Laid-off lawyers, cast-off consultants

Sourced from The Economist:

The downturn is sorting the best professional-services firms from the rest

Jan 21st 2010 | NEW YORK | From The Economist print edition

Illustration by David Simonds

WHAT do you say to a recent law-school graduate? “A skinny double-shot latte to go, please.” From New York to Los Angeles, Edinburgh to Sydney, the downturn of the past two years has hit the legal profession with unprecedented severity. As even some leading law firms struggle for survival, recruitment has dried up. The lucky few who get jobs are often being told to find something else to do for now, and report for duty on some far-off date. The same is true for MBA graduates seeking jobs in management consulting. Even the mighty McKinsey is said to be postponing start dates by several months.

Given that new graduates are the grunts of the professional-services industries, earning less than anyone else and working the longest hours, the lack of demand for their services is the clearest indicator of how bad things are. Although a deeper-than-usual cyclical downturn is largely to blame—and is hitting hardest those firms that specialised in financial-market activities such as mergers and acquisitions, and private equity—it is already clear that there will be long-term structural consequences, not least a growing gap between the best firms and the rest.

Cutting lawyers’ jobs used to be frowned upon in the profession and thus rarely happened, even in recessions. But last year was the “worst year ever for law-firm lay-offs”, reckons Law Shucks, a legal-industry blog. It counted 218 reports of lay-offs at 138 big firms, including no less than ten rounds of cuts at Clifford Chance, a British firm whose ambitious global expansion before the crisis now seems a big mistake. Thacher, Proffitt & Wood, a New York firm which by 2007 earned around half its revenues from structured finance, was devastated by the bursting of the subprime mortgage bubble and ended up being dissolved in December 2008. It was followed in March 2009 by the venerable but property-exposed Philadelphia firm of Wolf, Block, Schorr and Solis-Cohen.

As for management consulting, in the third quarter of last year Marsh & McLennan reported a 10% decline in its consulting revenues, in line with the overall shrinkage of the industry. Figures from other big firms are patchy, since they are private partnerships. Still, in 2009, to ensure they had enough cash to weather the financial storm, even leading firms such as McKinsey and BCG held back a chunk of their partners’ bonuses. Of the big three, McKinsey and Bain are said to have suffered slight falls in revenues last year, while BCG, after a strong second half, was slightly up. All three deny making lay-offs—although it is said that they made their “attrition rates” increase, by significantly raising the bar on their traditional “up or out” policy. McKinsey now has 10% fewer consultants.

The experience of some once-booming boutique consultancies has been even worse. Marakon Associates was bought for a song by CRA International after the bankruptcy last January of its parent, Trinsum; and Katzenbach Partners was saved by Booz & Company after shrinking alarmingly in the first six months of 2009.

Perhaps the hardest hit of the professional services has been human-resources consulting, where revenues fell by 20% in Britain last year. Pay-and-benefits consultants also suffered: sharply falling revenues were one reason why Towers Perrin and Watson Wyatt decided to merge last year. And although accounting firms are less exposed to the cycle than most professional-services firms—annual reports still have to be prepared and audited, whatever the state of the economy—in the year to last June the two biggest accountants, PricewaterhouseCoopers and Ernst & Young, each suffered 7% falls in revenues.

Of course, firms with countercyclical activities, such as bankruptcy work, have fared better. Consultants offering outsourced services, like IBM and Accenture, have also done well as cost pressures have driven other companies to use their services. In particular, legal-process outsourcing is booming, as law firms parcel out some of their more basic work to reduce costs. One of the leaders of this nascent market, Pangea3, whose offices in Delhi and Mumbai take on work from clients worldwide, expects to earn twice as much revenue this month as in January 2009.

Another booming business is helping the government sort out the economic mess. This is favouring the market leaders most, says Heidi Gardner of Harvard Business School, because the crisis has made governments risk-averse about whom they hire. Slaughter and May, a big London law firm, earned £33m ($54m) for its work on the financial crisis, including on the nationalised Northern Rock bank. Sullivan & Cromwell in New York has also done nicely from helping the American government with troubled banks. Big management consultancies have done well too, despite their poor record in the public sector (see Schumpeter). BCG, for instance, has advised the quango created to oversee America’s state-rescued car firms.

Under the knife

Though the best will gain at the expense of the rest throughout professional services, the legal profession seems likely to undergo the most profound structural changes. For the first time—long after IT and finance departments went through the same experience—the corporate legal departments that hire law firms are under great budgetary pressure, and are thus demanding much better value from them.

In a recent paper, “The Death of Big Law”, Larry Ribstein, a law professor at the University of Illinois, argued that after decades without changing, law firms are likely to have an outburst of experimentation with different business models: even the venerable and lucrative “billable hour” method of charging clients is in doubt. The experimentation may include more firms abandoning their traditional partnership model to go public, following in the footsteps of an Australian law firm, Slater & Gordon, which went public in 2007.

Not everyone is excited by this idea. “At firms like McKinsey it was the partnership ethos that helped them through the crisis, as partners believed they were in it for the long term. At some law firms too,” says Jay Lorsch of Harvard Business School. Contrast that with the investment banks that switched from being partnerships to public companies, such as Goldman Sachs. “If you talk to some older Goldman partners they are unhappy with the behaviour of those now running the firm, who have abandoned the partnership ethos in favour of aggressively pursuing profits and have ended up looking like greedy bastards.” As they adapt to survive a tougher climate, lawyers and consultants will need to ensure that any changes do not put their culture of professionalism at risk.

GST - a consumption tax

KPMG has produced a lucid piece that describes the impending GST regime for Malaysia:

Our Prime Minister, in his maiden National Budget speech on October 23 2009, had announced that the government was in their final stage of completing its study on the proposed implementation of a Goods and Services Tax (GST) system in Malaysia.

After much anticipation, this week, the Prime Minister further announced that a proposed bill to introduce GST will be tabled in Parliament at the end of the present Dewan Rakyat sitting. To allay concerns that the GST will unnecessarily burden the rakyat, the Prime Minister has re-assured the rakyat that GST will be introduced gently and at a rate that would not burden the poor or the middle-class.

Falling into the family of indirect taxes, the GST is intended to replace the Malaysian service tax and sales tax. This article seeks to provide a general illustration of the principles and mechanics of a GST system.

It is assumed that the Royal Malaysian Customs would be the authority in charge of administering the GST.

The GST, also known as a consumption tax, is a tax levied on supplies of goods and services. To the man on the street, it is incurred only when money is spent.

If no consumption occurs, no GST is suffered by the individual. This can be contrasted with an income tax which is payable when income is generated.

Hence, some have viewed the GST as a more equitable means of collecting revenue for the government as it matches the tax with the ability to pay.

A number of countries including Singapore, Thailand and Australia, have already adopted a similar type of indirect tax.

The mechanics of GST are similar to the value added tax in the UK and Europe, so this tax although new to Malaysia has an established place on the world tax scene.

Mechanism of GST

Conceptually, GST is imposed on the value added to goods or services by each separate processor in the production and distribution chain.

The value added is the value that a producer (whether a manufacturer or distributor, etc) adds to its raw materials or purchases before selling the new or improved product or service.

Upon selling the product or service, the manufacturer or distributor will include a charge for GST at the relevant rate on the value of the supply made.

The manufacturer or distributor will pay the GST collected on its sales (also known as output tax), to the Royal Malaysian Customs, but after deducting the GST it suffered on its purchases (also known as the input tax). And the cycle goes on.

Hence, in reality, GST is a multi-stage tax on the increase in the sales price of the goods or services as they pass through the chain.

The consumer ultimately bears the burden of the tax. This can be seen in the simple illustration chart (right).

Input tax and output tax

In order for a taxpayer to impose GST, the taxpayer must be registered with the Royal Malaysian Customs.

There will generally be a minimum threshold (e.g. based on turnover) before a taxpayer is required to charge GST. The registered taxpayer would be required to submit periodic GST returns. If the output tax is greater than the input tax, the taxpayer will have to pay the excess.

Conversely, if the input tax is greater than the output tax, the taxpayer could seek a refund from the Royal Malaysian Customs.

GST rates and taxable supplies

It is envisaged that not all goods and services will be subject to GST. In the UK for example, there are four types of supply for GST, namely standard rate (15 per cent), zero rate (0 per cent), exempt supplies as well as the reduced rate (5 per cent).

The table above shows an example of the four classifications of supplies in the UK:

It is important to know what category the supplies fall in. This is because where a registered taxpayer is supplying standard rated or zero-rated supplies, the registered taxpayer will be able to claim an offset for input tax suffered on supplies it acquired. However, if the registered taxpayer's supplies are exempted, the taxpayer will not get a refund on the input tax suffered.

Similarly, the taxpayer's customer will not have any input tax to set off against its output tax. This may be an important factor in determining the business competitiveness of the taxpayer.

What can be expected next is the release of the GST Bill. However, as GST is industry-based, there would be accompanying Regulations to implement the system effectively and these regulations are likely to be quite extensive.

It would be interesting to see the various rates of GST and the extent of the taxable supplies. And as everybody will be affected, it is important to understand not only how the system works but what actions need to be taken in the run up to GST.

Running through the checklist below could be a good starting point.

Getting prepared for GST

Checklist for businesses:

* Check whether you need to register for GST

* Check whether you need to register for GST* If yes, what are the compliance requirements

* If yes, what are the compliance requirements* Prepare a costing/ pricing analysis as well as pricing strategies

* Prepare a costing/ pricing analysis as well as pricing strategies* Notify your customers/ suppliers on your GST status

* Notify your customers/ suppliers on your GST status* Update your invoices

* Update your invoices* Educate your staff

* Educate your staff * Check IT capabilities

* Check IT capabilities* Review long-term contracts

* Review long-term contracts

Checklist for final consumers:

* Check whether the goods and services you consume are taxable and the relevant rates

* Check whether the goods and services you consume are taxable and the relevant rates* Price of goods and services post-GST may or may not change. Hence plan your budget wisely

* Price of goods and services post-GST may or may not change. Hence plan your budget wisely

Clearly, preparation for the implementation of GST is essential for businesses and at the same time understanding the implications of GST on consumption is vital for consumers.

.

GST likely in 2011 or 2012

The Malaysian government is expected to table the draft of the Goods and Services Tax Bill in Parliament on December 17. The Goods and Services Tax ("GST") is a consumption tax which is also called a valued-added tax in other jurisdictions.

The GST is regarded by economists as an efficient tax mechanism due to its broader base of tax reach.

Some analysts expect the actual implementation of the GST in Malaysia to take place in 2011 or 2012. It is also expected that there will be a reduction in the top-tier personal income tax to ameliorate the effect of the GST. There is also likely to be significant transactions that are exempted from the GST to avoid burdening lower-income groups.

There is some concern about the efficiency of GST refunds, which is a key feature of value-added tax regimes in other jurisdictions.

Here is the report from the Business Times:

The goods and services tax is likely to be near term revenue neutral and could be accompanied by personal income tax cuts to avoid political backlash, says an economist

MALAYSIA may eventually implement the goods and services tax (GST) although analysts say it is more likely to happen either in 2011 or 2012.

They said the government is expected to study all aspects before introducing the tax.

"This is because GST is a regressive tax hitting the lower income group the most, so (it) can be politically unpopular," economist Kit Wei Zheng said.

He was commenting on a news report quoting Prime Minister Datuk Seri Najib Razak in New York as saying that the first reading of GST proposal will be tabled during the current parliamentary session.

He thinks the GST is likely to be near term revenue neutral, as it would be replacing sales tax and could be accompanied by personal income tax cuts to avoid political backlash.

"The fiscal benefits from GST implementation would be felt more in the medium term, with immediate benefits far less visible," he said.

He added that the government has already hinted it is in the final stages of completing a study on the GST implementation and that the rate would be lower than the sales and services tax rates while exemptions would be granted to lower income groups.

The cabinet decided at its meeting last week for the tabling to allow for discussions and feedback from the public.

Najib had said that if the government decides to implement the tax, it would at a rate that will not burden the poor or the middle class.

Najib also said the rate for the proposed GST may be less than the current sales and services rate of between 5 per cent and 10 per cent.

Standard Chartered Bank economist Alvin Liew said the decision to look at the GST is definitely a move in the right direction.

"The timeline for this to happen may not be in 2010, maybe more likely in 2011 when growth becomes more entrenched," he said.

RPGT: Possible computation workings

Below is an article by Dr Choong Kwai Fatt that attempts to explain the manner in which the new RPGT (Exemption Order) 2009 is to be calculated. The drafting of the Order is still a matter of vigorous debate by Malaysian lawyers. Nonetheless, Dr Choong has offered his considered views on the matter:

Exemption order an interim measure to a complete RPGT system

IN Malaysia, real property gains tax (RPGT) is imposed with the intention to curb property speculations. It is imposed on the gains on disposal of Malaysian landed properties and the rate varies from 5% to 30% depends on the holding period.

With effect from April 1, 2007, the Government decided to exempt RPGT in view of the economic slowdown and it was aimed at assisting property developers in disposing of their houses, and spearheading the economic progress.

Prime Minister Datuk Seri Najib Tun Razak, who is also Finance Minister, on Oct 23, however, reintroduced RPGT to put in place a fair administration of taxes.

In a nutshell, an equitable system will now be in place as income tax are imposed on income derived by any person in Malaysia while RPGT, on capital gains on disposal of landed properties. There will not be any loss of revenue to the Government.

In the Budget 2010 speech, the Government’s intention was clear. It is to ensure that the Malaysian tax system is equitable and continue to be able to generate revenue for development purposes. In line with this, the Government proposed that a tax of 5% be imposed on gains from the disposal of real property from Jan 1 2010. Any agreements signed between now till Dec 31 remains RPGT exempted.

Finance Minister II Datuk Seri Ahmad Husni Mohamad Hanadzlah then, exercising his power under section 9(3) of the Real Property Gains Tax Act 1976 (RPGTA), gazetted Real Property Gains Tax (Exemption) Order 2009 which will take effect from Jan 1, 2010. A fixed RPGT rate of 5% on gains from property gains is achieved through the application of this exemption order.

Malaysian individuals are accorded tax exemption of 10% of the chargeable gain (CG) from the computation of RPGT3. Thus, this would effectively mean that they will be paying less than 5% of RPGT rate while companies continue to pay 5%.

The RPGT Exemption Order exempts any person from the application of Schedule 5 of the RPGTA on the payment of tax on the CG arising from any disposal of assets on or after Jan 1, subject to the condition that the amount of CG exempted shall be determined in accordance with the following formula: A/B x C where:

A = Tax on CG at the appropriate tax rate reduced by the Tax on CG at 5%;

B = Tax on CG at the appropriate tax rate;

C = Amount of CG

Effectively, the exemption formula can be simplified as follows:

Chargeable gain x (Appropriate rate – 5%) / Appropriate rate

The appropriate tax rate to be applied on this exemption order depends on the holding period of the property which is summarised as per Table A.

Illustration: Malaysian citizen individuals

Chia Lat acquired a condominium in Bangsar for RM500,000 on Jan 1, 2008. On March 31, 2010 he decides to dispose the property for RM780,000. The RPGT to be paid by him would be as per Table B.

Illustration: Companies

Using the same example as above, and assuming the taxpayer is a Sdn Bhd, the RPGT payable would be as per Table C.

Mathematical confusion

The mathematical formula stipulated in the RPGT exemption basically restores to the fact that the RPGT is 5% on the CG. This is the mathematical equation:

Assuming the appropriate tax rate is y and CG is x, then the RPGT payable after the RPGT exemption would be :

[x – x(y - 5%)/y ] y =xy – xy + 5% x

= 5% of x

The Government has stated that the purpose of the RPGT is to have a fair administration of taxes. Thus the exemption is an interim measure to begin with RPGT of 5% taxes. In years to come, once the exemption order is revoked, RPGT payable would revert to the original position, ranging from 30% to 5%, depending on the holding period.

Policy reform: Currently, taxpayers are only required to keep accounting records for seven years under the law. It may not be feasible to impose 5% on the chargeable gain on gains derived from holding periods more than seven years. This would mean tax payers are required to keep their accounting records for an indefinite time to justify cost attributable to the acquisition.

It is therefore suggested that the Government impose 2% on selling price instead of holding periods exceeding seven years or as in the past, exempt these gains from RPGT. After all, the underlying purpose of RPGT is to curb speculation of properties rather than tax collection.

Moving forward, the Government may likely further align the taxes on landed transactions to be equitable with the income tax system. Therefore, it is crucial that the rakyat understand the Government’s overall objectives and appreciate that this exemption order is an interim measure to prepare the country for a complete restoration of the RPGT system when the time comes.

Once the country’s economy is paced and sustaining desired growth, this exemption may likely to be revoked and property gains will be back causing gains will be taxed at the appropriate rate.

Till then, this exemption order will continue to allow us to enjoy most of our short-term trading gains from real property transactions.

Case Digest: Thor Eagle Maritime Agencies v Innovest Bhd

The recently reported case of Thor Eagle Maritime Agencies v Innovest Bhd [2009] 6 MLJ 74 decided by the High Court in Kuala Lumpur dealt with the features of contracts of affreightment that is instructive for the shipping, logistics and transportation industry.

The case involved a customer that had entered into a contract of affreightment with the shipping line, via a shipping agency, to carry goods.

The time of shipment stated that the date of arrival of the ship would be "about" 10-15 August 1998.

The ship actually arrived on 16 August 1998.

About one week prior to the date of the ship's arrival, the client had communicated clearly to the shipper that it wished to repudiate or terminate the contract.

The facts of the case suggest that the client's act of repudiation or termination was not effective. The court did not deal with the matter. So, we are not able to see why the repudiation by the client was not effective.

The issues before the High Court were:

1. Whether time was of the essence in that contract of affreightment. If it was found that time was of the essence, the client would not be liable to the shipper; and

2. Whether the shipper had made any effort to mitigate losses from the repudiation. If there were no efforts to mitigate, the client's liability would be reduced.

Whether time was of the essence
The High Court relied on 3 matters in ruling that time was NOT of the essence in that case.

a. The contract of affreightment did NOT specifically state that time was to be of the essence in the contract.

b. The contract merely stated that the date of arrival of the ship was "about" 10-15 August 1998.

c. There were previous occasions in dealings between the client and the shipper where the client had proceeded to load the goods even though the ship had arrived later than the scheduled dates.

The High Court made the following observation:

It is trite that in contracts relating to shipping, time may not be of the essence and it all depends on the terms of the contract, intention of parties, custom, practice etc.

Mitigation by the shipper
As with the laws of contract of most nations, Malaysian contract law required the shipper to make an effort to mitigate or reduce its losses from the cancellation of the contract by selling the cargo space to other clients.

In that case, the shipper did not offer any proof that it had attempted to mitigate its losses.

As such, the shipper's claim of USD256,760-00 was reduced to USD80,000-00.

FRS 139 and its bearing on transfer pricing

As if transfer pricing per se is not complex enough, by January 1, 2010 there will be an added factor that involves fair value accounting which is also known as the "mark-to-market" rule.

Since transfer pricing compliances are very much driven by collating data on comparable activities and products provided by competitors within the same jurisdiction - a process that is already difficult in and, of itself, fair value accounting will mean that applicants may have even higher standards of proof.

This Ernst & Young piece is instructive:

COME Jan 1, the Malaysian Accounting Standards Board’s Financial Reporting Standard 139 – Financial Instruments: Recognition and Measurement (FRS 139) will finally be implemented in Malaysia. Four years since its implementation date was set, it is still considered uncharted waters for many corporations. This is not surprising since FRS 139 is considered the “mother” of all standards by some.

Under FRS 139, many financial assets and financial liabilities are required to be carried at fair value. This will have a significant impact on loans between related parties, which generally can be interest-free or carry interest rates which are well below the market rates.

The definition of fair value under FRS 139 is “the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction”. Paragraph 48A of FRS 139 further states that “The best evidence of fair value is quoted prices in an active market ... Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available ... ”

Interestingly, it loosely echoes the Organisation for Economic Cooperation and Development’s guide for an arm’s length interest rate:

“... an arm’s length interest rate shall be an interest rate which was charged, or would have been charged, at the time the financial assistance was granted, to uncontrolled transactions with or between independent persons under similar circumstances.”

It could well imply that the measurement of related party loans initially at their respective fair values and subsequently at amortised cost using the effective interest method, may be deemed to be in line with the arm’s length principle since market interest rate is used.

Following the introduction of Section 140A of the Income Tax Act 1967 (ITA) which basically requires taxpayers to ensure that their related party transactions are carried out at arm’s length, would this then mean that an assessment of the fair value of related party loans by the auditors under FRS 139 can serve as contemporaneous documentation for transfer pricing purposes?

The corporate taxpayers do not have an option as to whether to accept the fair value accounting treatment in their financial statements – it is a requirement of FRS 139 and also the Companies Act 1965.

Further, requiring corporations to measure related-party loans initially at their respective fair value may not only affect the income statement. However, for certain, the subsequent amortisation amounts, measured at amortised costs, will represent accounting interest income or interest expense in the income statement. Book entries are generally not the actual receipts or payments, and in tax terms are not real costs or income earned.

At this point, it would be helpful to look at what other tax jurisdictions have done under similar circumstances. Hong Kong, Singapore and New Zealand tax authorities have issued departmental interpretation and practice notes on the income tax implications arising from the adoption of IAS 39 or its local equivalent.

While in general most tax authorities require the tax treatments to follow or be consistent with the accounting treatment under FRS 139 as far as possible, they also acknowledge that the revenue versus capital consideration would need to be considered in determining the tax treatment.

As an example, in Singapore, the tax adjustment is such that the discount on the interest-free loan recognised in the income statement will not be allowed as a tax deduction and the interest income recorded will not be taxed because these are merely book entries.

The auditor’s primary role is still that of expressing an opinion as to the true and fair view of the financial statements. This means that corporations would still need to provide auditors with supporting evidence of the fair value of the related-party loans to enable auditors to express an opinion.

The fair value measurement rests on the rebuttable presumption that effective interest rates used in the amortised cost method is the market interest rate and is thus, at arm’s length. While this is generally true, loan arrangements made with unrelated parties in the current business environment should be considered as arm’s length, although they may not carry the same market interest rates due to various factors such as level of credit risks, tenure, size of collaterals, etc.

So, what would corporations provide to the auditors? Section 140A of the ITA provides that the acquisition or supply of property or services with related parties be conducted at arm’s length, failing which the Director General of Inland Revenue may adjust the transfer prices.

Since 2003, transfer pricing guidelines have been issued, setting out the extent of information required in a transfer pricing report. The guidelines also stipulate that it is a pre-requisite that a comparable analysis (benchmarking) be carried out to substantiate the arm’s length pricing.

To ensure that corporations provide auditors with the correct arm’s length and market rate interest for related-party loans in the FRS 139 measurement of fair value, it is very likely that a comparable analysis would need to be carried out. This should then provide the setting not only for the auditors but for the tax authorities in support of the argument for arm’s length. Any fair value book entries put through the financial statements should then be met with minimum queries from the tax authorities.

Abolition of Foreign Investment Guidelines in Malaysia

This is a re-cap from the liberalisation of Malaysian investment policies earlier in 2009. This is extracted from Maybank Investment:

Market-friendly Initiatives on corporate equity ownership. PM Najib’s abolition of FIC guidelines and other directives for GLCs, and capital raisings will mark him as one of the most market-friendly Malaysian prime ministers. We believe the changes would benefit commercial REITs, potentially raise interest in Sime and a handful of other stocks, and in the long-term, attract foreign direct investments.

The abolition of Foreign Investment Committee (FIC) rules for all corporate equity transactions and most property transactions could become a hallmark of Najib’s premiership. Foreign REIT managers would now have greater reason to enter and eventually list REITS on Bursa, while a major shareholder who had wanted to raise his shareholding may now do so more easily. Foreign ownership restrictions imposed by ministries / regulators remain in key sectors such as telecoms, water, energy, media.

GLCs to be further transformed. PM Najib has also instructed Government-linked companies (GLC) on two market-friendly moves: (i) government shareholdings in GLCs to be reduced to aid market liquidity and free-float, (ii) GLCs to dispose non-core assets. Both moves will render GLCs more attractive investments although it could initially dampen appetite for their shares. The moves would also benefit the investment banking community with more corporate deals.

Property, by comparison, was a sideshow. The FIC guideline changes to corporate equity ownership and equity raisings, and potential GLC activity, may well have a greater impact on the capital market than on physical property. In particular, individuals states may continue to impose conditions or require consent for foreign property ownership, frustrating foreign investements.

Table 1: Summary of Reforms

Reforms	Key measures
FIC deregulation	FIC guidelines on acquisition of interests, mergers and takeovers repeated with immediate effect FIC will no longer process share transactions nor impose equity conditions on such transactions
FIC approval on acquisition of properties	FIC will only process transactions involving dilution of Bumiputera and Government interests. Even then, FIC approval is only required for properties > RM20m All other transactions (e.g. transactions between foreigners and non-Bumiputeras) no longer require FIC approval
Corporate equity ownership	30% Bumiputera equity requirement during IPO is removed* SC, as sector regulator, will continue to impose at least 25% public spread requirement Bumiputera allocation of IPO shares to be 50% of public spread requirement No equity condition imposed on equity raisings post IPO except for RTOs and backdoor listings
Ownership in services industry	Wholesale segment of the fund management industry fully liberalized to allow 100% ownership Foreign shareholding limits for retail unit trust management companies and existing stock broking companies raised to 70% from current level of 49% BNM and SC will review all visa applications for the financial services industry and capital market respectively