Danajamin Established to Support Corporations to Raise Funds in Bond Market

Further to the announcement made during the Second Economic Stimulus Package on the 10th of March 2009, the Government is pleased to announce the establishment of the national financial guarantee institution that will commence operations today. The institution is named Danajamin Nasional Berhad (Danajamin). Danajamin will provide credit enhancements to facilitate corporations with viable businesses and investment grade ratings to enhance their access to the Malaysian bond market. As a corporation rated AAA by RAM Rating Services Berhad and Malaysian Rating Corporation Berhad, Danajamin aims to enhance the ability of corporations to tap the bond market for funding at reasonable cost.

The establishment of Danajamin signifies the commitment of the Government to ensure that viable corporations continue to have access to financing. Danajamin is owned by the Government with an initial paid-up capital of RM1 billion. The paid-up capital will be raised to RM2 billion if necessary. With an initial paid-up capital of RM1 billion, it is expected that Danajamin will be able to underwrite guarantees of up to RM15 billion in bonds.

Danajamin is licensed as an insurance company pursuant to the Insurance Act 1996 and subject to the regulatory purview of Bank Negara Malaysia. As a licensed entity that undertakes financial guarantee insurance business, Danajamin will be governed by strict corporate governance and prudential requirements to ensure its commercial sustainability over the medium and longer term. The management of Danajamin will report to an independent Board of Directors comprising mainly private sector professionals that have extensive experience in the financial sector. Dato' Sri Abdul Hamidy Abdul Hafiz, who has an extensive experience in the Malaysian banking sector, has been appointed as Chairman of the Board.

Danajamin complements the various reforms and initiatives that have been put in place to enhance the role of the bond market in the economy. Today, corporations source their financing requirements mainly from the bond market, accounting for 58% of their total financing requirements as compared to 21% in 1998. This is a significant transformation over the years and augurs well towards strengthening the role of the financial sector in the economy. Danajamin is also expected to enhance the vibrancy and robustness of the bond market to continue to support the requirements of the economy.

Further details on the criteria for the guarantees and operations of Danajamin will be announced by Danajamin later today.

PRIME MINISTER OF MALAYSIA
Dato' Sri Mohd Najib
Putrajaya
15 May 2009