INVESTING in foreign projects through public private partnership (PPP) will help mitigate risks for small businesses, said a financial industry expert yesterday.
The Group Chief Executive Officer at Malaysia Government-linked investment agency Pelaburan Mara Berhad, Nazim Rahman, said that there will always be risks associated with investing into a foreign country.
These risks could come in the form of political risks or currency risks, among others, he told The Brunei Times during an interview on the sidelines of the Brunei Islamic Finance News Roadshow 2013 held on Thursday.
“So if you look at Indonesia for example, the government is so serious about attracting private sector investment.
“When they launch the Indonesia Infrastructure Guarantee Fund, it guarantees all the risks associated with undertaking the infrastructure development through the public private partnership (PPP).
“So I think that is one key element if small businesses are looking to mitigate their risks in investment elsewhere.”
Nazim said such partnership can be formed as a government to government initiative.
“We can structure it as a combination of the fund from Brunei and the fund from the local market. If you are going into Malaysia, then you are going to have a tie up with the fund from the local market.
“Then you can use whatever is being offered by the government, like the guarantee fund, to mitigate your risks,” he said.
“When there is a government involvement to help the private sector to invest elsewhere, then there is an element of risk mitigation there.”
The key for the Sultanate, however, is that it has to look beyond the local market and go into the regional economies to accelerate the growth of its local markets.
He said countries such as Malaysia, Thailand, Indonesia are going through numerous big infrastructure projects in which debt securities may be issued and can be participated by Brunei.
“When there is a lot of mismatch between liquidity and assets, that’s where the problem lies.
“Because capital market has got to have a matching of fund and the assets.
“When there’s not enough assets, then it’s difficult to grow the market,” Nazim explained.
“I think there is a potential for Brunei’s private sector to invest abroad because otherwise, if there is so much liquidity but there is no active investment going, then the growth of the local capital market will be hampered.”
Copyright 2013 ,The Brunei Times (by Fitri Shahminan)