Keynote Address by
YBhg Datuk Ranjit Ajit Singh
Chairman of Securities Commission Malaysia
at the AICD Company Directors’ Conference 2015
in Kuala Lumpur on Wednesday, 20 May 2015

His Excellency Mr Rod Smith
Australia’s High Commissioner to Malaysia;
Mr Michael Smith
Chairman of the Australian Institute of Company Directors;
Mr John Brogden
Managing Director and CEO of AICD;
Distinguished guests, ladies and gentlemen – a very good morning to everyone.

1 It is a great pleasure for me to be here at the Company Directors’ Conference 2015. Thank you, Michael Smith, for inviting me to speak at this event and congratulations to AICD for once again bringing together such a large and influential gathering of Australian business leaders.
2 I am delighted to welcome all of you to Kuala Lumpur, and I hope that you will have the opportunity to explore some of the experiences that the city has to offer, particularly the dizzying array of gastronomic delights that have earned KL its reputation as a food lovers’ paradise.
3 The hosting of this conference in Kuala Lumpur coincides with an important milestone in our countries’ long history of commercial and socio-political ties, with 2015 marking the 60th anniversary of Australia’s diplomatic presence in Malaysia. Regional proximity and our shared Commonwealth heritage have made us steadfast and natural allies, with many Malaysians – such as I – also benefiting from the formative years we spent in Australia’s world-class education system.
4 The close relationship between our countries has enabled us to leverage on each other’s strengths and become close economic partners, with Malaysia emerging as Australia’s ninth-largest trading partner.1 There are also Australia touches on the modern-day Kuala Lumpur skyline, from the participation of Australian firms in the construction of landmarks such as the Petronas Twin Towers and KL Sentral transportation hub.2  Such physical transformation is emblematic of broader forces of modernisation within Malaysia, which has transitioned away from its previous reliance on agriculture and commodities into an industrialised upper-middle income economy which is the third largest in Southeast Asia.
5 One of the factors which paved the way for such modernisation was the development of a large and diversified financial system, anchored by a deep and resilient capital market which enabled Malaysia’s large pools of long-term savings to be mobilised into financing its growth. Lessons learnt during the ‘90s drove home the importance of ensuring the availability of stable and diversified domestic sources of financing for both the public and the private sectors, and the Securities Commission Malaysia – which I chair – was established specifically to safeguard the integrity of the capital market while also fostering its continuous development.
6 Today, the Malaysian capital market has grown to approximately AU$983 billion (RM2.82 trillion), approaching three times the size of GDP, and the equity market is home to the highest number of listed companies in Southeast Asia. The market’s role in promoting capital formation is illustrated by the sustained interest of issuers in the primary market, with corporate fundraising forecasted to exceed AU$30 billion (RM90 billion) per annum for the fourth consecutive year. One of the most important developments which have made such scale of capital-raising possible is the establishment of a domestic bond market which is now the third-largest in Asia as a percentage of GDP, underpinned by domestic institutional liquidity amounting to more than AU$392 billion (RM1.1 trillion). A concerted effort to develop retail investment products has also enabled the Malaysian unit trust industry to grow into the largest in Southeast Asia.
7 At the same time, Malaysia continues to flourish as the global leader in the Islamic capital market, once again emerging as the world’s largest issuer of sukuk in 2014. The development of the Islamic capital market in Malaysia was the result of a concerted policy to establish a full-fledged Islamic financial system in parallel with the conventional financial system, in order to broaden the range of financial product and service offerings to Malaysia’s investing public while also capitalising on the socially beneficial principles of Islamic finance which espouse values such as ethical conduct, fair treatment of investors and the avoidance of speculation. Our efforts to further mainstream Islamic finance internationally are beginning to gain traction beyond predominantly-Muslim markets, with large financial centres such as London, Hong Kong and Luxembourg making debut sukuk issuances last year.
Ladies and gentlemen,
8 Unlocking business opportunities in Malaysia and ASEAN

Malaysia’s experience underscores the importance of capital market development in catalysing economic growth – a lesson which will be increasingly drawn upon leading up to the establishment of the ASEAN Economic Community (AEC) by end-2015. By breaking down barriers in the world’s third-most populous region, the AEC will bring together a population of 633 million – larger than that of North America and the European Union – and accelerate growth in a region which is already the world’s seventh-largest economy with a combined GDP of US$2.4 trillion.3 The opening up of such untapped opportunities in one of the world’s fastest-growing regions represents a compelling business proposition for Malaysian and Australian companies, who currently stand to gain from first-mover advantage in nascent markets and offer healthy competition to incumbents in more established markets.

9 The fact that 400 million of the ASEAN population is projected to reach “middle class” status by 2020, in particular, is likely to benefit providers of consumer goods and services. With greater disposable income comes increased purchasing power, with consumer spending expected to double to US$2.3 trillion over the same period, representing US$770 million in “new money” inflows into the consumer market segment.4
10 At the same time, rapid urbanisation and the need to establish greater physical and digital interconnectivity in the region means that ASEAN requires US$8 trillion dollars of investment in infrastructure over the next decade. Such infrastructure needs are wide-ranging, spanning energy, telecommunications, transportation as well as water and sanitation – which represent multiple entry points for Australian firms with expertise in this area, as well as a potential asset class for Australia’s superannuation funds.
Ladies and gentlemen,
11 Capital market development as a critical enabler of regional growth

Securing the financing necessary for such investments, however, will be a major and important challenge for ASEAN policymakers. While public financing currently dominates near-term infrastructure expenditure for many countries in the region, a more diversified model involving greater private investor participation will be essential in the coming years to alleviate the demand on public finances and ensure the sustainability of sovereign fiscal commitments.

12 The urgency of meeting the region’s infrastructure financing needs is but one of the many factors which led us to understand how crucial it was for ASEAN to accelerate efforts to develop and integrate its capital markets. As chair of the ASEAN Capital Markets Forum (ACMF), I currently lead a group of securities market regulators from all 10 member countries who have been pursuing various measures to promote freer movement of capital, businesses and professionals within the region over the last decade.
13 Today, ACMF has made significant progress in connecting ASEAN capital markets while facilitating a more seamless experience for individuals and businesses across the region. Through initiatives led by ACMF, it is now easier for companies to raise funds across ASEAN and cross-list on multiple regional exchanges, while investors also stand to benefit from direct access to regional capital markets and investment products.
14 Moving forward, further regulatory harmonisation is imperative, as well as greater focus on market developmental efforts to narrow existing gaps among member states. ACMF will further strengthen interlinkages through the proposed establishment of an ASEAN funds passporting regime, while also remaining open to other potential avenues for regional cooperation in Asia Pacific. Such ambitions, however, are not without their attendant challenges, given the different levels of development and institutional structures within ASEAN member states. However, as policymakers we remain committed towards the pursuit of greater regional integration, which is the key to unlocking ASEAN’s economic competitiveness.
Ladies and gentlemen,
15 Strengthening the business environment through corporate governance

To ensure that ASEAN growth remains sustainable, lessons learnt from recent crises point towards a common denominator, which is corporate governance. Accounts of the global financial crisis may be peppered with references to exotic financial instruments and a surfeit of acronyms, but at its heart lies the failure of governance – failures that permeate through an organisation’s DNA and precipitated a calamitous breakdown in the trust and confidence of the general public in the financial system. Contrary to conventional narratives, the GFC has illustrated that poor corporate governance is actually a global problem, with advanced economies equally culpable as emerging markets in this regard, particularly as more and more instances of misconduct are revealed, such as the fixing of benchmark rates and mis-selling of financial products to retail investors.

16 As a result, corporate governance forms an important policy priority in our efforts to strengthen ASEAN’s overall business ecosystem. Under the ambit of ACMF, we have introduced the ASEAN Corporate Governance Scorecard which enables well-governed regional companies to be showcased to investors and provides an avenue for public listed companies to assess their own adherence with good CG practices. Moving forward, the ACMF will place greater emphasis on market developmental initiatives designed to narrow existing gaps among ASEAN capital markets, focusing on areas including capacity-building for corporate governance.
17 In Malaysia, the Securities Commission has taken a very structured approach towards the development of a culture of good conduct and corporate governance, with CG-related considerations being systematically incorporated into rules and regulations for the capital market. The Corporate Governance Blueprint released in 2011 articulates our approach to the next phase of corporate governance in Malaysia and provides extensive analysis and recommendations on areas including board composition and remuneration, as well as the role of information intermediaries and gatekeepers. Today, 83% of the recommendations contained in the Blueprint have already been implemented, including the release of a more comprehensive Malaysian Code on Corporate Governance and Code for Institutional Investors, with Malaysia’s continued improvement in international corporate governance rankings lending further support to our efforts.
18 Learning from the Australian experience: making CG a market agenda

However, policymakers continue to face significant challenges in this regard, the most persistent of which being the broad perception that corporate governance is first and foremost a regulatory agenda. An unfortunate corollary is that efforts to drive improvements in corporate governance tend to be top-down and government driven, with propensity by the private sector to opt for compliance in form rather than substance.

19 An important area where ASEAN (and indeed Malaysia) could learn from developed markets such as Australia is how this perception may be addressed to ensure that corporate governance will be embraced as a bottom-up, private sector-driven market agenda. Voluntary practices such as “black-sheeping” of poorly-governed firms are important in building a genuine and enduring culture of good governance, and cannot be coerced into existence by sheer regulatory might. Such a change in mindset was acknowledged in Malaysia’s CG Blueprint, which proposes the importance of three self-reinforcing pillars of governance, namely regulatory discipline, market discipline as well as self-discipline.
20 As boards are both the nucleus and conscience of a company, equipping them with a diverse mix of competencies, experience and perspectives is essential in building an organic culture of self-discipline and good governance. This is where capacity-building initiatives for directors – particularly those undertaken by institutes of directors such as AICD – are instrumental in nurturing directors who may effectively fulfil their stewardship role, provide thought leadership and professional scepticism, as well as champion good governance and ethical practices throughout the organisation.  Indeed, the AICD is widely regarded as a standard-setter in this regard, and I would like to commend you on the establishment of the Centre for Governance Excellence and Innovation.
21 I am also pleased to note that MINDA, which is the Malaysian counterpart to AICD, has been proactive in engaging with AICD in its efforts to establish the MINDA Directors Institute (MDI) in Malaysia. I understand that meetings have been held over the last two days to discuss potential avenues for cooperation and I hope that the discussions had been fruitful.
Ladies and gentlemen,
22 Conclusion

As we celebrate six decades of Australian and Malaysian cooperation, I look forward to many more years ahead of even stronger ties between our two nations specifically and within the Asia Pacific region generally. Malaysia and ASEAN are open for business, and we strongly encourage Australian businesses to explore the opportunities that we have to offer – opportunities that include not only commercial linkages but also the sharing of knowledge and best practices in building a vibrant private sector.

Once again, thank you for inviting me to speak and I wish you a very productive conference.

– END –

1 Australian government statistics

2 Lend Lease

3 UNDP and McKinsey

4 Accenture projections