The Rebalance authors Mercy Kuo and Angie Tang regularly engage subject-matter experts, policy practitioners and strategic thinkers across the globe for their diverse insights into the U.S. rebalance to Asia. This conversation with Ms. Raja Teh Maimunah – Managing Director/Chief Executive Officer of Hong Leong Islamic Bank and adviser to the World Islamic Economic Forum – is the eleventh in “The Rebalance Insight Series.”
Ms. Raja Teh, with over 20 years of banking and investment experience in Southeast Asia and the Middle East, you understand the global impact of local knowledge. Your bank is one of the few Chinese Malaysian-owned Islamic banks with 50 percent non-Muslim clientele. From your perspective, what are two key trends driving Asia’s global economic competitiveness?
A large consumer base – we are home to nearly 60 percent of the estimated 7.2 billion world population – helps drive high consumption and high expenditure. Softening commodity prices helps curb inflation. Improvement in economic conditions in the United States and Europe helps the rise in exports. Structural reforms following the launch of the ASEAN Economic Community at the end of the year will help free flow of goods, services, and investments, as well as freer flow of capital and skills.
Hence, our big economies are set to grow by 6.3 percent this year according to ADB’s [Asian Development Bank’s] annual report. South Asia is trending higher to 7.2 percent in 2015 and 7.6 percent in 2016 and Southeast Asia is rebounding to 4.9 percent in 2015 and 5.3 percent in 2016. Asia has contributed three-fifths of the world’s GDP since the financial crisis broke out in the West and is set to remain the dominant contributor to global GDP growth.
The U.S. rebalance to Asia seeks to build an integrated trade and investment community by promoting coherent regulatory standards, efficient supply chains, protection of the environment, intellectual property, innovation and the spread of green technology. For Asian banking and financial institutions, how might future U.S. engagement be strengthened?
Frankly, I am uncertain as to how Asian banks can better engage with the United States. The U.S. rebalance to Asia conversation is largely China-centric and viewed by many as a strategy to contain the rise of China. The reluctance by the U.S. to participate in the AIIB signals its unwillingness to engage with Asia, particularly China. That makes the conversation difficult as the large banks in Asia are predominantly Chinese.
For Asian banks, recent financial regulations issued by the U.S. have an impact on Asian banks. The recent Dodd-Frank Act, which implements the much contested Volcker [Rule], affects Asian banks that have U.S. branches, agencies or subsidiaries. FATCA [Foreign Account Tax Compliance Act], which was introduced to avoid tax evasion, is also set to be a burden to Asian banks. Given the imposition of its laws by the United States on Asian banks, I don’t think the banks are in a position to effectively engage the U.S. on its “pivot to Asia” road.
Malaysia was one of the first countries to join China’s Asian Infrastructure Investment Bank (AIIB) and position itself as a Chinese currency – RMB (renminbi) – clearing center. How the AIIB upholds international regulatory standards will reflect China’s commitment to transparency. What are the implications of China’s growing leadership role as a norm-setter in this sector?
I believe the AIIB could play an important role in addressing infrastructure gaps in Asia. Infrastructure investment in Asia has its own peculiar legal, environmental, social, and commercial challenges. The existing infrastructure banks have often been criticized for being less than understanding of Asia’s infrastructure investment idiosyncrasies. Hence, they have been slow moving. This causes frustration for Asian governments and infrastructure players.
China’s leading role in the AIIB will help define new rules for investment in Asia, which is welcome in most part of Asia in balancing the world economic order. Concerns by the United States on China’s commitment to transparency are mitigated by the participation of the Europeans and other Asian nations, as they will most certainly influence the rules governing AIIB. But, we will have to wait for now and see how AIIB faces up to the challenges of a multilateral organization and deliver on its intent.
As one of an elite cohort of Muslim women CEOs, please describe obstacles and opportunities for female leadership in Asia’s Muslim-majority countries and what it might portend for counterparts in the Middle East.
While gender discrimination is apparent in many Muslim-majority countries, it is important to note that such inequality stems largely from cultural factors and not due to Islamic laws as often thought. Islam promotes both gender diversity and female rights.
According to the World Bank Malaysian Economic Monitor, the women labor force participation rate in Malaysia in 2013 was 52.4 percent and Indonesia was 51.9 percent. Malaysia in particular is conscious of the need to promote gender diversity. The [Malaysian] government has set a policy that women must comprise at least 30 percent of those in decision making positions in the corporate sector by 2017. There is now a requirement for a listed company to disclose its gender diversity policy in its annual report to shareholders. Close to two-thirds of public university entrants last year were women.
Opportunities for women to rise through the ranks in Malaysia are plentiful. Hence, we have women in key leadership positions in Malaysia, though I appreciate that this may not be the case for my counterparts in some parts of the Middle East as cultural norms confine women to subordinate roles.
What should the next U.S. president understand about Malaysia’s role in Asia’s economic growth trajectory?
Regional cooperation has always been Malaysia’s major preoccupation, and ASEAN is the cornerstone of Malaysia’s foreign policy. As chair of ASEAN 2015, Malaysia is set to play a vital role in influencing the future direction of ASEAN and its bid to become a regional economic powerhouse. Malaysia has expressed its commitment to the realization of the ASEAN Economic Community (AEC) by the end of the year has made it the main goal for its 2015 chairmanship of ASEAN.
Malaysia is generally regarded as a great economic house of the Muslim world. While Islam is the religion of the majority, Malaysia propagates diversity within its multiracial, multicultural society. Malaysia is populated by the three major Asian races, namely Malay, Indian and Chinese, and each retain their cultural identity with their countries of origin. Its promotion of diversity has enabled it to retain peace and stability, which in turns allows it to prosper and provide leadership within ASEAN.