Malaysia is joining the bandwagon to attract family offices, along with Hong Kong and Singapore, which are already well ahead in this segment.
However, Malaysia and Singapore are not the only two countries in Southeast Asia eyeing the family office space, as Indonesia, the largest economy in the region, has announced its interest to launch its guidelines and regulatory framework for family offices, and is believed to be making Bali its family office hub.
In a space where the early birds catch the worm, Malaysia and Indonesia will need to work hard to attract new and established names, and may need to carve their own niche, so as to create a competitive edge against their regional peers.
Malaysia plans to offer a zero tax rate for family offices that are set up in the Forest City Special Financial Zone. But the reality is that tax incentives alone typically do not attract family offices, as such decisions usually involve the movement of large sums of money.
In general, key factors for consideration include the regulatory environment and conditions, economic growth prospects, capital mobility, potential investment opportunities, access to strong supporting professional services, as well as the financial tools and data on hand in a given location.
One area in which Malaysia may be able to establish its niche is the Islamic family office space. For many years, Malaysia has positioned itself as a leader in Islamic finance, and the Islamic asset management industry has also grown significantly over the years.
There are also a lot of innovations being made by the Islamic asset management industry – for example, Kuala Lumpur-based Kenanga Investors has been working on launching a waqf exchange-traded fund (ETF), which essentially allows investors to channel a portion of the income distribution for waqf purposes. Waqf is an inalienable charitable endowment under Islamic law.
And while the tax incentives scheme will take effect next year, all eyes will be on the family office space in Southeast Asia, which is expected to experience heated competition. If Malaysia’s strategy is successful, the country will be in a position to add a new dimension to its financial services industry and wealth management sector.
