 |
ANZ Bank buys into Malaysia
ANZ Bank last week splurged A$833
million (K1.98 billion) on a 24.9% stake in Malaysia’s fifth
largest bank during Australian prime minister John Howard’s first
official visit to Kuala Lumpur.
ANZ, which quit its role as operator of India’s largest foreign
bank in 2000 because of problems on its home front, has been
steadily rebuilding its Asian connections in recent years.
Despite what appears to have been a longstanding interest, the
purchase of a stake in Malaysia’s AMMB Holdings has followed ANZ
forays into the Philippines, Indonesia, Vietnam, Cambodia and
China.
ANZ has made up for its late arrival with the size of its
Malaysian investment, which is equivalent to its total investment
elsewhere in Asia.
For the moment, though, ANZ’s fully owned branch network in Papua
New Guinea, which has a long and uninterrupted history, continues
to be its most profitable outside of its traditional bases in
Australia and New Zealand.
The timing of the Malaysian foray could have something to do with
improved bilateral relations as signalled by Howard’s visit
following a history of antagonism dating back to Labor prime
minister Bob Hawke and his successor, Paul Keating.
Most of the bilateral spats coincided with Malaysian prime
minister Mahathir Mohamad’s long years in office.
Howard was able to tell reporters at a news briefing that his
meeting with Dr Mahathir’s successor, Abdullah Ahmad Badawi, and
the speeding up of talks on a free trade agreement showed
bilateral relations were presently the best ever.
“We all know that relationship between Australia and Malaysia has
sometimes had its difficulties but it has been sustained through
very strong business links, very strong people links,” he said.
Howard said his “working visit”, the first by an Australian prime
minister in 20 years, was aimed at improving trade, cultural and
defence relationships. Both he and Abdullah expressed hopes a
comprehensive FTA would be signed by the end of next year.
An Australian study last year suggested that over a 20-year
period, such an agreement would increase Malaysia’s gross domestic
product by A$6.5 billion (K15 billion) and Australia’s by A$1.9
billion.
Many Malaysians would probably consider the former figure ‘too
good to be true’ considering that total annual bilateral trade now
stands at A$9.3 billion (K22 billion) with the services trade at
A$1.83 billion (K4.4 billion). But the study made this forecast on
an expectation of much greater Australian investments, which
appears highly probable.
At present, Australian investment in Malaysia only amounts to
A$800 million (K1.9 billion) compared with Malaysian investment in
Australia of A$5.8 billion (K13.8 billion).
The ANZ investment could well be a forerunner of a bigger flow
into Malaysia’s somewhat highly protected services sector, where
the FTA could open doors for Australian architects, lawyers and
others professionals.
ANZ’s chief executive John McFarlane, who has masterminded
Australia’s biggest banking presence in the Asian region, said
Malaysia’s 25 million people represented a very attractive market.
As Asia’s fifth fastest growing economy, Malaysia had a growth
rate which almost double that of Australia, he noted. The much
greater level of Malaysian investment in Australia is partly a
reflection of the encouragement given by the Malaysian government
for overseas investments that have been spearheaded by both public
and private sector companies.
New Australian investments will be very welcome in Malaysia
following a dramatic fall in foreign direct investment since the
1997 Asian economic crisis. Throughout much of the 1980s and
1990s, Malaysia was among the top 10 recipients of foreign direct
investment, enabling it to enjoy economic growth of more than 8%
annually over a period of more than a decade.
Despite its tiny size, Singapore has always attracted
significantly more foreign investment than Malaysia which, in
turn, is now proving less attractive than other Asean neighbours
such as Indonesia, Thailand and Vietnam.
Part of the problem appears to be concerns about excessive
government controls in the socio-economic arena, which is partly
contributing to a flight of capital by some major entrepreneurs.
While the latest ANZ investment has made for some headlines
because of the significant amount involved, there have been a
number of other recent deals.
Insurance Australia Group, a spin-off from Australia’s former
motor insurance organisation, could be looking to invest an
additional A$100 million to increase its equity stake in its
recently acquired 30% stake in AM Insurance. This would be
necessary if IAG decides to take up the maximum allowable foreign
equity stake of 49% following a proposed merger between AM
Insurance and Malaysia’s fifth biggest general insurance company,
Commerce Assurance.
Australian resource companies are also looking to set up
industrial ventures in Malaysia with the Perth-based Grange
Resources interested in setting up an export-oriented plant to
produce iron ore pellets from magnetite. This has become
attractive even though Grange has access to relatively cheap gas
near its iron ore mine in Western Australia because the Malaysian
government has granted Grange pioneer status and a 15-year tax
holiday.
Another Australian-listed company, Lynas Corporation, has recently
raised A$75 million (K179 million) and decided to build a rare
earths plant in Malaysia rather than China, a major potential
customer, even though the capital costs would be 25% higher.
Lynas chairman Nick Curtis said the Malaysian operation would
benefit by avoiding value added taxes and export duties it would
face in China along with the added incentive of a 10 to 15-year
tax holiday.
There are many top executives at ANZ Bank who regret pulling out
of India, where it continues to house sizeable backroom support
operations, especially in view of India’s celebrated economic take
off in more recent years.
Ironically, ANZ’s Malaysian investment is occurring at a time when
economic growth has slowed from over 8% annually to around 5%.
Despite the slower growth, many analysts believe there is scope
for more attractive profit growth within Malaysia’s financial
services sector.
There are also synergies to be gained from ANZ’s growing regional
network, including benefits from the bank’s role in PNG’s
burgeoning trade in the Asia-Pacific region.
 
|
