Tuesday, December 08, 2009

Make M'sians Become High Income Growth Model

Financial institutions say employment of highly-skilled labour a key ingredient
PETALING JAYA: Banks can innovate and support the high income growth model for which a basic ingredient is the setting up of industries that employ highly-skilled labour.

“All over the world, countries with high income would have industries and activities involving highly skilled workers who would be paid high wages,” said Sanjeev Nanavati, CEO of Citibank Malaysia.

The starting point is the availability of such a pool and in Malaysia’s case, there is an urgent need to iron out some serious human capital issues relating to education, innovation and the rate of emigration.

“There is enough financing in the country,” said Sanjeev.

“What it needs is more private investments in highly skilled areas to take place. Malaysia has to make itself a compelling, not just attractive, destination for foreign investments,” he added.

“It needs to increase the momentum towards achieving the high income growth model by repositioning itself as a hub for higher education.”

It should consider inviting the top universities in the world to set up an international campus here, setting up more international schools which should be more accessible to Malaysians and making a concerted effort to change the quality of human capital.

CIMB group chief financial officer Kenny Kim sees the banking sector’s role as providing financing schemes to grow new sectors of the economy, particularly in the knowledge intensive areas.

“This may involve taking a different approach in assessing credit risk as these industries do not have traditional collateral,” said Kim.

Banks and the Government should also collaborate to support businesses seeking capital to grow in new areas such as clean energy.

According to Alliance Bank CEO Datuk Bridget Lai, processes and services that help generate cost and time saving for businesses will become more prominent.

Cash management, e-commerce, payroll and other automated services will free up more resources that can be directed towards higher income generating activities.

“A high income economy driven by the services sector will increase the population of educated, high networth individuals who will demand more sophisticated offerings,” she said.

This is apart from the bread-and-butter products such as credit cards, personal loans and mortgages. (In 2008, mortgages represented 54% of total consumer loans, vehicle financing 31%, personal loans 9% and credit cards 7%).

“Variety and flexibility in savings and/or investments, transportability of resources and assets as well as reputable fiduciary and estate planning will feature heavily in this economy,” she added.

As customers require higher value added from banks, a “one-size-fits-all” approach will not work.

A bigger shift is expected towards more financial planning services versus the traditional selling of financial products.

“CIMB group is making investments in this area to enable its frontliners to better understand its clients’ unique needs before recommending solutions,” Kim said.

There will be more emphasis on insurance, unit trust and structured products to complement traditional deposit products as a means of income growth and preservation.

Banking services should become more accessible through the growing usage of Internet and mobile banking as well as call centres.

A bigger role lies ahead for banks and other financial intermediaries in providing sufficient education and understanding of complex investment options.

“Banks will need to meet these new benchmark levels of expectations,” said Lai. Besides financial planning skills, further education is required in portfolio management, risk and diversification techniques as well as international offerings of financial investment options.

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