Malaysia has a lot going for it in terms of ease of doing business.
By Zhen M
The World Bank’s Doing Business 2014 report puts Malaysia at number six on the ease of doing business index, taking our nation to the top 10 for the first time. It is indeed a nice feather to have in one’s cap and arguably brag-worthy – we are now in the same league as Singapore, Hong Kong, New Zealand, the United States and Denmark and ahead of South Korea, Norway, the United Kingdom and Australia!
But does this make any difference to how foreign investors see Malaysia? Would this attract more multinational companies (MNCs) to set up shop here?
Malaysian International Chamber of Commerce and Industry (MICC) executive director Stewart Forbes says: “An upgrade in ranking is always a positive sign but probably not that important by itself. The rank does not tell us very much as it is derived from a variety of factors, some good and some not-so-good. MNCs will evaluate many aspects of an economy before deciding to invest.”
Forbes sees greater importance in the trend in rankings. “In recent years, we have seen a steady improvement in Malaysia’s ranking. This suggests an ongoing improvement in ease of doing business, which hopefully will continue.”
Malaysia already ranked the highest in terms of ease of getting credit for the past six years and has been making significant strides in other areas. For instance, in terms of dealing with construction permits, its ranking rose from 96 to 43 in this year’s ranking, while in terms of starting a business, its ranking went up to 16 from 54.
Speeding up process of starting business
Improvements like these, which will speed up the process of starting a business/project, bode well for Malaysia, opines Alliance Investment Bank Bhd chief economist Manokaran Mottain. “They are positive points for any country that wants to attract investments. The ease and speed in getting a licence/permit is an important factor in an investment decision, more so in times of uncertainty.”
While Malaysia has shown creditable improvements, as highlighted by the report, there is still plenty of room for improvement, Dato’ Sri Idris Jala, CEO of Performance Management and Delivery Unit (PEMANDU) had commented, adding that “the number of business licences required has been systematically reduced through business process reengineering to expedite business licensing. By 2015, the government expects the remaining 548 licences to be consolidated into 323.”
Forbes lauds Malaysia for always having a very open and consultative relationship with its investors “which makes engagement and problem solving an easier task (here) than in some other regimes”.
He notes that through the partnership approach of ‘Malaysia Incorporated’ and the formation of consultative bodies such as Pemudah, many administrative and operational challenges have been tackled. “Historical bottlenecks such as immigration and work permits have been significantly improved. The ongoing improvements in licences and business administration provide optimism for continuing improvement. Recent moves to commence reform in the taxation system are also welcome and positive.”
“The push towards transformation into an innovative and productive developed economy has brought with it many challenges and highlighted areas – such as education and innovation – where much work still needs to be done. But, at least steps are being taken along this road, even if not as fast as may be wished,” Forbes comments.
Among the major challenges in attracting and keeping quality MNCs in Malaysia, human capital remains a forefront concern.
“The availability of skilled workers sufficient to meet industry’s needs is still an area that concerns the private sector, as are the quality and work ethics of graduates entering the workplace. Cost of labour is rising without evidence of corresponding increases in productivity while out-of-date labour laws are preventing companies from managing their human capital resources as well as they would like to,” laments Forbes.
That said, Malaysia turned in an unexpectedly good showing in the World Economic Forum (WEF)’s inaugural Human Capital Index 2013 which was released last October. The country ranked 22 out of a list of 122 nations, and fifth in the Asia-Pacific region, after Singapore, Japan, New Zealand and Australia, but ahead of South Korea, Taiwan, Thailand and the Philippines. The index is part of WEF’s Human Capital Report 2013, a pioneer study that compares the abilities of 122 countries to “develop and deploy healthy, educated and able workers”.
Also on the positive side, Malaysia continues to have a ‘comfort factor’ in terms of stability, fiscal competency, a generally business friendly government (at both Federal and State levels), and a high quality of life, says Forbes. “These together create an environment in which companies can flourish without undue interference from the authorities.”
MICCI, formed in 1837, is Malaysia’s longest established trade association. It serves close to 1,000 corporate members representing over 30 nationalities in the manufacturing, services and professional services sectors. Member composition includes both MNCs and SMEs, with about an equal spread between Malaysian companies and those with foreign equity.