How will the ASEAN Economic Community (AEC) and the liberalization of the regional market impact legal professionals?
KOK: Generally speaking, legal services have been well protected in the past. The legal sector is one of the last where one can have a monopoly and law firms do not need to worry about competition. However, as the country moves towards a more integrated ASEAN framework and towards the WTO and so on, lawyers have had to adapt. I would say that the sector has not been liberalized as it should be to cope with the challenges of businesses coming to this part of the world. Interestingly, the government has liberalized legal services and they are going to open up 17 sub-sectors, which include legal services. However, the reality is that 95% or more of the lawyers will not be affected by the changes because they still participate in litigation and conveyancing, which continue to be closed. The areas open to competition are those that attract foreign investors and foreign law firms, such as banking, capital market, and competition law. Less than 5% of lawyers are involved in these areas so the majority of the lawyers are not very affected by the changes.
How are foreign investors protected in Malaysia? How does the legislative framework here compare to that of regional neighbours with regards to investor protection?
KOK: In the World Bank 2013 report, which has recently come out, Malaysia scores very high in the protection of investors. I think we came 12th in that ranking. Interestingly, we rank above many other countries, like Thailand. However, we are behind well-known countries such as Singapore and New Zealand. This is one particular area that the government, especially the Prime Minister’s Office, is very keen to enhance because when you have good laws that promote integrity, transparency, and investors’ protection, the country is able to attract more FDI. I think Malaysia competes very well and I think that the World Bank 2013 study, by ranking Malaysia 12th among 185 countries, is a reflection of that. I also think that, generally speaking, Malaysia is very well positioned to look after investors and these laws are already in place. Of course, it can be improved, if you want to go in New Zealand or Singapore, but the trend is positive and there is continuous improvement in the investor protection side and in enhancing the protection of all stakeholders doing business as a whole.
To what extent has Malaysian economic growth been matched by equivalent development in the nation’s legal systems and the sophistication of the organizations that practice in the region?
KOK: The world is shifting, in terms of economic centre of gravity, from the west to Asia. Within Asia, ASEAN is one of the power drivers of development and this explains why we are seeing a lot of foreign investors coming in, including the recent transformation of Myanmar. ASEAN, as a region, is attracting a lot of capital flow, trader services flow, investments, and so on. Thus, the legal profession is required to develop alongside these changes to match business’ needs. Business people want to know the law that governs the sector in which they work. In the past, the challenge was linked to the fact that there were many countries within ASEAN. In fact, ASEAN is one region made up of 10 different countries, which vary in their economic strength from Singapore, an advanced and developed country, to Laos or Myanmar, which are still developing countries. Thus, how do you integrate and coordinate the law? How do you enable companies to do business in a way that is uniformed and harmonized all over the region? ZICOlaw, and our network, has been focusing on the ASEAN community since 2003. It is very important for us that people do not see ASEAN as a one stop common platform, as there are many differences among the countries, even when there are shared values and shared customs. So the legal services need to be sensitive and customized according to the different legal systems. ZICOlaw’s approach in this respect can be summarized by our credo, that is, “regional expertise and local grounding”. At ZICOlaw, we have different law firms in each country that can ensure you will receive the right guidance, whether you are in Myanmar, in Laos, or in Cambodia. In the past, people would make the mistake of coming to ASEAN thinking there was one legal system applicable to the entire region. On the contrary, what applies in Singapore, may not apply in Thailand or Laos or Cambodia, so you need to have a local grounding and a local sensitivity. This is very important and when clients come to ASEAN, they increasingly look at us to guide them and to navigate them through the different countries and systems. Ultimately, with many of these clients, we formed a partnership.
How has the recent Western debt crisis impacted the region and Malaysia?
KOK: Asia, in a way, has benefited from 1998 financial crises, which forced the economies, especially those in South East Asia, like Thailand, Indonesia, and so on, to restructure the whole financial system to cope with the debt. The lesson learnt there resulted in ASEAN governments becoming more resilient, having more liquidity in the banking system, developing a back boned governance for the more speculative types of investments, and forcing a higher level of savings on the people. As a result, the Euro zone crisis, although it affects Asia because Asia exports a lot to the west, has a minor impact on the financial or banking system. The financial and banking systems are also more resilient in Malaysia because Malaysia has the advantage of having an important domestic savings base, which means that banks are well capitalized and are not as adventurous to go out and take bad risks. I would say that Asia’s financial and banking system is totally insulated and that it will survive. This is also due to the powerful growth of China and of ASEAN, not just from an international perspective, but from a regional, intra-ASEAN, perspective too.
The government has liberalized legal services and they are going to open up 17 sub-sectors, which include legal services. However, the reality is that 95% or more of the lawyers will not be affected by the changes because they still participate in litigation and conveyancing, which continue to be closed.