Is Malaysia Becoming a Hub For Islamic Finance in Asia?

Yes, Malaysia can be already dubbed as a center for Islamic finance in South East Asia, if not Asia.

Recently, Malaysian Islamic banking groups launched The Corporate Murabahah Master Agreement (CMMA) to boost Islamic finance money market. This is to ensure the market remains vibrant, volatile and nice-to-jump-in. To put it in layman's terms, CMMA is a standard document for deposit taking between financial institutions and corporate customers; where you can see the standard agreement would specify a common modus operandi for Islamic financial institutions in accepting deposits via commodity Murabahah.

But an interesting question quotes: "Do halal financial instruments hold up better than conventional and traditional bonds and stocks?" Or to put it in another way, "Is Islamic finance much safer than conventional finance?"

Islamic Finance: The basis, standard and core concept of Islamic finance has always been in the 'shared risk' area. As a start, you might find this more plausible than conventional trading, since the concept of Islamic finance itself calls for collateral backing by an individual or an entity in the middle of a financial instrument (more famously known as "Sukuk"). Sukuk is an Arabic term for "financial certificate."

Although there may be some arguments to whether many Islamic financial products are structured using LIBOR (London Interbank Offered Rate), a benchmark or reference rate for short-term interest rates worldwide calculated daily), there is no doubt to one thing - Islamic financial models (think concept) disguises its risk profiles to a certain extent. Because ruling on Shariah-compliance has been heavily emphasized and focused, there are a few factors that we could 'miss' - The more important factors to determine whether or not it adds positive value to an economy's financial system.

BUT, halt. That's generalization. Doesn't work this way in all ends. For a country like Malaysia, an economic stronghold in Asia in Islamic finance growing rapidly as an Islamic hub, authorities have considered many ends of conventional banking before introducing sophisticated finance products that are Islamic-based. They have one major problem - "Non-compliance with Islamic principles".

The Asset Way: One of the most famous ways of going about 'interest rates' (as Islamic principles disallow charging of interest rates) is to sell assets. This method has been used for years and there are many ways to go about it. Let's start.

Mr. A wants a RM10,000 personal loan. In conventional banking, the bank lends Mr. A the requested amount of money and charge an interest rate of say 1% per annum. Repayment 5 years. For Islamic financial products, that's not Halal.

So what they do is, the financial institution will take a readily available asset, price it above the agreed rate, sell it to Mr. A and immediately requests that Mr. A sells it back at the 'loan price'. So the bank may sell it to Mr. A at RM20,000 and he will have to sell it back to the financial institution immediately at RM10,000.

Shariah-compliance: Islamic financing has taken a brand new approach in introducing new methods of handling conventional banking; in its essence to serve its own population with compliance to its dos' and do nots'.

Can Islamic financing in Malaysia thrive, with its introductory of what some people call 'pseudo-Islamic Shariah'? Should we look into the ways of what Muslim scholars introduced to us as another way through conventional banking so that we're more secure?

Article Source: http://EzineArticles.com/?expert=Ken_Low

GST Implementation in Malaysia - The Argument

There were many responses when the Malaysian government first announced the Financial Budget for Malaysia, year 2010, both good and bad. But when they were undecided about GST, it sparked more conversation on whether it'll benefit the Rakyat, or further threaten poorer communities in Malaysia.
What goods GST covers
As proposed by our dear government, GST covers all types of goods & services sold to Malaysian & non-Malaysian residents (therefore consumers) except for a common commodities such as rice, flour & sugar.
This goes to mean: Whenever you walk into your favorite hypermarket with the family to get some groceries in the future, you will be charged additional ~% (the proposed additional 4%) on top of your bill except for certain controlled items.
Further, Malaysia's main revenue shouldn't just live off petroleum. In other words, we shouldn't put all eggs in one basket because petroleum revenues have risks of its own, seeing that it's a natural resource.
What reason did they give? More funds for development and expenses.
How much would they probably get? RM1 billion (RM1,000,000,000) per annum in estimated rounded-up revenue.
Will it hurt the poor & middle class?
To a certain extent, it will somehow affect pockets of middle and lower income group Malaysians.
The arguments:

1. Recent price hike in petrol, prices of commodities have increased drastically. And now another one called GST?
2. Income tax brackets for high earners aren't as 'expensive' as middle-to-low income groups.
3. The Malaysian government has saved approximately RM2 billion (RM2,000,000,000) by lowering fuel subsidies - What's the take on GST now for lower income groups?
4. GST is tax on SPENDING. Basically, everything from parking fees to purchasing mattress. Even with GST-exempted items, this would still hit lower income groups in Malaysia.
5. Private sectors aren't paying much to Malaysians - Other more developed countries such as Singapore could take this hit because wages & salaries are much higher.
6. Other countries such as Britain, India, Hong Kong, Japan and Singapore has GST - Doesn't mean GST has to be implemented in Malaysia. Their economic status and way of gaining revenue varies from Malaysia. (GST is also called VAT - Value Added Tax in other countries)
7. Inflation may happen. Prime Minister Mr. Najib has guaranteed no inflation - But with the introduction of GST, the chain of 'passing the cost' will end up usually at the hands of consumers.
8. Corruption isn't a rare thing in Malaysia - So businesses has already included 'corruption prices' in goods & services. How does that not reflect additional costs to consumers?
9. Out of inflation pressures, higher prices for goods & services are sought.

Prime Minister Mr. Najib has promised Malaysians that they will be tabling a public discussion on GST (called the GST Bill) on December. There are also several upsides that could be seen - But until Mr. Najib tables the meeting on GST Bill, we shouldn't be skeptical of anything yet.
Other side of the GST story
GST has been said to promise a few things:

1. Implementation will not be abrupt. It will be a slow & steady tax preparation so that individuals and small businesses will not be adversely affected.
2. It will replace the 10+5% services and goods tax. This means taxes are lower now - Consumers need not pay more for one area, but it's divided into many other source of 'tax' payments.
3. GST rates are promised at 4%, out of the normal 10% or 5% charged in restaurants.
4. Implementation will not occur until middle to late 2011 or 2012. Planning time is essential to not put 'inflation pressure' on small businesses.
5. Government's coffers will increase. This will enable further development and budget control to the country, other than relying just on petroleum or income tax revenues.
6. Tax when consumed, not when earned is much better. It allows better control. Spending influences will be "Careful" and "More controlled" when purchasing on higher prices are made rather than "taxable incomes" generated from work.
7. It's a broad-based tax system. Some items may be slightly more expensive & cheaper. It's not a overall standardized taxation method.

Your opinion on GST
Of course, there are many pros and cons of the new GST system - And the implementers should look more intricately into all income groups, balance their sheets and understand what are the effects first. While we can only propose so much, there's only so much we can do.
Here are some of the 'preparation techniques' the tablers of the GST Bill can adopt:

1. Be intricate with details: Tax is a complicated subject, like a science of its own. If you make the subject complicated, it may lead to more misunderstandings and later, more arguments.
2. Introduce 'layman terms' for further understanding. Giving examples always help. Examples on implementations always help. Tell a story to the public - And make it make sense to them.
3. Use other form of publicity media: Tabling the GST Bill on national newspapers and mass media isn't going to cut it. Find other means such as introduction campaigns Malaysia-wide.
4. Engage community understanding: Allow certain private and public (individual or company) figures to table talks and debates on GST Malaysia-wide. This encourages engagement and allows more problems & solutions to be seen.

The Malaysian government or finance department has a long time more (approximately 15 - 20 months) to table talks around Malaysia with regards to GST.
Article Source: http://EzineArticles.com/?expert=Ken_Low 

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