In administering the exchange control regulations, Bank Negara Malaysia adopts the principle that the measures complement other macroeconomic initiatives to ensure stability in domestic financial markets in order to bring about sound and sustained economic development of the country. The rules are, therefore, reviewed from time to time to ensure that they do not pose as impediments towards achieving greater efficiency in the financial system and in business operations. Past periodic reviews of the rules have led to liberalisation of exchange controls to reduce formalities and facilitate business transactions.

As part of this continuous review process, Bank Negara Malaysia today announces further liberalisation of several exchange control rules. These measures aim at further improving the business environment in Malaysia by according greater flexibility to residents and non-residents in sourcing ringgit funds, in managing their foreign exchange exposure and improving overall operational efficiency.

Effective from 1 April 2003, several exchange control rules are liberalised as detailed below:

1. To provide flexibility to Non-resident Controlled Companies (NRCCs) in obtaining domestic credit facilities, the restriction on foreign-owned banks to extend not more than 50% of all credit facilities from banking institutions is abolished. In addition, the amount of ringgit credit facilities that can be extended freely by residents to a NRCC is raised to RM50 million from RM10 million. While compliance with the 3:1 gearing ratio for domestic debt and eligible capital funds remains, the computation of domestic debt and eligible capital funds is liberalised. NRCCs are now given the flexibility to compute their gearing ratio either on per corporate group basis or on single entity basis. Additionally, the 3:1 gearing ratio is only applicable and computed based on the amount of domestic borrowing that is in excess of the RM50 million limit.
    
2. To reduce transaction cost and enhance overall operational efficiency and risk management, the overnight limits on foreign currency accounts is liberalised. The maximum overnight limit of foreign currency accounts (FCA) maintained by resident exporters with onshore commercial banks and Islamic banks is raised to USD50 million from USD10 million. Additional flexibility is also granted for resident exporters to retain in the account another 10% of subsequent export proceeds repatriated to Malaysia. Under these more flexible arrangements, exporters who are eligible to retain export proceeds up to USD50 million could retain an additional USD20 million in their accounts. The foreign currency account limit for Approved Operational Headquarters is also raised to USD70 million from USD10 million.
   
   The new and previous limits are shown below: 
    

3. Monthly average export receipts (RM million)	Previous limit (USD million)	New limit (USD million)	Limit including 10% accumulation (USD million)
   Exceeding RM100 million	10	50	70
   Exceeding RM50 million up to RM100 million	10	30	50
   Exceeding RM20 million up to RM50 million	10	10	30
   Exceeding RM10 million up to RM20 million	5	5	10
   Exceeding RM5 million up to RM10 million	3	3	5
   Not exceeding RM5 million or new exporters	1	1	3



4. To facilitate foreign exchange risk management, the rules on hedging are being liberalised in stages. In addition to current rules allowing forward sales of export proceeds, residents are also freely allowed to sell forward their foreign currency receivables for any purpose to authorised dealers provided the transaction is supported by firm underlying commitment to receive such currency receivables and the tenure of the contract does not exceed 12 months.
    
5. To reduce administrative costs to residents and the banking industry, the threshold for completing Form P for payments to non-residents by residents is increased to RM50,001 from RM10,001 in ringgit or its equivalent in foreign currency, irrespective of purpose of payment. Payments for overseas investment, including extension of loan to a non-resident, continue to require prior approval if the amount exceeds RM10,000 equivalent.
    
6. In addition, to ensure that statutory reporting requirements do not hinder the efficiency of resident exporters, the requirement to complete Form KPW X for exports in excess of RM100,000 f.o.b. is now abolished. Resident exporters only need to continue to submit quarterly and annual reports on their export related transactions.