An air of uncertainty among local businesses

PETALING JAYA: Uncertainty over government policies is the top concern among Malaysian businesses, said Ipsos Business Consulting (Ipsos BC).
“Policy uncertainty, especially concerning economic policies such as taxation, trade and investment, significantly impedes business decisions. A lack of clarity and firm policy adds a layer of risk for long-term business planning,” it said in a statement.
While there has been a lot of communication between the new government, media and the public, businesses still feel that there is a lack of clear and comprehensive direction from the government.
According to Ipsos BC, businesses want further clarity concerning the status of some mega projects initiated by the previous government and large local enterprises have expressed concern over the possibility of contract termination or delay in projects that are already in their pipeline.
Ipsos BC, the business advisory division of market research and consulting company Ipsos, carried out a study on the views of businesses operating in Malaysia, involving 100 businesses nationwide.
Besides government policies, the study also revealed the depreciation of the local currency as a key concern among 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,” it said.
Meanwhile, multinational companies (MNCs) are more worried about the ringgit’s fluctuation due to the impact on their international trade operations. These MNCs also expressed concern over the cost involved in the reversal of the goods and services tax.
Areas that the business community want the government to address include stabilising the local currency in order to reduce currency risk and ensuring consistent policies as well as providing adequate transition time for policy changes.
“In addition, small and medium enterprises 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,” said Ipsos BC.
Overall, the majority of businesses are generally optimistic towards the economic outlook over the next one year, with MNCs expressing a slightly higher level of optimism.
The positive sentiment is underpinned largely by a hope that the new government will come up with policies and initiatives that 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.
In line with the optimistic sentiment, the majority of businesses indicated their intention of increasing their investment in the next one year, with a greater likelihood to invest among large local companies as well as MNCs.
However, businesses are also cautious about the policy direction under the new government and are taking a wait-and-see approach until policies are clearly set.
“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,” said Ipsos BC country head for Malaysia and Philippines Kiranjit Singh.
However, he noted that 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. The current upbeat mood among businesses can quickly turn downward if the uncertainty continues,” he added.