DFIs in Financing Green Technology: The Malaysian Experience Wan Azhar Wan Ahmad Chief Executive Officer Credit Guarantee Corporation Malaysia Berhad 26 April 2012 1

1.0 Introduction Green Economy in Malaysia New Economic Model (NEM) - Malaysia aims to create a high income, inclusive and sustainable society for its citizens. Focus on: Sustainability from climate change Sustainability from environmental impact Growing acceptance that natural resources are limited 2015 targets Source: Social Aspects of Green Tech Goal in Malaysia by Dr Adnan Hedri, USM, 11 October 2011 for United Nations Research Institute for Social Development Current : 2% of GDP from green business & 95,000 green jobs By 2015 : 8% of GDP from green business & 500,000 green jobs

1.0 Introduction GT Goals in 10th Malaysia Plan 2010 2015 2020 Increased public awareness & commitment for adoption and application of GT; Widespread availability & recognition of GT; GT becomes preferred choice in procurement of products and services; Larger local market share against other technologies. Widespread adoption of GT reduces overall resource consumption while sustaining national economic growth; Expansion of research, development & innovation activities on GT Increased production of local GT products; Expansion of local SMEs on GT into global markets; and Expansion of GT applications to most economic sectors Malaysia becomes major producer of GT in global market Increase foreign & domestic direct investments (FDIs and DDIs) in GT manufacturing and services sectors; and Significant reduction in national energy consumption; Short-term Goals Short-term Goals (2010-2015) Medium-term Goals (2016-2020) Medium-term Goals Long-term Goals Long-term Goals (Beyond 2020) Marketing & Promotion FOCUS AREA OF DFI FINANCIAL SUPPORT Development & Production Short-term Goals: Increased public awareness & commitment for the adoption and application of GT through advocacy programmes; Widespread availability and recognition of GT in terms of products, appliances, equipment and systems in the local market through standards, rating and labeling programmes; Increased foreign and domestic direct investments (FDIs and DDIs) in GT manufacturing and services sectors; and Expansion of local research institutes and institutions of higher learning to expand Research, Development and Innovation activities on GT towards commercialisation through appropriate mechanisms. Investment

National Green Technology Policy 2.0 Landscape of Green Economy in Malaysia Introduction of Ministerial Portfolio Ministry of Energy, Green Technology and Water in 2009 Formulation of National Policy Statement National Green Technology Policy overseeing ‘greening’ in 4 sectors: energy, buildings, water and waste management and transportation ENERGY ENVIRONMENT ECONOMY SOCIAL Seek to attain energy independence and promote efficient utilization Conserve and minimize impact on environment Enhance national economic development through use of technology Improve quality of life for all 4 Pillars of National Green Technology Policy • Introduction of a ministerial portfolio in the Federal administration Established Ministry of Energy, Green Technology and Water (replacing Ministry of Energy, Water, and Communications); • Formulation of a national policy statement on green technology –The central role of green technology was emphasized by the release of the National Green Technology Policy overseeing ‘greening’ in four sectors, namely energy, buildings, water and waste management and transportation; • Source: Social Aspects of Green Tech Goal in Malaysia by Adnan Hedri, USM, 11 October 2011 for United Nations Research Institute for Social Development

2.0 Landscape of Green Economy in Malaysia Establishment of Implementing Agency Malaysian Green Technology Corporation Formation of National Green Technology and Climate Change Council Coordinate issues of green technology between Ministries, agencies, private sector & other stakeholders in ways to implement policies. Registration of a Green Building Association Malaysia Green Building Confederation (MGBC) launched Green Building Index to enable green grading & certification of Malaysian buildings. Initiation of a Green Financing Scheme Green Technology Financing Scheme to attract innovators and users of green technology. Launching of Green Township Framework Outline comprehensive guidelines for new and existing townships to go green by incorporating environmental friendly technologies. • Establishment of an implementing agency –On October 2009, Malaysia’s Energy Centre was restructured and rebranded as the Malaysian Green Technology Corporation to implement the Ministry’s agenda for green technology; • Formation of an inter‐ministerial council as a decision‐making body on green technology – Prime Minister established and chaired the Green Technology Council with senior memberships from government and public sectors. The Council was later merged with the Climate Change Council; • Registration of a green building association –Malaysia Green Building Confederation (MGBC) was established in 2009 to support the government’s objective of promoting sustainable built environment. The Green Building Index had also been launched to enable green grading and certification of Malaysian buildings; Source: Social Aspects of Green Tech Goal in Malaysia by Adnan Hedri, USM, 11 October 2011 for United Nations Research Institute for Social Development 5

2.0 Landscape of Green Economy in Malaysia Efforts on Green Economy Introduction of Green Procurement in all government agencies Green procurement manual, procedures & standards are currently under development Formulation of Legislation to promote Renewable Energy The Renewable Energy Act 2011 (Act 725) and Sustainable Energy Development Authority (SEDA) Act 2011 Formulation of Low Carbon Green Growth Act is currently underway Examples of Govt support : COP15: Committed to reduce carbon emissions up to 40% by 2020 Development of Putrajaya & Cyberjaya as green townships Priority to Environment-friendly goods in Govt procurement National Eco-labeling programme by SIRIM Annual International Greentech & Eco Products Exhibition & Conference Malaysia (IGEM) United Nations data shows Malaysia's carbon emissions in 2006 stood at 187 million tonnes or 7.2 tonnes from each Malaysian. • Initiation of a green financing scheme –In 2010, a soft loan incentive, the Green Technology Financing Scheme was launched to create a policy environment that will attract innovators and users of green technology; • Launching of green townships framework ‐ Green Township Framework would outline comprehensive guidelines for new and existing townships in the country to go green by incorporating environmental friendly technologies; • Introduction of green procurement in all government agencies ‐ Green procurement manual, procedures and standards are currently under development • Formulation of legislation to promote renewable energy –The Renewable Energy Act 2011 (Act 725) provides for the establishment and implementation of a special feed‐in‐tariff system to catalyse the generation of renewable energy in Malaysia. The law will be administered by the Sustainable Energy Development Authority. • Formulation of Low Carbon Green Growth Act is currently underway – as mentioned in the Malaysia-European Union dialogue on green technology and low carbon growth was held on 12 October 2011 in Malaysia. COP15 - 15th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change in Copenhagen

3.0 Green Financing for SMEs Green Technology Financing Scheme (GTFS) Objective - to promote investments in GT : Minimises degradation of environment; Has zero or low green house gas (GHG) emission; Safe for use & promotes healthy and improved environment for all forms of life; Conserves use of energy & natural resources; or Promotes use of renewable resources.

3.1 GTFS – Implementation Role BNM Act as coordinator for GTFS MGTC Verify technical feasibility of project prior to financing processes by FIs. Upon approved, issue ‘Project Certification’ to applicant. CGCMB To provide g’tee support & pay FIs claims on g’teed loans according to risk sharing / g’tee cover through CGC. To reimburse 2% interest subsidy to FIs for financing granted under scheme MOF To manage, administer & monitor GTFS on behalf of MOF – include processing guarantee applications & claims. To submit monthly & quarterly reports on scheme performance to GreenTech Malaysia, BNM & MOF Malaysian Green Technology Corporation (MGTC)

MEACP - Maybank Middle East & Asia Capital Partners Pte Ltd 3.2 GTFS – Performance Additional to GTFS, other financial assistance provided specifically for greentech companies in Malaysia are: Malaysia Debt Ventures: aims to disburse RM300 mil. within a year from May 2011. for startups and existing companies that produce green tech products. Maybank MEACP Clean Energy Master Fund aims to invest in diversified portfolio of clean energy projects in Asia-Pacific region. 10 year fund size of RM 1.6 bil. (effective Nov. 2011) MDV – to date have approved RMXX mil to xx customers. Maybank MEACP - clean energy projects in Asia-Pacific region, focusing on China, India, Indonesia, Malaysia, Thailand, the Philippines, Vietnam, Cambodia and Laos. - 1st deal expected to close July 2012. MEACP - Maybank Middle East & Asia Capital Partners Pte Ltd 9

4.0 Challenges Issues hampering the take-up rate of GTFS Lack of familiarity in GT among local companies and banks as GT is still new. R&D is expensive and skills are difficult to obtain for local companies compared with MNCs. Lack of track record or entrepreneurs have not secured long term contracts with reputable buyers. Government guarantee of 60% still low for FIs.

5.0 Possible Solutions Initiatives to Address Challenges Green Procurement and IGEM Government will implement Green Procurement and PMS for Energy. IGEM helps business matching for green tech entrepreneurs. Education and awareness at all levels Country-wide seminars/workshops are continuously held with key stakeholders. Training for FIs Address gap in bank officers’ skill sets and understanding. Program established by the Institute of Bankers Malaysia (professional & education body for banking and finance industry in Malaysia). Monitoring of all policies and initiatives By Green Technology and Climate Change Council. IGEM - International Greentech & Eco Products Exhibition & Conference Malaysia Chaired by the Prime Minister of Malaysia and supported by 8 Working Committees

6.0 Conclusion GT still in infancy stage in Malaysia. Constantly seeking to improve and learn from experts in this field. CGC working closely with FIs and Government to avail access to GTFS.

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