Governor’s Feature Address at the Khazanah Megatrends Forum 2022 Speaker: Tan Sri Nor Shamsiah Mohd Yunus / Venue: Kuala Lumpur / Language: English / Speech/Interview Date: 03 Oct 2022 /  Navigating Malaysia's Economic Transition, in a post-COVID world 1. A very good afternoon to all of you. I would like to thank Khazanah for inviting me to speak. This morning, I will be pleased to share with you what we in Bank Negara Malaysia are seeing in the economy today, and what we believe is needed to secure our future. 2. For a good part of the past three years, the world has been grappling with managing not only a health crisis, but an economic crisis. Actions were taken to protect both lives and support people’s livelihoods. Following the warp speed effort to vaccinate the country last year, containment measures were soon lifted and borders reopened. Today, the economy is no longer in a crisis, and Malaysia’s economic recovery is well underway. A number of key indicators support this. 3. First, the Malaysian economy is showing positive growth momentum. This year, growth is expected to be strong. The reopening of international borders has and continues to lift tourism-related sectors. This will have significant spillovers to the rest of the economy given the importance of the services subsectors. Also, investment activity and prospects continue to be supported by the realisation of multi-year projects.

New licences were issued to foreign conventional and Islamic banking institutions, while the minimum foreign strategic stakes in the insurance and takaful industry were increased. Increased operational flexibilities were also accorded to the existing foreign banking institutions in the financial system which now account for about 30% of the banking system. At the same time, the foreign participation in our securities market was liberalised in 2007 to allow foreign corporations to raise financing either in domestic or foreign currency. The capital account liberalisation throughout the first decade in the 2000s has involved the progressive removal of restrictions on foreign exchange administration rules. This liberalisation was intensified after 2005, taking into account the state of readiness of the financial system and the economy to manage the consequential increased cross border financial flows. In July 2005, Malaysia migrated from a fixed exchange rate regime to a flexible exchange rate regime to accord greater flexibility to adjust to changing structural conditions in the region and the global economy. With the progressive dismantling of restrictions, businesses now had the flexibility to manage their financial exchange exposures. This encouraged two way capital flows and contributed towards stabilising the volatile capital flows to our economy. Finally, in addition to being accorded with the necessary powers in the new legislations, the policy toolkit of the Central Bank has also been expanded to address the potential build-up of financial imbalances and its risks to financial stability following increased internationalisation. This includes macro-prudential and supervisory measures to collectively address the underlying causes of financial stability.