Nov. 4 (Bloomberg) -- Malaysia will issue a banking permit to Industrial and Commercial Bank of China Ltd. as it seeks to boost foreign direct investment, according to two people with knowledge of the matter.

Malaysia’s central bank and government are in the process of completing the approval for ICBC to operate in the country, one of the people said, declining to be identified because he isn’t authorized to speak to the media. ICBC spokesman Xie Taifeng said he was unaware of any pending announcement.

Beijing-based ICBC, the world’s most profitable bank, would become the first foreign lender to receive a banking permit in Malaysia in nine years. Prime Minister Najib Razak said in April he would give out as many as nine new licenses to overseas financial institutions as the country liberalizes its banking industry.

Malaysia will issue three licenses to foreign banks in 2011, the first since Bank of China Ltd., based in Beijing, received a permit in 2000, Najib said April 27. The central bank will also issue two Islamic banking licenses this year, another two to sell Islamic insurance, and as many as two specialized permits to overseas commercial banks, he said at the time.

Inviting foreign banks is part of Najib’s plan to increase the proportion of Malaysia’s gross domestic product derived from services to 60 percent from 55 percent in 2008, and wean the country off its dependence on export revenue. Malaysia’s $195 billion economy may shrink 3 percent this year, the first contraction in a decade, as exports slump, Najib said Oct. 23.

The government may announce the approval for ICBC to start its business in Malaysia, which will include setting up four branches, during Chinese President’s Hu Jintao’s two-day visit to Kuala Lumpur next week, the Straits Times reported today, citing unidentified financial executives and government officials.

Bank Negara Malaysia, the country’s central bank, declined to comment, according to an official.

-- With assistance from Eugene Tang in Beijing. Editor: Philip Lagerkranser

To contact the reporter on this story: Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.netBarry Porter in Kuala Lumpur at Bporter10@bloomberg.net

Last Updated: November 3, 2009 21:54 EST