Appendix I

External Policy Milestones

1999

January 4 Banking institutions were instructed to achieve a minimum loan growth of 8% by the end of 1999.

January 10 BNM took control of MBf Finance Berhad, the biggest finance company (with assets amounting to about US$5 billion, one-fourth of total assets of all finance companies) on grounds of weak management.

February 4 The 12-month holding rule on repatriation of foreign portfolio capital was replaced with a three-tier exit levy on the principal and profit.

February 18 Repatriation of funds relating to investment in immovable property was exempted from the exit levy.

May 26 BNM raised US$1 billion through a global bond issue. The issue was oversubscribed by 300%.

July 29 BNM unveiled a plan to combine the country's 58 financial institutions (22 commercial banks, 11 merchant banks and 25 finance companies) into six large banking groups.

August 7 Residents were allowed to grant overdraft facilities in ringgit not exceeding RM200 million for intra-day and not exceeding RM500 for overnight to foreign stock-broking companies subject to certain conditions.

August 9 BNM's intervention rate was reduced from 7% to 5%.

September 21 The three-tier levy on repatriation of portfolio capital was replaced with a flat 10% levy on profit repatriated.

October 21 Commercial banks were allowed to enter into short-term currency swap arrangements with non-resident stockbrokers for a maturity period not exceeding five working days with no rollover option.

2000

March 14 Funds arising from sales of securities purchased by non-residents on the CLOB market were permitted to be repatriated without paying exit levy.

September 30 Licensed offshore banks in the Labuan Offshore Financial Centre were allowed to invest in ringgit assets from their own account only and not on behalf of clients. The investment could not be financed by ringgit borrowing.

October 27 Profit earned from foreign portfolio investment in Malaysia for a period of more than one year was exempted from the 10% repatriation duty.

December 15 The 10% levy on profits earned from foreign portfolio investment repatriated within one year was abolished.

December 20 Licensed commercial banks were allowed to extend intra-day overdraft facilities not exceeding RM200 million and overnight facilities not exceeding RM10 million to foreign stockholding companies and foreign custodian banks.

2001

January 6 All controls on the trading of futures and options on the Malaysian stock exchange were abolished.

November 21 Licensed banks were allowed to extend credit facilities to nonresidents up to an aggregate of RM5 million to finance projects undertaken in Malaysia.

2002

March 12 RM10,000 ceiling on foreign currency loans to residents for investment overseas was removed. The requirement for using only ringgit for settlement of transactions on ringgit-denominated assets between residents and non-residents and between non-residents was abolished.

August 3 Banks were permitted to extend ringgit overdraft facilities not exceeding RM500,000 in aggregate to non-residents provided the credit facilities are fully covered at all times by fixed deposits placed by the non-resident customer with the lending bank.

2003

January 4 The maximum amount of repatriation of profits, dividends, rental income and interests on all bona fide investment without prior approval was increased from RM10, 000 to RM50, 000 or its equivalent in foreign currency. Residents who have foreign currency funds were permitted to invest freely in any foreign currency products offered by onshore licensed banks. The ceiling on bank loans to non-residents (excluding stock broking companies, custodian banks and correspondent banks) was raised from RM200, 000 to RM10,000,000.

2005

April 1

1. Investment in Malaysia by non-residents
   • There is no restriction on repatriation of capital, profits, dividends, interest, fees or rental by foreign direct investors or portfolio investors
   • Ringgit assets purchased by residents from non-residents may be settled in ringgit or foreign currency, other than Restricted Currency
2. Investment abroad by residents
   • Licensed onshore bank and approved merchant banks may invest abroad as long as they comply with the Banking and Financial Institution Act 1989 or Islamic Banking Act 1983 and their approved foreign currency net open position limit. Remittances for investment abroad must be made in foreign currency, other than Restricted Currency
   • Residents, companies and individuals with no domestic borrowing are free to invest abroad. The investment may be made through the conversion of ringgit or from foreign currency funds retained onshore or offshore.

July 21 BNM announced abolition of the ringgit peg to the US$ in favor of a managed floating system tied to a basket of currencies.

2007

April 1 Foreign exchange administration rules are liberalized to:

1. Expand the scope of licensed onshore banks' foreign currency business
   • Abolish net open position limit of licensed onshore banks which was previously capped at 20% of the banks' capital base
   • Abolish the limit imposed on licensed onshore banks for foreign currency accounts maintained by residents
   • Allow investment banks in Malaysia to undertake foreign currency business subject to a comprehensive supervisory review on the capacity of the investment banks.
2. Facilitate investments in ringgit assets by non-residents
   • Further flexibility for non-resident stockbrokerages and custodian banks to obtain ringgit overdraft facility from licensed onshore banks to avoid settlement failure due to inadvertent delays
   • Abolish the limit of the number of residential or commercial property loans obtained by non-residents
   • Allow licensed onshore banks to appoint overseas branches of their banking group as a vehicle to facilitate the settlement of any ringgit assets of their non-resident clients
   • Remove the restriction on Labuan offshore banks to transact in ringgit financial products on behalf of non-resident clients to enhance the role and scope of business of the Labuan offshore banks
3. Enhance business efficiency and investment opportunities
   • Increase the limit of foreign currency borrowing than can be obtained by resident corporations from licensed onshore banks and non-residents as well as through issuance of onshore foreign currency bonds, to RM100 million equivalent in aggregate and on corporate group basis from the previous RM50 million equivalent
   • Allow residents to hedge foreign currency loan repayment up to the full amount of underlying commitment
   • Enhance flexibilities for resident individuals and corporations to invest in foreign currency assets
   • Increase the limit for resident institutional investors to invest in foreign currency assets
   • Allow resident corporations to lend in foreign currency, the proceeds arising from listing of shares on foreign stock exchanges to other resident corporations within the same corporate group in Malaysia
   • Abolish restrictions on payments in foreign currency between residents for settlement of foreign currency financial products offered onshore
   • Allow resident individuals to open and maintain joint foreign currency accounts for any purpose
4. To facilitate development of the capital market to support the initiatives to expand the pool of high quality stocks and to provide diversity of offerings and promote cross-border linkages with other markets, the following foreign exchange administration rules are liberalized:
   • Allow non-resident corporations to utilize abroad the proceeds arising from the listing of shares through initial Public Offering on the Main Board of Bursa Malaysia
   • Allow resident corporations to utilize proceeds arising from the listing of shares through Initial Public Offering on the main Board of Bursa Malaysia for offshore investment purposes

August 1 The individual reporting threshold for transactions between residents and non-residents is increased to RM200,001 or its equivalent in foreign currency from RM50,001 per transaction.

October 1 The liberalization covers the following areas:

1. The abolition of 5 registration requirements.
   • Forward foreign exchange contracts by residents
   • Ringgit-denominated loans to non-residents for purchase or construction of immovable properties in Malaysia
   • Investment in foreign currency assets by residents
   • Foreign currency borrowing by residents
   • Prepayment or repayment of foreign currency borrowing by residents
2. Granting greater flexibility for Islamic funds managed onshore.
3. Providing greater flexibility on hedging of ringgit exposure by nonresidents.

November 28 Resident companies with export earnings are allowed to pay another resident company in foreign currency for the settlement of purchases of goods and services. The objective of this liberalization is to enhance Malaysia's competitiveness by reducing the cost of doing business for resident companies.

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