Malaysia Must Rediscover Its Ambition and Think Beyond Crises
I am delighted to join the veteran leaders of Malaysia’s capital market to launch “Echoes of the Boardroom: Untold Stories of the Malaysian Accounting Standards Board”, which chronicles the three-decades of Financial Reporting Foundation and Malaysian Accounting Standards Board (MASB).
There is no better time to launch this book as MASB is recently on the minds of everyone who follows the findings of the Royal Commission of Inquiry (RCI) into the Lembaga Tabung Haji.
The crux of the question of the RCI is whether the 2017 financial statements materially complied with the Financial Reporting Standards (FRS).
A recent piece in the Edge Financial Weekly alleged that the 2017 statements had “a number of departures from FRS which collectively indicated that the financial statements for the year ended 31 December 2017 did not materially comply with the FRS issued by the Malaysian Accounting Standards Board (MASB).”
While the wider Malaysian audience now may wonder what Financial Reporting Standards is all about, the foundations were laid 30 years ago. The then Finance Minister Datuk Seri Anwar Ibrahim said that “to achieve a financial reporting environment of international standards, it is my view that financial reporting standards must be widely accepted and given the appropriate recognition within the wider financial and investment community. It is apparent that those outside the accounting profession generally regard accounting standards, particularly the adherence there to the domain of accountants. As long as the setting of accounting standards continues to be within the accounting profession, this attitude will prevail and those outside the profession will not have the ownership of the standards and will regard compliance with accounting standards as not being their responsibility. Therefore, there needs to be a mechanism in place that would give ‘ownership’ to all relevant parties involved in the financial reporting process.”
It was with this vision that Tan Sri Ranjit Singh, then of Securities Commission, led a working group in 1995 to draft the legislation that led to the formation of MASB, and its oversight body, the Financial Reporting Foundation.
Raja Tan Sri Arshad Raja Tun Uda, the founding Chairman of MASB, stressed that the agency was not founded as a response to the Asian Financial Crisis, which was triggered by the attack on Thai baht in July 1997. The legislation, the Financial Reporting Act 1997, was passed and gazetted in March that year. The financial crisis only strengthened the belief that good
governance, accountability and robust standards are a necessary building block for a business environment that is resilient and trustworthy.
The founding of MASB three decades ago was the collective demonstration of institutional foresight and not quick fixes to any immediate crises, as well as a showcase of bold leadership.
One particularly remarkable point which I learnt from the book was about the initial RM30 million capital grant provided by the Ministry of Finance, the Securities Commission and Bursa Malaysia in 1997 to support the development of financial reporting standards. That RM30 million in 1997 represented a very significant financial commitment and demonstrated considerable foresight on the part of the country’s leaders.
Thirty years later, we should recognise not only the institutions that were built, but also the ambition and vision that drove their creation.
It is also important for the veterans who were involved in shaping Malaysia’s institutions during the 1990s and subsequent years to document their experiences, whether through oral history or memoirs. Their experiences of institution-building and managing crises should be preserved so that future generations can understand what Malaysia went through, as well as the ambitions that the country once held.
Certainly, Malaysia has its fair share of crises and scandals to deal with. Yet, at the core of our institutions, there have always been people who were willing to think long term, contribute their time in committee rooms and international forums, establish standards and build institutions for those who would come after them.
The book provides an opportunity to rediscover both the lofty ambitions and the unfinished business of Malaysia in the 1990s.
Before the Asian Financial Crisis, there was a period when Malaysians believed that the country could become a greater nation. The slogan of Malaysia Boleh was not received with any cynicism. The establishment of institutions such as MASB reflected that confidence and faith.
When Labuan Offshore Financial Centre was launched in 1996, for instance, the ambition was to develop it into a financial centre capable of rivaling Hong Kong. Those ambitions dissipated due to domestic crises and were overtaken by major changes in the regional and global economy.
Malaysia faced the Asian Financial Crisis in 1997, domestic political and economic crises in 1998, and another major structural challenge when China joined the World Trade Organization
in 2001. China’s accession effectively eroded many of the global advantages Malaysia had enjoyed prior to that.
Today, however, Malaysia once again has an opportunity to punch above its weight.
Malaysia is becoming globally relevant in an era of geopolitical competition, partly because of its position as a non-aligned country. At a time when major powers increasingly struggle to work with one another, Malaysia can provide a platform for engagement.
This opportunity extends beyond geopolitics. It creates possibilities across different sectors of the economy and society.
The challenge now is to rediscover the ambition of the 1990s that Malaysia once had and to imagine what the country can become in the decades ahead.
As Malaysia approaches its 70th anniversary of Merdeka, there is value in thinking about Malaysia at 100. What kind of country do we want to become? What do we want Malaysia to look like when today’s younger generation reaches middle age?
The work documented in this book contributes to that conversation. It reminds us of the ideas and ambitions that shaped Malaysia’s institutions and encourages us to think about what those institutions can achieve in the future.
There are several important lessons from the development of Malaysia’s financial reporting framework.
First, Malaysia’s convergence with International Financial Reporting Standards (IFRS) in 2012 was significant. It demonstrated that Malaysia was prepared to adopt international standards and, in doing so, position itself to punch above its weight.
Second, while Malaysia adopted international standards, it also sought to localise them to suit the country’s own circumstances. This can be seen in the two-tier reporting framework for listed companies and private entities, as well as efforts to address specific domestic issues, including those involving property developers and Islamic finance.
More importantly, some of these locally developed ideas were subsequently advocated internationally, allowing Malaysia not only to follow international rules but also to contribute to the shaping of regional and global standards.
These are important lessons for Malaysia today.
The contribution of those who built and strengthened these institutions should be recognised and documented. Their work demonstrates that institution-building is not simply about
responding to today’s problems. It is about creating systems that remain relevant for generations.
As Malaysia enters a new era of global relevance, we should once again have the confidence to think beyond the next crisis and imagine what this country can become.
I would like to record my appreciation to Datuk Zainal Abidin Putih, Chairman of MASB, and Tan Bee Leng, Executive Director of MASB, for receiving me at the office the other day to help me understand the achievement of MASB.
I would also like to congratulate Securities Commission Executive Chairman Datuk Faiz Azmi and his team for putting this book together. I hope SC could devote more resources to record oral history and write about the history of Malaysian regulators and the capital market.
The most important lesson from the past 30 years is that Malaysia has the capacity to think beyond its immediate challenges, shape international standards and punch above its weight. The task now is to rediscover that ambition and carry it forward.