Malaysia takes another step toward easing capital controls
Malaysia takes another step toward easing capital controls
KUALA LUMPUR (Reuters): The Malaysian government on Thursday
took another step toward easing capital controls by excluding
foreign investments in property from a new system of levies on
repatriated principal and profit.
The central bank, Bank Negara Malaysia, said in a statement
that foreign investments in property would be immediately
excluded from a new system of levies on repatriated principal and
profit.
It said that for funds which came in before Feb. 15, 1999, no
levy would be imposed on repatriated principal invested in
properties.
Repatriated profits from property investments for funds which
are brought into the country on or after Feb. 15 would not be
taxed, Bank Negara said.
"Consequently, the levy is only imposed on investments in
shares, bonds and other financial instruments," it said.
Economists and analysts cheered the move, which came two weeks
after the government had scrapped a rule barring foreign
investors from repatriating the principal of investments for at
least 12 months.
But they said the move would probably not provide an immediate
boost to the glutted real estate market.
"Overall, anything that lessens fund flow controls, we view
positively," said Chong Yoon Chou, investment manager at Aberdeen
Asset Management in Singapore.
"It still leaves the question whether foreigners apart from
Singaporeans are going to be interested in the Malaysian market."
On Feb. 4, the government relaxed capital controls in place
since September by replacing the 12-month restriction on the
outflow of foreign portfolio investments with the system of
levies.
Repatriated principal of portfolio investments other than in
property made before Feb. 15 are subject to a levy ranging from
zero to 30 percent depending on how long the principal is kept in
the country.
For investments made on or after Feb. 15, there is no levy on
repatriated principal, but repatriated profits draw a tax of 30
percent if taken out of the country within 12 months, and 10
percent if after 12 months.
"I don't think it will have a significant impact on the
overall market as a big chunk of the foreign investments are in
the equities side," said Anthony Dass, economist at KAF Group.
"Foreign investors are not going to change their investment
plans because of this. So the impact, if any, on the property
sector as well as the stock market and the economy will be
insignificant," he said.
The Kuala Lumpur Stock Exchange's Property Index was also not
impressed by the news.
The index, which was down 2.35 percent at 08:00 GMT when the
announcement was made, ended 2.21 percent lower.