Thumbs up to infrastructure and Bank Negara, thumbs down to crime, corruption

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Continuing our focus on doing business in Malaysia, today, we look at the member experiences of an organization whose Malaysian members employ over 50,000 people and whose combined yearly revenue exceeds RM20 billion a year.

Since 2Q2003, Vistage Malaysia surveys its CEO membership quarterly and publishes the ‘Vistage-MIER CEO Confidence Index’ in collaboration with MIER.

Based on its 3Q2012 survey, CEO optimism on outlook of the Malaysian economy, as well as prospects of their firms, fell. After two consecutive quarters of quarter-on-quarter gains, the CEO Confidence Index fell 5.3 points to 92.5 points. The fall implies a 5.4% fall in confidence among responding CEOs.  In the previous quarter, CEO confidence had increased 4.6%.


Of the 335 respondents, proportionately fewer CEOs (9% compared to 14% in the previous quarter) believe that overall economic conditions in Malaysia improved compared to a year ago. When asked about anticipated changes in economic conditions over the next 12 months, there were again proportionately fewer respondents (14% compared to 21% previously) who indicated that they expect conditions to improve.

The survey results also indicated that CEOs, compared to the previous quarter, are less optimistic about the overall performance of their firms over the next 12 months. 56% of responding CEOs, compared to 59% in the second quarter, anticipate revenue growth to increase going forward. Though proportionately more CEOs foresee better profits in the coming year (52% compared to 51% previously), proportionately more of them (19% compared to 15%) now expect profitability to fall.

As for the only component index that bucked the trend, 46% of responding CEOs in the third quarter expect to increase their planned fixed investment spending over the next 12 months, compared to 42% in the previous quarter.

However, considering that the CEO Confidence Index fell 5.3 points in the third quarter and it remains below the 100-point threshold, the 3-point rise in the planned fixed investment component index to 133 points is not exactly a bright spark in the overall Index’s lethargic performance.

CEOs were asked in the 3Q2012 survey about their perceptions with regard to the incidence of corruption and crime in Malaysia over the past three months. 36% respondents indicated that they believe the incidence of corruption in Malaysia rose over the past three months, while 79% believe that the crime rate rose over the same period.

On the positive, a high percentage of Vistage members felt that the Malaysian infrastructure relating to roads, power, telecommunications, seaports and water supply are relatively good although there is room for improvement. Our capital markets are quite well regulated and enforcement is visibly present. Bank Negara is staffed by competent people, and is quite efficient. Good financial regulation provides a stable financial environment for doing business in Malaysia.

Some challenges faced by Vistage community:

  1. Collection from Government departments for work performed under contracts is slow due to bureaucracy.
  2. Lack of adequate talent at all levels is a continuing problem, especially for SMEs. The ongoing brain drain will keep compounding the problem. Unless the root cause is fixed, matters will deteriorate. The Government’s neurosis about allowing foreign labour, skilled and unskilled to enter Malaysia is a constraint.
  3. Broadband efficacy is still lacking. This is a critical success factor in today’s age of economic progress.
  4. The halal body for standards and enforcement is making it difficult for halal food businesses owned by non-Muslims to renew their permits. This may result in some relocating their business elsewhere eventually.
  5. Getting permits for construction of factories and office-cum-warehouses and later CFs (Certificate if Fitness) are a continuing issue resulting often in delays and cost over-runs.

The Government may consider, among other factors, the following:

  1. Appointing officials to coordinate industrial construction applications for SMEs – setting time-period KPIs for approving permits and giving CFs.  This will assist SMEs to invest and/or expand their businesses.
  2. ‘Reverse brain drain’ by making the recruitment of foreign talent faster, easier and less costly for businesses or designated sectors which need it badly. This not only discourages Malaysian companies from moving offshore but also attracts foreign investors.

 

The views expressed here are the personal opinion of the columnist.

Photo credit: Flickr user kenteegardin

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