Although Malaysia’s financial services sector has experienced considerable success in attracting foreign firms – between 2003 and 2014 the country attracted more than $1.7bn in greenfield investments from 114 companies, according to greenfield investment monitor fDi Markets – Kuala Lumpur continues to struggle to compete with Singapore as the headquarter destination of choice for financial services firms in south-east Asia. While Singapore attracted the most projects in the sector in the Association of South-east Asian Nations (Asean) region between 2003 and 2014 – 388 projects worth $16bn – Malaysia attracted 249 new projects.

In addition, while Singapore was the leading city among all 10 Asean members in attracting capital from financial services companies during that period, fDi Markets data shows that Kuala Lumpur finished in fourth place by this measure, behind the likes of Ho Chi Minh and Hanoi in Vietnam. Yet Saif Malik, the managing director and head of corporate and institutional clients at Standard Chartered Bank Malaysia, says that the government’s push to promote Kuala Lumpur as a financial services hub in the Asean region is paying off.

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Exchange launch

Pointing to the government’s decision in 2012 to launch the Tun Razak Exchange (TRX), which will offer premium office space to financial and business services companies in the ‘Golden Triangle’ central business district of Kuala Lumpur, Mr Malik is confident that this will be a critical game changer.

“The central bank and the Malaysian government have created a resilient financial system that still has room for further growth and expansion going forward,” he says. “This can be seen in the initiatives over the past few years to develop and encourage Islamic finance and to liberalise the domestic financial sector. One initiative is the TRX. Situated in the heart of the city, it will generate an estimated RM3.5bn [$1.08bn] in FDI as some 100 global companies are expected to be based there.”

Islamic finance hub

Created to strengthen Kuala Lumpur’s standing as Malaysia’s financial services capital, the TRX is a 28-hectare development which provides office space as well as world-class residential, hospitality and retail centres. Upon its completion, companies based in the TRX will have access to a supportive ecosystem through being located in the same building as financial services providers as well as other ancillary businesses. Moreover, companies based in the TRX will be close to the underground Mass Rapid Transit (MRT) interchange station, as well as a number of major roads.

Although Kuala Lumpur prides itself on offering businesses an array of financial services – Malaysia's central bank estimates that the city is home to about 30 licensed commercial banks – the TRX has worked to position Kuala Lumpur as the leading Asian location for Islamic finance. Malaysia has extensive experience of creating diversified Islamic financial products dating back to the 1960s but the TRX signifies the country’s most proactive attempt to extend its array of sharia-compliant offerings to local and foreign Muslim investors.

Building on the success of the Malaysia International Islamic Financial Centre, which was launched in 2006 to develop Malaysia’s Islamic finance market by connecting Islamic and conventional financial institutions, the TRX is expected to significantly extend this platform.

“The purpose in launching the TRX is to reshape the financial landscape of Malaysia, particularly in Islamic finance,” says Mr Malik. “Its aim is to create a strong business network which will leverage Kuala Lumpur’s strong financial sector to create a comprehensive financial hub. Furthermore, with the anticipated creation in 2015 of the Asean Economic Community, the TRX is poised to become a central trading post for all participating countries. The TRX could potentially be the next Wall Street for Malaysia, as a front-running country for the global Islamic finance industry.”