Malaysia warms to private equity but problems exist

Navis grew out of The Boston Consulting Group in Asia. Over time, the firm has added professionals with backgrounds that include investment banking, securities analysis, structured finance and specific industry sector experts.

Today it manages approximately $5 billion and is mainly focused on Southeast Asia, Muse says.

George Koshy, head of Malaysia transactions advisory services for Ernst & Young, said that Malaysian companies are starting to "warm" to PE firms as they look to move away from traditional funding channels. But the move is not without its hurdles.

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He said Malaysia must ensure that its regulations and guidelines surrounding foreign investors are relevant and effective.

"The Securities Commission's recent revision of its equity guidelines is a good step forward in enhancing investor protection. It provides clarification on principles and requirements which will improve market efficiency and address the associated risks of investing in the country," he said.

Idris Jala, minister in the Prime Minister's Department, said during a sideline briefing at the InvestKL promotion earlier this month. "We are bullish on private investment, moving forward."

He told The Star Online that Malaysia would now be on investors' radar after surging to sixth position from 12th among 189 economies in the World Bank Doing Business 2014 report.

According to a recent statement by Malaysia's central bank, Bank Negara, growth in private investment expanded 16.5 percent in the fourth quarter last year, compared with 15.2 percent in the third quarter.

The government said Malaysia will continue to record double-digit growth in foreign direct investments this year on the back of sound economic fundamentals which should help boost PE investment.

Analysts say the government, which aims to reduce the domestic economy's dependence on State-owned companies, is encouraging PE financing to help small businesses expand.

The country's largest State-run pension fund is leading the way by allocating more funds to PE investments, according to a report in the Malay Mail.