3rd World Capital Markets Symposium 2013

By Tuesday October 22nd, 2013 No Comments

Ladies and Gentlemen.

It is a pleasure to have the opportunity to address the World Capital Markets Symposium once again. There are many events that bring thought-leaders together to discuss the issues affecting the global economy. But as far as I know, this is the only one that does so from the perspective of capital markets.

This is curious. After all, modern economies are based on markets, and capital markets are the means by which information on many aspects of human activity is disseminated. Of course, their primary purpose is to enable economic decision making; but they can also inform policymaking at the grandest scale.

This symposium reflects that role. Over the years, it has attracted Nobel prize-winners, government officials and business leaders from around the world. And this year is no different. I am glad – but not surprised – to see such a strong line-up of speakers for the next two days.

On behalf of all the people of Malaysia, let me welcome you to Kuala Lumpur. I hope you will find time not only for fruitful discussion, but also to experience our rich culture, community and cuisine.

This year’s symposium is particularly auspicious, as it coincides with Securities Commission Malaysia’s 20th anniversary. In 1993, the SC was given an explicit mandate to set the foundations for the development and sustainable growth of Malaysia’s capital market.

That ambition has been met. According to institutions such as the International Monetary Fund (IMF), our own regulatory framework meets best-in-class international standards. And Malaysia is today acknowledged as a thought-leader and significant contributor to international regulatory reform efforts.

Their success has made a genuine contribution to our national story. Over the years, the capital market has been instrumental in enabling Malaysia’s economic transformation, resulting in broad-based development and a higher standard of living for its people.

And so I would like to take this opportunity to congratulate the Commission and its staff on a solid twenty years of striving to achieve their mission; of promoting a safe and transparent capital market for Malaysia, and facilitating its orderly development. May you repeat and grow your success over the next twenty.


Ladies and Gentlemen,

As we look to a future defined by further growth and development – where Malaysia’s economy is more open, more competitive, and better integrated with global markets – it is worth pausing to consider the role that our capital market has played in our past success.

Over the last twenty years, the rise of a vibrant capital market in Malaysia has followed a familiar pattern. The broadening and deepening of the capital market has enabled savings to be more efficiently mobilised and utilised for capital formation.

By unlocking latent sources of capital, markets have enabled enterprises to raise capital for long-term fixed investments. This in turn paved the way for broad-based development, by financing critical public and private infrastructure, such as utilities, transportation and telecommunication.

Opportunities for Malaysians to build wealth over the long-term and for the long-term have also grown. Through the capital market, corporate ownership has been increasingly democratised, enabling Malaysians to play a bigger part in – and benefit from – our nation’s growth story.

Thanks to special institutions and investment schemes to encourage and facilitate investment by lower-income households, our capital market is now more accessible than ever.

It is also more inclusive. The capital market has enabled socially beneficial innovations that open up economic participation to a wider range of stakeholders. One particularly prominent example is our world-leading Islamic capital market, which meets the demand for shariah-compliant investment and capital-raising.

These benefits are not felt by individuals alone. Initiatives to address the financing needs of the entire spectrum of businesses – across the public and private spheres, from small- and medium-sized enterprises to large corporations, from start-ups to social enterprises – are complementing these efforts at building a more inclusive market.

As a result, our capital market now really matters to our economy. Malaysia’s capital market is today valued at US$816 billion – two-and-a-half times our current GDP. Our bond market, worth US$314 billion, has grown to become Asia’s third largest relative to GDP. We have today the largest unit trust industry in ASEAN, with a combined net asset value of US$102 billion; our sukuk market accounts for almost 70% of the global total, and we are home to the world’s largest Islamic unit trust industry.


Ladies and Gentlemen,

As Malaysia’s experience suggests, when correctly harnessed and channelled, markets can prove to be transformative: not just for the economy, but for society too. By unlocking opportunity, and giving citizens a greater stake in their nation’s success, they can strengthen both individual prospects and the bonds of community.

But in the aftermath of the global financial crisis, there are real questions being asked about international finance; about the role and reach of regulators, and about the true nature of sustainable growth. And it is clear that, although the fault lines that manifested in global finance led the world economy into crisis five years ago, we cannot achieve a meaningful return to growth without first breathing new life into financial markets.

How then do we resolve this extraordinary paradox? How can it be that financial markets could be both the riddle and the solution?

First, I believe we must accept the fundamental neutrality of markets. Markets do not make decisions nor do they make judgment calls. They are a medium whose behaviour and influence are driven by the millions of players whose choices and interactions have moulded the global financial industry into what it is today.

If we accept the premise neutrality of markets, then we can conclude that it is the prerogative of the users to use them as a force for good. This, I believe, is the essence of today’s symposium: to show the good that markets can do, by defining their positive purpose and utility; and at the same time to guard against the bad, by setting boundaries and reining in excess.

Ladies and Gentlemen,

For markets to fulfil their role as enablers of growth, I believe we need to reshape their relationship with the real economy. In doing so, we must acknowledge the socioeconomic role of markets, which have such an important impact on the distribution of wealth and opportunities, and on social mobility.

The relationships between markets and the economy, between investors and investees, and between issuers and intermediaries, should be governed by principles of social justice; such as inclusiveness, equity and sustainability. Only then can the social value of markets be realised, understood and benefitted by the people at large.

We should not confuse growth with development: achieving very high growth today does not always mean that we will be developed tomorrow. Nor should we judge our development on the basis of per-capita income alone; we should instead aim for a much broader measure of development, one which more accurately captures improvements to the lives and futures of citizens.

For this reason, our goal should be to optimise, not to maximise; with a view on the long-term, rather than the immediate; to do the right thing, rather than to be expedient.


Ladies and Gentlemen,

With the current global preoccupation on the quality of growth, governments and policymakers now have a greater social mandate than ever before to make courageous decisions to reshape their economies.

However, history has shown repeatedly that such sentiment will ebb and flow with the financial cycle. While we have time and public support on our side, we should make the most of this opportunity before cautious optimism gives way to either unfounded euphoria or unwarranted despair.

In Malaysia, we have been measured and steady in our approach to growth, and to market development in particular. We have typically adopted a gradual or phased approach, ensuring that the domestic building blocks of a strong economy are in place before opening the economy to international competition and pressures. This involves, among other things, establishing strong domestic institutional capacity not only to develop but to deliver policy.

However, where external factors – such as the global financial crisis – have
warranted, we have responded swiftly and decisively, smoothing the impact of swings in the global financial and business cycles on Malaysia’s economy.

Ladies and Gentlemen,

The global financial system has often been compared to a machine; and like any machine, if left unmonitored, it could be prone to overheating. To prevent this, we need a holistic system of checks and balances to detect and thwart excesses, to ensure that no one part of this vast, intricate apparatus runs ahead of the others.

We also need to ensure that the act of reigning in irrational exuberance does not cause undue collateral damage; we do not wish to become hostage to a dysfunctional system for fear of incurring even greater losses.

While the problems we face are global in nature, the tools and institutions that we have to address them are mostly domestic. This inevitably gives rise to coordination failures at the international level: a classic example of the Prisoner’s Dilemma. As a result, we have seen how well-intended policies can give rise to unforeseen consequences and negative externalities.

Furthermore, while policymakers are responsible for designing and implementing the right incentives and parameters, other stakeholders have their own role to play. Governments can set broad boundaries and deploy specific regulations, but responsibility for setting the tone is dependent on leadership from businesses and wider society.


Ladies and Gentlemen,

The political philosopher Michael Sandel has argued that we have let market forces run too far – that we have moved beyond having a market economy and instead become a market society.

As a result, actions that were once beyond social norms have been made implicitly acceptable, provided the right price has been paid. In some sectors, we have allowed market failures to persist beyond reason and in opposition to national interest. If we let this continue, we risk losing our ability to distinguish between what is right and what is wrong; and we are instead reduced to merely fretting over technicalities.

Ladies and Gentlemen,

There has never been a better time to ask fundamental questions of ourselves and our systems. What are the moral limits to markets? How can we re-engage markets with the real economy to enable them to support growth and resilience? Do we have the courage and the conviction to redefine the purpose and responsibilities of markets?

The diversity of backgrounds and opinions here at this symposium make it an ideal space in which to answer those questions. I believe that your perspectives will lend a new verve and vigour to these discussions; as Albert Einstein said, “we cannot solve our problems with the same thinking that we used to create them.”

I hope that the discussions over the next two days will contribute towards global efforts to reshape markets into socially optimal enablers; to rediscover their higher purpose, and rebuild global growth. I wish you a productive and engaging symposium.
Thank you.

Wabillahitaufik Walhidayah Wassalamualaikum Warahmatullahi Wabarakatuh.

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