Posted at 1:10 a.m. PST Sunday, December 14, 1997
Malaysia, U.S. still at odds on financial agreement
KUALA LUMPUR, Dec 14 (Reuters) - Malaysia Sunday stuck to financial
regulations despite implicit U.S. threats to impose sanctions over them.
Malaysia refused to budge from an offer it made under the financial
services agreement concluded at the World Trade Organization in Geneva
on the weekend: a maximum 51 percent ownership of local financial
institutions by foreign firms.
The U.S. demands unlimited foreign ownership.
The issue particularly affects American International Assurance (AIA), a
wholly owned Malaysian subsidiary of U.S. insurance company American
International Group (AIG).
A spokesman for Malaysian Deputy Prime Minister Anwar Ibrahim told
Reuters that Malaysia would stand firm on its offer, and that AIG would
have to divest 49 percent of its equity in AIA.
``At this time our offer stands at 51 percent on new and current
companies,'' said Anwar's press secretary, Adlin Zabri. When asked if
this meant that AIG would have to divest the 49 percent stake, Adlin
replied, ``Yes, yes.''
U.S. Trade Representative Charlene Barshefsky said Saturday the U.S.
would seek improvements in some countries' offers under the deal.
Barshefsky said countries such as Malaysia that forced divestiture of
existing rights in the insurance sector would be ``carved out'' from
U.S. obligations under the pact.
That means the U.S. would be able to impose sanctions on Malaysia if it
forced the U.S. insurance company to divest those holdings.
``This practice of forced divestiture is unacceptable,'' Barshefsky said
of Malaysia.
When the WTO deal was concluded on Saturday negotiators said it would
help investor confidence by bringing financial services, fastest growing
sector of the world economy, under WTO rules -- meaning that states
breaking their commitments can be taken to its dispute settlement
system.
When enacted in March 1999, it would provide the big Western
multinationals with guaranteed if phased access to most developing
economies, increasing capital flows and improving the quality of their
industries by injecting competition.
Anwar, who is also finance minister said in a statement faxed to Reuters
on Sunday that Malaysia was satisfied with the outcome of the talks, and
that the government ``remained committed to the principle of progressive
liberalization as inscribed in the WTO.''
He added that Malaysia's offer to the WTO had ``contained substantial
improvements to its 1995 offer.''
``These include (a) binding 51 percent majority ownership for the
original foreign owners of locally incorporated insurance companies,''
said Anwar. Other offers include allowing a higher number of expatriate
personnel in ``several categories of financial services and...committing
to issue new licences in the reinsurance subsectors,'' he said.
Prime Minister Mahathir Mohamad told a business conference on Saturday
that the 51 percent ceiling which Malaysia had proposed at global talks
in Geneva would apply to all foreign insurers.
``We are now prepared to allow 51 percent foreign ownership. We are not
willing to have 100 percent foreign-owned companies, foreign-owned
banks, foreign-owned insurance companies,'' he said.
``The U.S. insists that it is 100 percent foreign owned. We are
insisting on this 51 percent. We are not giving in although we have
softened a bit,'' Mahathir added.
Trade superpowers and developing countries concluded the landmark deal
in the early hours of Saturday to clear away international barriers to
the expansion of banking, insurance and securities industries.
The agreement is scheduled to be ratified by the end of January 1999 and
go into force by March of that year.
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