This is a Press Release by Treasury Malaysia

The Government wishes to announce a new policy with respect to the repatriation of portfolio capital. The measures implemented on September 1^st 1998, which include the requirement for such capital to be in Malaysia for at least 12 months, has contributed significantly to the stability of the economy. In response to discussions with fund managers, the Government wishes to announce measures to replace the 12-month holding rule.

The new policy will allow portfolio investors to repatriate their capital and profits as well as encourage new capital inflows into the country.

There are two categories of funds – those funds in Malaysia prior to 15 February 1999,and those that come in on and after this date.

The new measure is in the form of levy. The original capital brought in before 15 February 1999 will be allowed to be repatriated subject to a graduated levy which is based on the duration of investment. For capital repatriated within a period of up to seven months from the date of entry into Malaysia (since the announcement on 1^st September 1998), the levy is 30%. For the period exceeding seven months and up to nine months the levy is 20%, for the period exceeding nine months and up to 12 months the levy is 10%, and after 12 months no levy is imposed. No levy will be imposed on the repatriation of profits made within the 12-month holding period. All profits made after this 12-month holding period will be subjected to a repatriation levy of 10%. Dividend, interest and rentals are not subjected to any levy.

For funds brought in on and after 15 February 1999, the principal is allowed to be repatriated without any levy. However, profits will be subjected to a levy of 30% if repatriated within a period of up to 12 months from the date when profits are made. The levy is reduced to 10% if the profit is repatriated after 12 months from the date profits are made.

For purposes of control and monitoring, funds brought into Malaysia on or after February 15, 1999 will be placed in special external accounts to distinguish these funds from the existing External Accounts.

These new measures are aimed to encourage existing portfolio investors to take a longer term view of their investments in Malaysia and to attract new funds into the country, while at the same time discourage destabilising short-term flows.