KUALA LUMPUR — Malaysian bankers need to look at offering longer-term loans of up to 50 years in tandem with the Chinese counterparts, as well as lowering interest rates to drive Malaysia’s swathe of infrastructure projects forward, Treasury secretary-general Tan Sri Mohd Irwan Serigar Abdullah said.
“Their (China’s) banks offer interest rates as low as 2% to 3%, our banks don’t offer these kinds of interest rates. Chinese banks also can structure loans for as long as seven years to 10 years.
“Malaysian banks give me the money today and expect repayment tomorrow,” he jokingly chided the roomful of bankers at the RHB regional conference themed “One Belt, One Road, One Asia” here yesterday.
The Finance Ministry’s top civil servant also noted that for some infrastructure projects, Chinese banks have structured loans for up to 50 years, a risk local banks are unwilling to take.
“People are talking about second- or third-generation loans, so banks must be creative to stay relevant. Technology is changing fast, you need to change as well.
“We need funds at a cheaper rate, with long-term repayment and grace periods. This will benefit infrastructure projects that we really need such as public transportation and highways planned, as well as the Digital Free Trade Zone (DFTZ).
“We need to embrace these to inject growth and spur gross domestic product in the long-term. And we need the funds cheap now because in five to 10 years, the costs of these projects could easily double,” he added.
Irwan Serigar told bankers that 20% to 30% returns are history, as returns on investments have now moderated, so much so that returns of 10% to 14% are considered good.
He continued: “When you want to lend to government, don’t charge sky-high (rates). Local bankers are telling me government guarantees don’t carry value, and they still charge us high (rates).
“But the government’s guarantee is a guarantee nonetheless, and they should change their mindsets,” the Treasury secretary-general said.
For the DFTZ, Irwan Serigar said he has instructed International Trade and Industry Ministry secretary-general Datuk Seri J. Jayasiri to prepare “a few thousand” small and medium enterprises (SMEs) in the fintech sphere to
participate in the Alibaba-led initiative.
“There are many incentives and benefits available in the DFTZ, so we must have a strong Malaysian presence there, otherwise Alibaba is just going to bulldoze us. We must be careful, and make use of this win-win situation,” Irwan Serigar said.
Similarly, he said local banks must be prepared to “be smart” and work with their Chinese counterparts to structure partnerships.
On the sidelines of the conference, Irwan Serigar said the request for proposal (RFP) for the Bandar Malaysia project was officially opened to interested parties yesterday for bidding as master developer.
Irwan Serigar, who is also the chairman of TRX City Sdn Bhd and Bandar Malaysia Sdn Bhd, said new criteria and conditions for participation in the RFP would be set.
“This includes the focus on experience and companies in the Fortune 500 list, and their cumulative revenues over the last three years must be at least RM50 billion.
“We have had several companies calling up and asking for information, and today my office will send out the RFP,” he said.
RHB Banking Group hosted the conference with the main focus on infrastructure development and investment opportunities within Asean. The one-day conference was participated by more than 200 delegates, featured a line-up of high-level government representatives and subject matter experts, who shared insights and raised awareness on the scale and benefits of the One Belt, One Road (Obor) initiative.
The Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives, now commonly known as Obor would see land and sea trading interconnect between 68 nations, encompassing 68% of the world’s population and 33.3% of global gross domestic product as at 2016. Trade between China and Asean — specifically trade between China and Malaysia can be a major cornerstone for the success of Obor.
Overall, the announced Obor projects in Malaysia have a cumulative investment size of close to US$50 billion (RM214.5 billion) that is to be spread out over a period of seven to 10 years up to 2027, said RHB Research in a recent report.
Meanwhile, Asean needs infrastructure investments to the tune of US$2.2 billion between 2016 and 2030, according to McKinsey Global Institute.
(US$1 = RM4.29)