Malaysia to set up RM10bn private equity fund

The fund is part of a broader initiative to spur investment activity in the country.

The Malaysian government will establish a private equity fund with initial commitments of RM500 million ($142 million; €101 million). The size will subsequently be increased to RM10 billion, Malaysian prime minister Najib Razak said in a speech at the Invest Malaysia 2009 conference in Kuala Lumpur, Malaysia.

The fund, Ekuiti Nasional Bhd (Ekuinas), will invest in sectors with high growth potential, in line with supporting the prime minister's “new economic model”. Ekuinas will also make co-investments with private sector funds, he added.

Over the next decade, the “new economic model” is intended to shift the country’s reliance from a manufacturing base that is dependent on low cost and semi-skilled labour to one that relies on a high technology and modern service sector with skilled and highly paid workers, the prime minister said.

These are important steps and will be of benefit to private equity and other investors.

Nick Bloy

Separately, the prime minister also outlined plans to ease foreign investment regulations in various sectors of Malaysia’s economy. The country’s Foreign Investment Committee (FIC) guidelines covering the acquisition of equity stakes, mergers and takeovers have also been repealed, without any new guideline in place.

FIC’s scope will now involve fewer transactions, rules and conditions. “This is in line with the government’s focus towards establishing a more conducive regulatory environment for the private sector to prosper, by facilitating robust investment activity and a more vibrant capital market,” the prime minister said.

According to another policy change, companies listing on the Kuala Lumpur exchange will no longer be required to allocate 30 percent of their equity to ethnic Malays as they have had to until now under the Bumiputera equity quota.

Bumiputera when literally translated means “son of earth”. In the 1970s, the Malaysian government implemented pro-Bumiputera policies, a form of affirmative action to benefit the majority ethnic Malay population and other indigenous ethnic groups.

“[The new regulations are] are good for foreign investors. The removal of the 30 percent Bumiputera ownership threshold, and the dismantling of the Foreign Investment Committee as an approving body – these are the important steps and will be of benefit to private equity and other investors. And also good for Malaysia,” said Nick Bloy, co-founder and managing partner of Malaysia-based buyout firm Navis Capital Partners, told PEO.

Bloy said he did not believe there would be any distinction between foreign private equity firms and other foreign investors.