Malaysia is seeking to deepen its financial market ties with Hong Kong to attract global capital, which could help the city grow its presence in Islamic finance, the Southeast Asian country’s trade minister said.
Tengku Zafrul Aziz proposed the increase in cooperation between the two economies during a Malaysian Chamber of Commerce (Hong Kong & Macau) event on Tuesday, following a trip to the Chinese mainland with Malaysian Prime Minister Anwar Ibrahim.
Malaysia would like to “leverage” Hong Kong’s position as a global financial center to “channel global capital into Malaysia’s economy,” said Tengku Zafrul, at the event. Meanwhile, as a leader in Islamic finance, Malaysia is well-positioned to help Hong Kong expand in what is now a $2.2 trillion global industry.
The Hong Kong government issued three batches of U.S. dollar-denominated Islamic bonds, known as sukuk, between 2014 and 2017.
Islamic finance refers to financial activities that comply with Sharia law, which prohibits payment and receipt of interest in financial transactions. The sector is growing as more Islamic financial institutions and businesses look to the capital market for financing. Sharia governs the financial needs of around a quarter of the world’s population, according to an S&P Global Ratings report.
Hong Kong, which is Malaysia’s ninth-largest trading partner, can also cooperate with the Southeast Asian country in the multitrillion-dollar global halal economy, Tengku Zafrul said.
The trade minister said he is “most excited” about Hong Kong’s application to join the Regional Comprehensive Economic Partnership (RCEP), and listed the services sector, digital and green economy, and talent development as areas where the two economies can collaborate more.
The RCEP pact, which went into effect at the beginning of last year, was signed by 15 Asia-Pacific countries — China, Japan, South Korea, New Zealand, Australia and 10 members of the Association of Southeast Asian Nations. The agreement aims to remove tariffs on at least 90% of goods traded among the countries.
Contact reporter Zhang Yukun (yukunzhang@caixin.com) and editor Jonathan Breen (jonathanbreen@caixin.com)
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