[ Laman Ehwal Semasa ReformIS ]
Date: 15 Aug 1999
Time: 20:26:50
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Tax incentives for Malaysian bank mergers insufficient: analysts
KUALA LUMPUR, Aug 15 (AFP) - Tax incentives to encourage mergers in Malaysia's financial sector are insufficient and unlikely to allay growing concerns over attempts to rationalise the industry, analysts say.
The incentives are expected to benefit the six core institutions proposed by the central bank but offer little to entice shareholders of other institutions, especially smaller banks, to give up their stakes.
And while the merger scheme addresses concerns in the banking sector such as cutting costs, some analysts said the way the process was being carried out raised questions and that many mergers might not go through.
They particularly questioned the central bank's decision to suddenly fast track the process after saying it was giving the banks time to merge, and warned that some of the anchor banks may not be strong enough.
The six core banking groups identified by the central bank are the Malayan Banking group, Multi-Purpose group, Bank Bumiputra/Bank of Commerce group, Perwira Affin group, Public Bank and Southern Bank.
Some analysts also noted that despite assurances that the merger plan was not politically linked, the process would lead to associates of former deputy premier Anwar Ibrahim relinquishing their controlling stakes in various banks.
A research head with a local brokerage said there did not seem to be a clear policy on the banking sector and that the push to fast-track the merger process was scaring off foreign investors.
"There is no clear policy direction on what the banking system will look like in 10 years' time. Look at the other countries. They put the policy in place and the banks merge on their own accord," he told AFX-Asia, a financial news service affiliated with AFP.
Another analyst said the move to institutionalise the banks was positive but "the manner in which it is being done leaves a lot to be desired".
"The incentives alone are seen as being beneficial to the anchor banks and hence they will pursue the mergers. But what about the other banks?"
The analyst said he believed many of the proposed mergers were unlikely to go through. "The merger of just two banks can cause a lot of headache -- what if 11 banks merge?" he said.
"My view is that Bank Negara should let market forces determine the merger process."
The analyst also questioned the rationale of Perwira Affin Bank Bhd. being one of the core banks.
"I have nothing against them, but my perception is that since the bank is owned by the army, the government decided to maintain it as a core bank."
As of April, Malaysia's Armed Forces Fund owned 42.83 percent of Affin Holdings Bhd. which owns Perwira Affin Bank Bhd.
A research head with a local brokerage said the incentives offered by Bank Negara may indirectly help the merger process, mainly on pricing.
The tax incentives include the extension of exemptions on stamp duty and real property gains tax to the end of June next year. Half of the accumulated losses of banks being acquired will also attract tax credits.
"Indirectly, the tax breaks will make the acquisition price more attractive for the acquired banks. For the acquiring bank, it will be cheaper as it can use the losses incurred by the acquired bank as tax credit," the research head said.
But while the tax perks may help the merger process, the whole issue could have been better handled.
"Only a fool would say the merger process is not politically linked. The whole issue has political implications. If the six anchor banks were chosen because they are strong, have big branch networks and a good track record ... well, I beg to differ," he said.
"I may have missed out something here but not all the core banks fall under this category."