It is not often that you get the opportunity to accompany the Lord Mayor of London on one of his mayoral trips, but, when we heard that he was visiting Malaysia and Indonesia in July, we were quick to offer our services as one of his business advisors. In our publication “Seeking New Trading Opportunities”, the London Market Group identified Malaysia and Indonesia as potential growth areas for the London insurance market, and the Mayor’s meeting agenda offered us access to a mix of government officials, central bank governors and business leaders that would have been almost impossible for us to secure without his help.
First up was Malaysia -a forward- thinking country with vision. With a population is just over 600 million and one of the highest standards of living in the region, it boasts excellent transport links and has plans for significant investment in infrastructure over the coming years.
Between 2012 and 2021, GDP growth in Malaysia is expected to average around 5%, making it one of the fastest growing A-rated countries. It aims to be one of the top global economies by 2050 through the implementation of its Transformasi Nasional plan or TN50. This focuses on improving productivity, innovation and creativity. One of the main drivers for change is Malaysia’s heavy reliance on foreign labour due to a lack of automation in many of its manufacturing processes.
All of this will obviously increase the assets at risk and presents great opportunity but, as a market, we face some significant barriers to entry. Firstly, there are government restrictions on foreign ownership and cession limitations to overseas reinsurers. There is a heavy reliance on China and Hong Kong for investment and their proximity is also cited as a reason why Malaysian businesses naturally gravitate to them for insurance and other professional services.
On the political front there still remains some uncertainty. The 2018 election heralded the first regime change in Malaysia’s history, and it is still not clear what regulatory and business reforms the new government will make, but conversation with Malaysia’s Attorney General offered little hope of any positive news for foreign businesses any time soon.
For me, Indonesia offers more immediate opportunity. It is the world’s fourth most populated country and the only Southeast Asian country to be a member of the G20. The government and private and public sectors are currently focusing on the need to boost economic growth, foreign investment and job creation, as well as improving resilience to natural catastrophes. Indonesia sits within what is known as the “ring of fire.”
Over the last few years Indonesia has been dismantling barriers that previously hampered foreign investment, and there are plenty of opportunities for the London Market to collaborate with them and increase trade. To add to this optimistic outlook, it has recently negotiated a very favourable FTA with Australia that allows the provision of financial services, including insurance and insurance mediation, cross border without the need for a local presence.
We have been quick to point the UK government to this agreement in the hope that it will inspire them to seek something similar with Indonesia when we leave the EU. Our recommendation would be that if it were in the form of a Memorandum of Understanding (MOU) that would undoubtedly be quicker and easier to negotiate.
Of course, there are still challenges with doing business with Indonesia. It can take time to build productive relationships and dealing with government bureaucracy is time consuming. There is also a general lack of understanding at all levels of the benefits of insurance to economic growth, but they are receptive to our message if it is framed in the right way.
My final observation is that, to take advantages of these opportunities, we need more help from the UK government through its network of consulates and embassies to assist us with promoting our profession. The imperative is for them to appoint an individual to focus on championing the UK financial services offering, both in Malaysia and Indonesia – and more widely. At the moment, there is no-one in-country fulfilling this role and, if we want to give ourselves a fighting chance of unlocking the promise of Asia, this needs to be addressed.