Money Back Policy – A Smarter Central Bank?

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Mar 26 2007
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EdgeDaily reported today how Bank Negara (Central Bank) Malaysia is getting smarter nowadays (or fear of losing more due to liberalization?) to prevent investors from by-passing capital control measures and take their monies out of the country by selling their stakes in Malaysian entities through swaps with foreign listed companies.

Malaysian resident shareholders of PPB Oil Palms Bhd (KLSE : PPB, stock-code : 6823), PGEO Sdn Bhd and Kuok Oils & Grains Pte Ltd (KOG), which would be acquired by Wilmar International Ltd via a share swap, must repatriate all dividends, profits and proceeds from the disposal of the Wilmar shares.

Shareholders with overall investments abroad of not less than RM50 million are also required to complete the “Quarterly Report in External Assets and Liabilities of Resident Companies in Malaysia” beginning the first quarter of 2007. Other Malaysian resident minority shareholders of PPB were only required to complete their respective forms for declaration of payment and receipts if their investment in Wilmar exceeds the equivalent of RM 50,000. The Malaysian shareholders must also inform the Foreign Exchange Administration Department accordingly.

Above are two conditions imposed by Bank Negara Malaysia when giving its approval to shareholders of PPBOP, PGEO and KOG to subscribe for 1.43 billion shares in Wilmar International Ltd. Earlier, The Kuok Group, controlled by tycoon Tan Sri Robert Kuok, undertook a mammoth S$6.6 billion (RM15.18 billion) corporate exercise to merge several of its companies in Malaysia and Singapore, including Wilmar International Ltd (SIN : F34) and PPB Oil Palms Bhd (KLSE : PPB, stock-code 6823).

As part of the deal, Wilmar has offered to acquire PPB Oil Palms, Kuok Oils & Grains Pte Ltd (KOG) and PGEO Group Sdn Bhd for about S$4.1 billion. Wilmar said the acquisition of the companies would be satisfied via the issue of 2.4 billion Wilmar shares based on their last transacted price of S$1.71 per share. FinanceTwitter believed the measure taken by Kuok then was to strengthen his empire from being taken hostile after the super merger of three of Malaysia’s largest palm oil producers – Kumpulan Guthrie Berhad (KLSE: GUTHRIE, stock-code 3131), Sime Darby Berhad (KLSE: SIME, stock-code 4197) and Golden Hope Plantations Berhad (KLSE: GHOPE, stock-code 1953).

Analysts said that while the central bank had been liberalising certain measures to actively promote investments in the country, it also appeared that Bank Negara wants to ensure that funds were not being channelled out of Malaysia through “back-door” methods. If the country’s investment climate is excellent and transparent with good prospect of generating more profit with re-investment, there’s no reason why investors (doesn’t Malaysian government trusts Robert Kuok?) would repatriate their monies out in a big-way. Isn’t Robert Kuok sits in the advisory board for IDR (Iskandar Development Region)?

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