Going nowhere

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Stedtfeld said MGCC members were generally satisfied with bureaucracies, processes and institutional handling in relation to setting up and running a business in Malaysia

Despite Malaysia’s continued restrictive policies on car imports, German companies feel these are small obstacles that can be overcome with time.

If German companies are every bit as relentless as their national football teams, Malaysia’s continued restrictive policies on car imports and public procurement are but small obstacles to be overcome with time. And in spite of these niggling concerns, German businesses in Malaysia remain firmly rooted in the country while the number of German investments continues to grow, according to the German Malaysian Chamber of Commerce.

“Companies are not leaving Malaysia. On the contrary, when we look at our business as a service provider, every year more German companies are coming here and staying here,” says executive director of the MGCC, Alexander Stedtfeld (pic).

Commenting on Malaysia’s ranking in the World Bank’s Doing Business Report, which was released in October, from a German perspective, Stedtfeld said its members were generally satisfied with bureaucracies, processes and institutional handling in relation to setting up and running a business in Malaysia.

The World Bank placed Malaysia at 12th position for ease of doing business in its assessment for 2013. Countries were rated on matters such as forming a company, paying taxes, getting credit, enforcing contracts and the level of protection on intellectual property, among others. In the last decade or so, Malaysia has been steadily climbing the tables, moving from 25th place in 2007 to 18th in 2012.

Nevertheless, to investors such reports only act as a general indicator of the attractiveness of an investment destination.  “Overall this kind of rankings is only one aspect. It’s just a tick on the list. Other more individual findings based on the enquiries of the companies are much more important,” explains Stedtfeld whose chamber assists about 12 to 15 German companies each year to establish a presence here.

Malaysia ranked particularly well for getting credit (first place) and protecting investors (fourth place). It made big improvements in ‘getting electricity’, ‘registering property’, ‘dealing with construction permits’, ‘paying taxes’ and ‘cross-border trading’.

While it fell to places to 33rd in the area of enforcing contracts, Stedtfeld noted that this only becomes a problem when a company does run into contractual problems; the likelihood of which is very low because of the strong institutional framework.

The biggest concerns of German companies remains in areas outside of the World Bank assessment. These are the shortages in the skilled and surprisingly, unskilled, labour forces. The transition to a high income economy means gradually weaning Malaysia off cheap foreign labour but German companies would like to see this happen at a slower pace as they restructure production processed to be more capital intensive.

“We don’t mind the introduction of minimum wages or a general policy but in certain areas, German companies can’t keep up with the pace. We’d feel more comfortable if the transition is much slower.”

Also, the absence of a Free Trade Agreement between Malaysia and the European Union puts German companies at a comparative disadvantage against US, Japanese and Australian firms. As with matters of affirmative action, that is probably best realised with time and patience.

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