The Malaysian Bar welcomes the Government’s commitment to freer trade through the process of liberalisation of the services sector announced by the Prime Minister yesterday. But the Prime Minister is also correct to be concerned that such a liberalisation of the services sector should not adversely affect the domestic services industry. We are therefore concerned that “the legal profession will be liberalised to allow up to five top international law firms with expertise in international Islamic finance to practise in Malaysia”, as he reportedly stated.
Since September 2006 the Bar Council has had several meetings with Bank Negara Malaysia (BNM) with respect to the latter’s desire to have foreign law firms established in Malaysia to practise in the area of Islamic Finance on what is referred to as a “stand–alone” basis, i.e. without the need for such a foreign law firm to enter into any joint venture with a Malaysian law firm. From the very beginning BNM’s desire to bring in five foreign law firms (mainly London–based) was linked to the Malaysian International Islamic Finance Centre (or MIFC) initiative, for which BNM is the driver. The idea is to make Malaysia the premier Islamic Finance hub in Asia. BNM is also hopeful that these five foreign law firms, once established here, will bring their foreign clients and their Islamic Finance business to Malaysia. Although the Malaysian Bar is supportive of the MIFC initiative overall, we are not convinced that this will be the case.
Since September 2006 the Bar Council has had several meetings with Bank Negara Malaysia (BNM) with respect to the latter’s desire to have foreign law firms established in Malaysia to practise in the area of Islamic Finance on what is referred to as a “stand–alone” basis, i.e. without the need for such a foreign law firm to enter into any joint venture with a Malaysian law firm. From the very beginning BNM’s desire to bring in five foreign law firms (mainly London–based) was linked to the Malaysian International Islamic Finance Centre (or MIFC) initiative, for which BNM is the driver. The idea is to make Malaysia the premier Islamic Finance hub in Asia. BNM is also hopeful that these five foreign law firms, once established here, will bring their foreign clients and their Islamic Finance business to Malaysia. Although the Malaysian Bar is supportive of the MIFC initiative overall, we are not convinced that this will be the case.
The Bar Council’s position is that a managed system of liberalisation, in which foreign law firms are required to enter into joint ventures with Malaysian law firms, represents the best of both worlds as the Malaysian Bar has, amongst its members, sufficient practitioners with expertise in the area of Islamic Finance at an international level. Foreign law firms are able to tap into the Malaysian law firm’s knowledge of domestic laws, regulations and business environment, while Malaysian law firms are able to access knowledge of new legal/financial products. This reflects a “win–win” situation that would augur well for an orderly liberalisation of the domestic legal services market. The Bar Council has made known to the Government its preference for this method of liberalisation since November 2004, and has even prepared the relevant amendments and rules and regulations, and is therefore extremely disappointed that the views of BNM have prevailed.
A “jump–start” approach as advocated by BNM is counter–productive to the Malaysian legal services market in the long run. By permitting foreign law firms to set up on a “stand–alone” basis, there is no necessity for such foreign law firms to share or transfer any technology or knowledge to Malaysian practitioners.
The decision to allow these five foreign law firms to set up in Malaysia to practise in the area of Islamic Finance on a “stand–alone” basis would also run counter to the commitment Malaysia has given at the World Trade Organisation, and to various bilateral free trade agreement negotiations currently underway. Free trade requires a level playing field. Free trade cannot be said to exist in Malaysia if Malaysian practitioners are still required by the banking industry and government–linked companies to comply with Bumiputra equity and staff quotas. The Government must address domestic market issues and ensure that such policies are also abolished if there is to be true liberalisation of the legal services market in Malaysia. There is no point making Malaysia welcoming to foreigners if we have not yet put our own house in order.
Ragunath Kesavan
President
Malaysian Bar
23 April 2009
A “jump–start” approach as advocated by BNM is counter–productive to the Malaysian legal services market in the long run. By permitting foreign law firms to set up on a “stand–alone” basis, there is no necessity for such foreign law firms to share or transfer any technology or knowledge to Malaysian practitioners.
The decision to allow these five foreign law firms to set up in Malaysia to practise in the area of Islamic Finance on a “stand–alone” basis would also run counter to the commitment Malaysia has given at the World Trade Organisation, and to various bilateral free trade agreement negotiations currently underway. Free trade requires a level playing field. Free trade cannot be said to exist in Malaysia if Malaysian practitioners are still required by the banking industry and government–linked companies to comply with Bumiputra equity and staff quotas. The Government must address domestic market issues and ensure that such policies are also abolished if there is to be true liberalisation of the legal services market in Malaysia. There is no point making Malaysia welcoming to foreigners if we have not yet put our own house in order.
Ragunath Kesavan
President
Malaysian Bar
23 April 2009