Others catch up as Malaysia slips

This year showed Malaysia falling one notch to 24th place out of 190 countries in the World Bank’s Doing Business Report 2018 released yesterday, compared with the 23rd placing last year, despite improvement in the domestic business climate.

Malaysia has been slipping down the global ease-of-doing-business rankings since 2013, when the country achieved its best-ever ranking of sixth globally out of 189 countries.

Commenting on the declining trend of Malaysia’s ease-of-doing-business rankings, economist Lee Heng Guie said: “This underscores a constant review and enhancement of regulatory and compliance hurdles to improve the ease of doing business. Policy clarity and certainty as well as a competitive tax structure are key to investors doing business.

“While the government has undertaken steps to improve the business regulatory environment, the fast-evolving technology changes demand for more streamlining of regulatory platforms for businesses via-government electronic systems for its speed, transparency and efficient delivery,” Lee, the executive director of the Socio Economic Research Centre, told StarBiz.

World Bank’s country manager for Malaysia, Faris Hadad-Zervos, said despite dropping one spot in the annual index this year, the business climate in Malaysia has actually improved.

He noted that the DB 2018 showed high ratings for Malaysia in terms of overall distance to frontier (DTF) score of 78.43, compared with 77.47 last year.

“That’s up by around 1% from last year. This is due to an improvement in Malaysia’s business climate having seen the enactment of three business reforms in the past year,” Hadad-Zervos told reporters during the launch of the World Bank Doing Business 2018: Reforming to Create Jobs report.

“Malaysia’s global ranking, however, went to the 24th spot due not to actions on its part, but the overall global rankings improvement and other depth and breadth and pace of reforms of other countries,” he explained.

The World Bank Doing Business 2018: Reforming to Create Jobs report, is the 15th in a series of annual reports measuring regulations affecting 11 areas of the life of a business.

These included starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency, as well as labour market regulations.

The report covered data collection from

June 2, 2016 to June 1, 2017.

According to the DB 2018, the three notable reforms implemented by Malaysia during the past year were adopted in the areas of Getting Credit, Trading Across Borders and Protecting Minority Investors.

Commenting on Malaysia’s ranking in DB 2018, the International Trade and Industry Ministry (Miti) said in a statement: “The drop in the ranking was a result of reforms undertaken by the United Arab Emirates, translating to an increase in the DTF score of 1.87 and enabling it to leapfrog from 26th last year to a ranking of 21st this year.

“Out of the top 25 economies ranked, only Malaysia and 10 others recorded improvement in DTF scores,” Miti pointed out.

The DTF score measures the distance of each economy to the “frontier economy”, which refers to the best-performing country on each of the indicators across all countries involved since 2005. An economy’s distance is reflected on a scale of zero to 100.

“The 78.43 overall score recorded by Malaysia this year means our economy is 21.57 percentage points away from the frontier,” Miti said.

Overall, New Zealand maintained its position as the most business-friendly country in the world, ahead of Singapore and Denmark, which also maintained their respective positions in the top-three rankings this year.

South Korea moved up one notch to the fourth place this year, while Hong Kong fell one notch to fifth place.

Within Asean, Malaysia was ranked second after Singapore, ahead of Thailand (26th), Brunei (56th) and Indonesia (72nd) this year.

Malaysia ranked fourth in Asia, after Singapore, Hong Kong and Taiwan (15th).

In terms of overall DTF scores, the countries that saw the biggest year-on-year improvements in this year were Brunei (9%), India (8.2%), Thailand (7.9%), Vietnam (4.3%) and Indonesia (3.5%). This compared to the improvement of 1.2% by Malaysia.

The World Bank noted that over the past 15 years, Malaysia had implemented 23 reforms improving business regulations, much higher than the per country average of 15 reforms in the East Asia and Pacific region.

“As the government continues to strengthen the business regulatory framework, it is important to focus on the areas where small and medium firms face difficulties, such as starting a business,” Hadad-Zervos said.

According to the World Bank, Malaysia has an opportunity for further improvements in the area of Starting a Business, despite six reforms carried out in this area over the last 15 years. Paying Taxes is another area where there is room for improvement, it added.

Source: The Star