Is there cause for worry for businesses?
Ipsos Business Consulting looks into concerns of Malaysian-based businesses 3 months into the new Pakatan Harapan led government.
The number one worry remains uncertainty over government policies and stabilising local currency which companies hope the government will focus on in the next two years.
In a study conducted by Ipsos Business Consulting (Ipsos BC) with over 100 businesses in Malaysia from June 2018 to July 2018 shows that policy uncertainty concerning economic policies such as taxation, trade and investment, significantly impedes business decisions.
A lack of clarity and firm policy direction adds a layer of risk for long-term business planning.
While there has been a lot of communication between the new government with the media and the public, there is still an opinion among businesses that there is a lack of clear and comprehensive direction from the government.
There is also desire among businesses to get further clarity concerning the status of some mega projects initiated by the previous government.
In addition, large local enterprises have expressed concerns about the possibility of contract termination or delay of projects that are already in the pipeline of their businesses.
The depreciation of local currency was also cited as a key concern by businesses.
Currency depreciation is especially worrying for companies that derive their sales domestically, but rely on imports for intermediate materials as this would increase the production cost and reduce profit margins.
Meanwhile, multinationals are more worried about the fluctuation of the Ringgit as it affects their international trade operations.
Any strong movement of the currency in either direction would have significant impact on their business operations. MNCs also expressed concern over the cost involved in the reversal of GST.
Ensuring consistent policies and providing adequate transition time for any policy changes is another area that businesses would like the government to address.
In addition, SMEs would like the government to provide better financial support and assistance for businesses, while large local companies would like the government to minimise red tape and cumbersome regulatory requirements.
The majority of businesses are generally optimistic towards the Malaysian economic outlook over the next one year, with MNCs expressing slightly higher optimism level.
This sentiment is underpinned largely by the hope that the new government will come up with policies and initiatives which are expected to restructure and boost the economy.
The overall positive sentiment on the economy also translated to an equally upbeat sentiment on their own business prospects, partly due to the expected improvement in the local business climate.
Most businesses have the intention to invest more in their business in Malaysia over the next one year.
The likelihood of investment is more prominent among large local companies as well as MNCs.
“The good news is that given the smooth political transition, Malaysia’s long-term attractiveness as an investment destination and a place to do business is now stronger. However, the government will now need to communicate a clear, consistent and comprehensive economic policy. Failing which, businesses may start losing their optimism and hold back in making any investment decisions,” says Kiranjit Singh, Country Head for Ipsos Business Consulting (Malaysia & Philippines).
“The current upbeat mood among businesses can quickly turn downward if the uncertainty continues.”
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