KL’s new financial district

Recently, myself and my colleague, Nafis Alam wrote a piece for an online publication called “The Conversation”. Our article was prompted by the ambitions of the Government of Malaysia to transform Kuala Lumpur into a major financial centre through the construction of the Tun Razak Exchange (TRX). In our article we sought to highlight some of the challenges that lie ahead. In particular, we noted that in the most recent version of the Global Financial Centres Index,  “the city dropped one place to 22nd globally but still featured in the Asian top 10. With London and New York ahead of the pack, Singapore and Hong Kong already in strong positions and the dynamism of Shanghai and Shenzhen to contend with, gaining ground on the superpowers will be tough for Malaysia”.

This may be a case in which a niche strategy has much to offer – and Malaysia’s record in islamic finance may be the basis for such a strategy. “Demand for Islamic financial services is growing both regionally and globally, and Malaysia has been well placed to take advantage of this. It is Islamic finance that provides Malaysia with its advantage over neighbouring financial centres, and those mapping out the country’s future business model would be wise to play to their strengths.”

“According to its central bank, Malaysia’s Islamic banking assets total US$168.4 billion, a quarter of its banking system. This in turn accounts for over 10% of the world’s total Islamic banking assets. The country’s Islamic financial sector is characterised by a robust and shariah-compliant regulatory system. It has a strong sukuk (Islamic bond) market – over 60% of the global total – making Malaysia one of the world’s leading Islamic capital marketplaces. This attracts institutions from across the globe and an associated pool of liquid cash.”

So how does all of this relate to Universities? Well, we go on to argue that  “if Malaysia is to join the top flight of international financial centres, it must leverage its status as an established Islamic finance hub. And it must address the challenges associated with the supply of high quality human capital.”

Universities play a key role on the provision of human capital for economic growth and development and a strong higher education sector is key to longer term economic success.

“The performance of international financial centres is underpinned by the quality of people, of the business environment, access to international markets, infrastructure and general competitiveness. To outperform Asian rivals on these attributes will be a challenge; there are continued concerns about the quality and employability of graduates, and while the World Bank says the ease of doing business has improved, there are still problems with infrastructure and general competitiveness. And the country’s ability to access international financial markets may depend on attracting major players away from established rivals.

Authorities are confident, however, that they will be able to attract these new players. The central bank estimates that up to 56,000 new finance industry positions will be needed in the next decade, including up to 40,000 jobs in Islamic finance.

However poor scores in international student assessments, declining English language capabilities and persistent concerns about the employability of graduates do not augur well……….. Yes, the government may be able to build world-class facilities in Kuala Lumpur and offer tax breaks and other incentives to companies looking to operate from the new district. And yes, Islamic finance will still give the country a profitable niche to exploit.

But without a supply of educated, English-speaking workers, hopes of challenging regional neighbours in Hong Kong and Singapore may be little more than a Malaysian pipe dream.”

And maybe this is where Malaysia’s openness to foreign universities will be crucial – with good practice from elsewhere in the world underpinning an educational offer to students that will drive up a focus on graduate quality and graduate employability.

[quotations from The Conversation – Malaysia Plans to be First Islamic Financial Superpower]

For most of us, when we hear the word “University”, we immediately think about students, education and qualifications.  After education, our thinking might turn to the role of Universities in undertaking research to address major global challenges, in finding solutions to problems and in making the inventions that lie behind so many new products and services. In essence, this is the idea that Universities are the engine of a knowledge economy.

Education, research and innovation are all key functions of Universities but our responsibilities extend more broadly. Universities are social institutions – we are part of local, national, regional and global communities and we have a responsibility to those communities – a responsibility to support their growth and development. We discharge our responsibilities in many different ways. One very common activity is to work with schoolchildren and their teachers – to offer young children an insight into university, to raise their aspirations, to encourage and support their learning. There are opportunities to work with the teachers themselves, supporting their professional development. And, of course, we can share facilities with local schools – providing access to, for example, our sports centres or event space.

And there is another hugely important strand of activity that is led by the student body. Higher education remains a privilege and so many of our students are aware that they are fortunate in being able to benefit from a University education. And they are aware that they have a responsibility to “give something back”. So in Universities and colleges throughout the world, students will undertake charitable work – whether locally in their immediate community or  indeed in any location where their skills and expertise can be put to good use. They will work to raise money for good causes (they may run, walk, cycle, shave their heads) or they will give their time to undertake different projects (building a school, digging a well). Or they may invest their time in campaigning – to promote sustainability, to protect biodiversity or to fight poverty.

And it is entirely correct and proper that they should do these things – they should recognise their obligations to the community and the society in which they live and study. But they (and we) will also benefit from this kind of work. It does not detract from their studies – indeed, if anything, it adds value. When our students undertake the kinds of activity listed above, they have to develop a better understanding of the world around them, they have to develop the skills associated with leadership, management, communication and organisation and they become increasingly the global citizens who will play a key role in ensuring that global society develops towards a sustainable, fair and just future.

(A longer version of this post was published in the New Straits Times)