Country Economic Work for Malaysia - Islamic Development Bank

Liberal Foreign Exchange Administration Rules
133. Malaysia continues to maintain liberal foreign exchange administration (FEA) policy
to support and enhance the competitiveness of the economy while promoting financial and
economic stability. The liberalisation of FEA rules are aimed at creating a more positive
environment for trade, business and investment activities in line with the readiness of the
Malaysian economy. Greater flexibility is given for effective financial and risk management
practices, as well as in support of Malaysia as an International Islamic Financial Centre. In
this regard, flexibility is given for Islamic funds to be freely invested abroad.
Tax Neutrality in Treatment of Islamic Banking
134. Malaysia offers the unique proposition whereby there is tax neutrality in the treatment
of Islamic banking and conventional banking products. Tax neutrality has been accorded to
Islamic finance instruments and transactions executed to fulfill Shariah requirements. There is
no additional stamp duty and tax payment incurred in the usage of Islamic products that have
comparable products in the conventional banks. Malaysia's tax neutrality framework is to
promote level playing field between conventional and Islamic financial products. Tax
neutrality reduces the cost of doing business in Islamic finance, thereby contributing to the
overall competitiveness and spurs the development of Islamic finance.
Comprehensive Human Capital Development for Islamic Finance Industry
135. Malaysia has placed a strong emphasis on human capital development alongside the
development of Islamic finance industry to ensure the availability of Islamic finance talent.
Malaysia has a large and diverse pool of Islamic finance talent comprises product innovators,
regulators, intermediaries and risk managers who have both financial and Shariah knowledge
and expertise. Malaysia adopts a structured and comprehensive approach to human capital
development in Islamic finance to meet the growing needs of Islamic finance talent by
domestic and foreign financial institutions. Malaysia has various institutions targeted at all
levels of Islamic finance education, training and research. Courses have also been developed
for professional talent enrichment, for undergraduate and postgraduate qualifications, for
research and for thought leadership in Islamic finance and Shariah. Many institutions of
higher learning in Malaysia also offer undergraduate and post-graduate programmes in
finance with a specialisation in Islamic finance. Malaysia has the edge in attracting talent in
Islamic finance to participate in its Islamic financial industry through its recent MIFC
initiatives by providing withholding tax exemption and facilitative immigration policies to
Islamic finance expatriates working in Malaysia.
Continuous Product Innovation and World Firsts
‣ First bai' bithaman ajil Islamic debt securities by Shell MDS Sdn. Bhd in 1990
‣ First Sukuk mudharabah by Cagamas Berhad in 1994
‣ First global corporate Sukuk ijarah by Kumpulan Guthrie Berhad in 2001
‣ First global sovereign Sukuk ijarah by Government of Malaysia in 2002
‣ First tradable Sukuk Istisna' by SKS Power Sdn. Bhd. in 2003
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