congress06 – 08 October 2015

(Nürnberg, Germany)

World’s Leading Trade Fair for Electronics Development and Production

10 – 13 November 2015(Munich, Germany)

29 & 30 September 2015

Oktoberfest Beer,

Authentic German Food

& Die Dorf Fest Kapelle.in the festively

decorated

Oktoberfest Tent

For information and tickets, please contact mageswary.salvarajoo@malaysia.ahk.de

Please wear the Oktoberfest wristband for admission. Dress code: casual

UNDER THE PATRONAGE OF THE GERMAN AMBASSADOR

Organised by: Supported by:Endorsed by: