New taxes to help fund tourism investments in Malaysia

Infrastructure and tourism-related programmes will be among the beneficiaries of a new levy on hotel stays that Malaysia’s government is imposing to help fund expansion of the country’s tourism offering.

Approved by Parliament in early April, the bill came into effect on August 1, having been postponed from its initial start date of July 1.

Revenue from the tax – which will apply only to stays by foreign tourists – will be reinvested back into the industry and its supporting infrastructure, according to Nazri Aziz, the minister of tourism and culture.

The levy will be imposed on a sliding scale: guests at five-star hotels pay a surcharge of RM20 ($4.66) per room per night, falling to RM10 ($2.33) for four-star establishments, RM5 ($1.17) for one- to three-star ones, and RM2.5 ($0.58) for budget or unrated accommodations.

Exemptions are made for homestays and kampung (village) accommodations registered with the Ministry of Tourism, as well as for properties run by schools, universities, training institutes or religious institutions, provided there are no plans to use the site for commercial purposes.

Revenue forecasts

Government figures predict the new levy will generate revenues of RM654.6m ($152.8m) in its first full year if hotel occupancy rates reach 60%, rising to RM872.8m ($203.7m) if they hit 80%.

Reaching the latter figure could prove ambitious, with last year’s hotel occupancy rate up 2 percentage points at 65%, according HVS, an industry consultancy. Yet the absolute revenue figure could also rise in the coming years thanks to capacity increases, given the number of new hotels set to come on the market.

If all current projects are completed, more than 25,500 new rooms will be added to the country’s hotel stocks by 2021, for a total of almost 350,000, according to HVS.

Industry voices weigh in

As with any new tax measure, the levy has received a lukewarm response from some industry players and local officials.

Hotel operators have raised concerns that it will harm profitability and reduce cost appeal amid tight regional competition, heightening the risk that tourists will choose alternative destinations over Malaysia.

“Local Malaysian businesses and leisure travellers are already paying for [goods and services tax] and income taxes. Subjecting them to new taxes is of concern,” vice-president of the Malaysian Association of Tour and Travel Agents, K L Tan, told local press, adding it would have the biggest effect on price-sensitive tourists, corporate and incentive groups, and long-haul travellers.

The tax has also met with opposition from key state governments, such as Sabah and Sarawak, which already impose similar levies on the hospitality sector. Both states have sought to defer the implementation of the new national tourism tax, though as of early August no such deferment had been announced.

Growth and forecasts

How much the new levy might impact bookings and tourism numbers is unclear, but at present the sector outlook is strong.

After a downturn in 2015, the industry is enjoying stronger growth in both arrivals and earnings: foreign arrivals rose by 4% last year to reach 26.8m, according to state agency Tourism Malaysia, generating record earnings of RM82.1bn ($19.2bn), up 18.8% on the previous year.

Stronger receipts were also bolstered by longer stays, with the average foreign visitor stay increasing from 5.5 to 5.9 nights in 2016.

Tourism figures for 2016 nonetheless fell short of the official 30.5m target for foreign arrivals.

The new goals set by Tourism Malaysia are to reach 31.8m arrivals and RM118bn ($27.5bn) in revenue this year, rising to 36m and RM168bn ($39.2bn), respectively, by 2020 – more than double the industry’s earnings last year.

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International cooperation pushes Malaysia towards higher education goals

Malaysia is strengthening its position as a destination for international students, having recently inked bilateral deals related to tertiary-level education with partners in Turkey and Senegal.

The most recent of these moves took place in May, when Malaysia’s Al Bukhary International University and Turkey’s Ibn Haldun University signed an agreement to work on a collaborative education programme.

Set to begin in September, the arrangement will see greater academic cooperation between the two countries, with the goal of fostering cultural as well as educational links.

This followed a memorandum of understanding (MoU) undertaken between Malaysia and Senegal in March. On top of offering 10 scholarships for Senegalese students to study in Malaysia, the MoU aims to increase the number of student and lecturer exchange programmes between the two nations.

Both agreements should help to enhance student mobility, particularly in an environment when students are choosing less traditional destinations to obtain their education. This trend was highlighted by Idris bin Jusoh, minister of education, in an opinion piece published by local media in May.

“Various factors around the world today, including a challenging global economy and changes in geopolitical trends in the US and Europe, mean that international students are looking to pursue higher education outside of traditional destinations, such as the US, the UK and Australia,” he wrote.

High-class appeal

One development playing a key role in bolstering Malaysia’s higher education offerings is EduCity. A fully integrated education centre that stretches over 123 ha, EduCity hosts several private universities and branch campuses.

The University of Reading is the most recent international addition to the EduCity hub, opening in March 2016. Enrolment at the branch campus is forecast to reach 2500 by 2024, with the UK-based university joining Malaysian branches of the UK’s Newcastle University and University of Southampton, as well as the Netherlands’ Maritime Institute of Technology.

A new addition is also expected in September, when the Management Development Institute of Singapore is scheduled to move from its current location in the city centre of Johor Bahru to a new EduCity campus currently being constructed.

The influx of foreign universities aligns well with Malaysia’s aim to take advantage of growing globalisation in the job market, as skills learned in one country become marketable in many, according to Joanne Oei, managing director of EduCity.

“It is important to understand that the job market and labour are becoming increasingly mobile and global,” she told OBG. “EduCity should prepare students to enter today’s global market.”

Education windfall

Attracting foreign students is a key goal in the National Education Blueprint for Higher Education 2015-25, which sets the target of hosting 200,000 by 2020 and 250,000 by 2025.

Malaysia is well on its way to achieving the mid-term goal, with foreign enrolment at just under 173,000 at the start of this year, according to the Ministry of Higher Education.

Hitting its 2025 target could generate significant revenue: the Ministry of Education estimates that foreign students bring in RM5.9bn ($1.4bn) each year, a figure that it says could more than double by 2020 as student numbers climb towards the 250,000-mark.

Malaysia’s recent focus on improving higher education services has yielded some international recognition, with Kuala Lumpur ranked 41st globally and eighth in Asia in the 2017 QS Best Student Cities Index. The 2017 result, a jump of 12 places on the last year, was based on the capital city’s affordability, quality of education and multicultural appeal.

Kuala Lumpur came in first on the affordability ranking due to its low cost of living and tuition fees, which averaged $2900 a year, much lower than in other prominent educational centres such as London ($21,400), Sydney ($23,000) and Boston ($46,800).

While the city ranked lower on other indicators such as desirability (74th) and employer activity (59th), high levels of investment could spur improvement in these weaker facets of the country’s tertiary-level offerings. “Malaysia devotes a higher proportion of the national budget to education than many countries, and establishing itself as an international destination for university education is part of the economic plan,” professor Tony Downes, provost and CEO of University of Reading Malaysia.

Malaysia pushes forward with robotics agenda

A new investment drive to make Johor the centre of Malaysia’s nascent robotics industry is moving ahead, part of a broader push to attract more high-tech developments.

In mid-May Malaysia’s Johor Corporation (JCorp) signed a letter of intent on cooperation with China’s Siasun Robot Investment, outlining plans to develop a large-scale centre for robotics research and development. Under the deal, Siasun will invest RM15bn ($3.5bn) in a project dubbed the Robotic Future City.

Covering an area of more than 400 ha in west Johor Baru, the state’s capital city, the site will include a planned regional base for Siasun, including robotics equipment and components, parts production facilities, research and development (R&D) labs, and a service centre.

The agreement builds on a memorandum of understanding signed in mid-April between JCorp, the Malaysian Investment Development Authority (MIDA) and Siasun subsidiary Beijing Huize Boyuan Robot Investment.

The centre’s development will further the government’s objective of creating high-income jobs and accelerate economic growth in the state of Johor, according to Kamaruzzaman Abu Kassim, president and CEO of JCorp.

“This strategic cooperation with Siasun represents a significant step towards leveraging advanced technologies in the areas of robotics, innovation and automation to benefit Johor and Malaysia,” he said in mid-May.

Malaysian officials have said they hope initial investments in the project will start to flow before the end of the year.

New arena

The Johor robotics agreement was one of nine business deals with a combined value of RM31.3bn ($7.3bn) inked between Malaysian and Chinese firms during a five-day visit to China by a delegation led by Prime Minister Najib Razak.

While other investments pledged during the trip focused on established sectors such as petrochemicals and logistics, the planned robotics centre represented a breaking of new ground.

As the first large-scale foreign investment in Malaysia’s robotics sector, the Johor project is expected to shape the industry’s future and generate the right set of conditions to attract further projects.

The push to build up production capacity in robotics comes as Malaysia’s industries try to keep abreast of a changing operational environment, according to Datuk N Rajendran, deputy CEO of MIDA.

“In line with the Industry 4.0 [the so-called fourth industrial revolution of digitally-driven manufacturing], local companies need to adopt automation, robotics, smart technologies and invest in R&D, and upskilling of talent to stay competitive,” he told an investment seminar in mid-May.

Developing a skilled workforce

Robotics is also a sector the government hopes will help drive the country’s next wave of industrial development, moving it up in the global value chain by reducing dependence on low-skilled jobs and increasing the number of high-skilled employees.

However, as Manoj Menon, managing director of Frost & Sullivan in Johor, told OBG, “Attracting talent is one of the major challenges for companies operating in Johor: a weaker ringgit makes local salaries uncompetitive compared to those offered in neighbouring Singapore”.

In the face of this issue, a shortage of skilled labour could be ameliorated through the government’s commitment to bringing internationally recognised private universities into EduCity – an integrated education hub in the Iskandar special economic region in Johor – according to Manoj.

Looking beyond China

China is rapidly becoming both a leading developer and a top market for robotics, making it a strong partner for Malaysia.

An early-April report by market research firm International Data Corporation (IDC) estimates that Chinese spending on robotics and related services will more than double to $59.4bn by 2020, reaching a 30% share of the global total that year.

Such increases will likely be driven by firms like Siasun, the world’s third-largest robotics developer and China’s biggest, which now has a market capitalisation of RM25bn ($5.8bn).

Malaysia has, however, been keen to promote its robotics potential beyond China’s shores.

During a trade-promotion road show in South Korea in mid-April, Mustapa Mohamed, Malaysia’s minister of international trade and industry, said his country hoped to develop tie-ups with Korean firms in the sector.

“We are interested in the automation and robotics industries, which South Korea has strength in,” he said. “We want to improve productivity of Malaysian small and medium-sized enterprises, so we encourage partnerships and joint ventures between companies from both countries.”

Expanding the market

Malaysia is also looking to incorporate robotics into spheres beyond industry, such as the banking sector.

Some of its banks are already considering using advanced technology to improve services and support growth, according to Liew Nam Soon, managing partner for financial services at EY ASEAN.

“These banks typically engage with them for projects revolving around mobile banking, payments, and loyalty programs,” he told local media in early May. “Others are looking at robotics or automation of their front- and back-office operations, including chatbots in place of call centres and electronic ‘Know Your Customer/Anti-Money-Laundering’ enablers.”

As interest in Malaysian manufacturing continues to rise, and as new ways of combining automation with “big data” are discovered, Johor’s robotics centre stands a good chance of building a waiting list of prospective clients before it breaks ground.

Positive growth prospects for Malaysia’s agriculture sector

Steady global demand for palm oil and improved weather conditions ending last year’s drought should help Malaysia’s agriculture sector recover from a decline in 2016, boosting returns for growers and processors and helping to ease inflation.

In its annual report issued in late March, the Bank Negara Malaysia (BNM) – the country’s central bank – forecast the agriculture sector to expand by 4% this year, contributing 0.3 percentage points to GDP growth.

“On the supply side, all economic sectors are projected to register positive growth in 2017,” the BNM report said. “The agriculture sector is expected to rebound as yields recover from the El Niño weather phenomenon.”

Warmer than usual seasonal temperatures related to El Niño saw production decline 5.1% last year, following a 1.2% decrease in 2015. This contributed to a decline in GDP growth, which hit 4.2% in 2016, down from 5% the year before, according to the Department of Statistics Malaysia (DOSM).

Agriculture currently makes up 8.1% of GDP, down from 11.5% in 2011. While the latter figure does reflect higher commodity prices at the time, the decline in the sector’s contribution has continued for decades as Malaysia’s economy has shifted towards manufacturing and services.

Nonetheless, agriculture remains a key facet of the country’s macroeconomic profile, with an improved performance from the industry this year likely to support growth in downstream industries such as food and edible oil processing. This should help to bring about the BNM’s GDP growth forecast of between 4.3% and 4.8% this year.

Palm oil market

According to the latest official data from 2015, palm oil made up 46.9% of agriculture’s contribution to GDP, followed by “other” (17.7%), livestock (10.7%), fishing (10.7%), rubber (7.2%) and forestry and logging (6.9%).

As the economy relies heavily on the crop, the impact of last year’s dry spell continues to be felt, with Malaysian traders importing above average quantities of palm oil and related products from Indonesia for processing.

Inbound shipments in the year to April were estimated to be up to 50% higher than the 40,000-50,000 tonnes usually imported each month, but these levels are expected to return to normal later in the year, local media reported at the end of March.

Analysts forecast the palm oil segment to continue improving through to the end of the year, in terms of both yields and productivity, driving up output to 19.85m tonnes, a 13% increase on 2016.

Higher yields, combined with increased imports, should push prices down to around RM2500 ($577) per tonne later in 2017, well below their four-year high of RM3000 ($692) per tonne recorded in January.

Sources of inflation

Lingering effects of the drought can also be seen in inflation figures, with the consumer price index up 5.1% year-on-year (y-o-y) in March, according to the DOSM – an eight-year high driven in part by rising food costs, especially for key staples.

The subindex for food and non-alcoholic drinks, which has a 30.2% weighting, climbed 4.1% y-o-y. Though some subgroups rose more slowly, those most affected by the drought increased at higher than average rates, with oil and fats up 38.8%, vegetables up 7.4% and meat up 3.4%.

Malaysia’s producer price index in March was higher still, as per the latest figures from the Department of Statistics, increasing by 9% y-o-y. This was mainly driven by rises in wholesale costs for agriculture, forestry and fisheries, which climbed by 13.8% over the preceding 12 months.

While production costs are likely to soften as yields rise and prices fall this year, they may feed into inflation for some time to come. In the latest revision of its inflation outlook for this year, the BNM projects year-end price increases of 3-4%, above the 3% ceiling in its earlier forecast.

Construction draws interest from private investors in Malaysia

High levels of private sector investment are expected to drive growth in Malaysia’s construction industry this year, with investors seeking opportunities in the regions of Johor, Sabah and Sarawak.

The Construction Industry Development Board (CIDB) recently forecast growth of 8% for the construction sector on the back of 7.4% expansion last year and 8.2% in 2015.

In terms of value, the CIDB expects the industry to see RM170bn ($38.5bn) in investment this year, up from RM166bn ($37.6bn) in 2016.

Much of this improvement is expected to be led by private sector investment in mega projects, continuing a trend set last year when more than 70% of 6035 projects were backed by private players.

Pan Borneo development

One of the most significant of these projects is the Pan Borneo Highway, connecting the states of Sarawak and Sabah on the island of Borneo with Brunei Darussalam.

The government is currently finalising technical and financial aspects of route’s phase two construction, which is expected to begin in 2018 and will run from the towns of Limbang and Lawas in Sabah through Brunei to Sarawak in west Borneo.

All 11 works packages having been awarded for the Sarawak section, and five of the 35 contracts for the Sabah stretch are expected to be handed out later this year.

Of the 11 main Sarawak contractors, some 35 sub-contractors will participate in the project. The most recent of these tenders was awarded to a joint venture (JV) between domestic companies Eastbourne Corporation and Naim Gamuda earlier this month. The JV will undertake work on an 89.4-km stretch between Pantu Junction and Batang Skrang.

Bolstering international linkages

Another major transport link between Malaysia and one of its neighbours is a Mass Rapid Transit (MRT) system connecting Johor and Singapore.

The project made ground at the end of last year as the two countries revealed they were close to agreeing on the construction of a high bridge as a way of joining Johor’s Bukit Chagar terminus station to the prospective Woodlands North MRT station in Singapore.

While progress has continued on the MRT since it was announced in 2010, a decision had not been made on how the RTS would connect the two terminuses.

“This was a major point: how are we going to cross the Strait of Johor – high bridge, low bridge, tunnel?” Singaporean Prime Minister Lee Hsien Loong told media at the announcement. The deal – and the decision – is expected to be finalised by end of this year.

Diversified property interests

While infrastructure projects accounted for close to 50%, or RM82.7bn ($18.7bn), of construction work in 2016 and look set to dominate the sector again this year, residential property development was the second-highest contributor, making up 23% of the total with a value of RM38.3bn ($8.7bn). A close third was non-residential projects, contributing 22.5%, or RM37.4bn ($8.5bn).

Property development could see another strong year in 2017, benefitting from the broadening of investor portfolios, as highlighted by Knight Frank’s third “Malaysia Commercial Real Estate Investment Sentiment Survey 2017”.

The report noted that respondents showed increased levels of interest in the states of Sabah and Penang for hotel and leisure development, with the two regions voted the most attractive for the segment. Johor, meanwhile, was seen as being the top region for its logistics and industrial development prospects, as well as health care.

Although Kuala Lumpur remained the preferred choice for commercial property projects, Sabah, Johor and Penang all took advantage of waning interest in the capital city this year by registering increases in positive responses of six, three and five percentage points, respectively, on last year’s survey.

The survey also pointed to the ongoing MRT and other infrastructure developments as being factors that will drive property development further.

Major sports development adds to project pipeline

Although Johor did not register highly for its leisure prospects in the recent Knight Frank survey, the announcement in December that a new Formula One-grade racecourse will be built in the state could help develop its image in this regard.

The 4.45-km circuit will be part of the Fastrack Iskandar fully integrated motorsports hub currently in development and scheduled for completion in 2019. The track has received a Grade 1 rating from motorsport’s world governing body, the Federation Internationale Automobile, meaning it has the potential to host Formula One races.

A JV between Fastrack Autosports – majority-owned by a Singaporean company with the Johor royal family as partner – and Malaysia’s UEM Land, the motorsports city is expected to cost RM3.5bn ($794m).

Malaysia’s energy industry sees a stronger 2017

Despite lower hydrocarbons earnings last year, Malaysia is moving forward with targeted energy investment and improved operational practices.

Petronas is pushing ahead with development of a large-scale refinery and petrochemicals plant in the southern state of Johor, with support from Saudi Arabia guaranteed as of last month.

In late January Petronas confirmed it would complete its Refinery and Petrochemical Integrated Development (RAPID) project on schedule, with production to commence in 2019. When fully on-line, the complex will have the capacity to process 300,000 bpd and up to 7.7m tonnes of petrochemicals annually.

Following the announcement, oil giant Saudi Aramco announced at the end of February that it would invest $7bn in the RAPID project out of a total investment of $16bn. This put to rest concerns that the programme would be scaled back or delayed, amid reports in January that the Saudi company had stepped away from forming a partnership with Petronas.

Building chains

The refinery is part of a larger development, the Pengerang Integrated Complex (PIC), which includes further midstream and downstream facilities intended to strengthen Malaysia’s value-added hydrocarbons chain, and help it maximise returns on its natural resources.

Establishing a complete supply and processing chain – encompassing upstream, mid-stream and downstream components – is becoming more important for Malaysia, particularly against a backdrop of lower oil prices.

Supply side

To maintain the links in this chain, Malaysia needs to sustain the flow of feedstock oil and gas for processing.

Last year saw a roughly 2% reduction in oil output to 648,000 barrels per day (bpd), down from 662,000 bpd the previous year, due in part to the maturing of existing fields.

As production wanes at several of its established, Petronas is looking to enhanced oil recovery (EOR) technology to maximise extraction, and also sees potential to boost production by developing smaller fields. The challenge for such projects will be to ensure profitability and viability in the present operating climate.

To this end, Petronas inked a deal with local upstream company Uzma at the beginning of the month to conduct research and development with universities on EOR projects that use carbon dioxide.

Extending the operating life of existing fields through EOR technology should also open up opportunities for service providers in the segment.

Balancing act

Though it has committed to continuing its RAPID project and other PIC-related developments, Petronas is likely to carefully weigh the costs at each stage, balancing outlays against potential returns.

Indeed, low oil prices saw state-owned energy firm Petronas register a 96% dip in profits in the first half of 2016. However, resurgent energy prices saw revenue recover by 1% in the third quarter to RM48.74bn ($11bn) and to RM58.6bn ($13.3bn) in the final quarter, a trend expected to continue into 2017.

While Malaysia is slated to cut its oil output by another 3%, or 20,000 bpd, this year –part of an agreement struck with the Organisation of Petroleum Exporting Countries at the end of 2016 to curb market oversupply – the impact on earnings could be offset by price increases expected from the reduction in excess global supply.

Nonetheless, this scenario has seen Petronas adopt a more careful approach towards investments and implement greater operational cost efficiencies.

Last year Petronas announced it was tightening its budget, cutting spending in the years to 2020 by as much as RM50bn ($11.2bn). In the first 11 months of 2016, the company said it had reduced costs by 9.4% y-o-y to RM30.7bn ($6.9bn).

Malaysia Year in Review 2016

Despite falling revenue from a weaker commodities market and concerns over political uncertainty, Malaysia’s economy maintained a steady growth rate in 2016, though expansion may come under pressure in the coming year.

Sustained low oil and gas prices have seen the contribution of hydrocarbons to state revenue decrease from 30% in 2014 to just 14.6% this year. However, earnings generated from a goods and services tax imposed in 2015 and solid growth should see the budgetary deficit kept close to the government’s projected 3.1% of GDP.

Debt levels should also close out the year below the 55% of GDP ceiling set by the government, a factor that helped Malaysia maintain its sovereign “A-” rating from Fitch in October.

Ringgit squeezed

US political uncertainty following President-elect Donald Trump’s win and fears over the impact of an expected US rate hike put pressure on the ringgit late in the year, with the currency coming close to 19-year low in late November, when its value fell by 6.5% to RM4.46:$1.

While some analysts forecast the downward trend will continue into 2017, others predict the ringgit will stabilise in the new year on the back of high investment ratings from credit agencies and the popularity of the central bank – Bank Negara Malaysia (BNM) – among foreign investors.

Despite the ringgit’s downturn, BNM decided to leave its overnight policy rate (OPR) untouched at 3% during its final meeting of 2016 in late November. The bank last changed its OPR in July, cutting it by 0.25% – the first reduction in seven years.

BNM has stated that its approach to the rate will ensure steady growth amid stable inflation, supported by what it said will be healthy financial intermediation in the economy.

Year-end inflation will come in at the lower end of the projected 2-2.5% bracket, according to BNM, with inflation in 2017 set to remain stable given the environment of low global energy and commodity prices.

Solid growth, risks ahead

GDP expanded by 4.05% year-on-year (y-o-y) in the first half of 2016, followed by growth of 4.15% y-o-y for the first nine months, according to the central bank.

This is in line with the IMF’s 4.3% GDP growth estimate issued at the end of October, with the fund expecting this figure to rise to 4.6% in 2017 and 5% by the end of the decade.

One suggestion that domestic growth will not make sustained gains at the end of 2016 comes from Malaysia’s banking sector, as average loan and deposit growth for the country’s leading banks posted hit a two-and-a-half-year low of 1.2% for loans and 1.8% for deposits in the third quarter of the year.

In late November Moody’s forecast that the slow pace of credit growth will continue through to 2017, and possibly beyond, reflecting what the ratings agency said was a challenging external economic environment.

A mixed picture

Construction was one of the best-performing sectors in the first half of 2016. As an area of specific focus under the 11th Malaysia Plan – which covers 2016-10 – the sector has benefitted from high levels of state spending in recent years, recording 8.9% growth in the first half of 2016.

According to data from the Department of Statistics Malaysia, the value of construction work in the third quarter reached RM31.9bn ($7.1bn), representing a 10.7% y-o-y increase.

Industrial activity, however, has not fared as well, and the November Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) – a measure of manufacturing performance – showed a slowdown in activity to 47.2 in October from 48.6 a month previously. A score of more than 50 indicates improvement in the sector. October also marked the 19th consecutive month of decreased output.

Figures from the automotive sector reflected the manufacturing sector’s weaker performance, with vehicle sales slipping 14.2% y-o-y in October to 47,879 units. Sales through to the same month totalled 466,208, down 13.9% from the same period of 2015.

Though manufacturers are hopeful of better sales rates going into 2017, it may take time for demand to shift up a gear.

Factoring in political risk

While the economic outlook is stable, there are some factors that could shake this view, including allegations that money from the state investment fund 1Malaysia Development Berhad (1MDB) was transferred into the private account of Prime Minister Najib Razak – a claim strongly denied by the premier.

Rumours of malpractice within the fund also threaten to undermine economic development by weakening investor confidence.

In late October Fitch said that while the impact of the 1MDB affair had only had a limited effect on government policymaking, political stability and public finances to date, it remained a source of concern.