3 Mar 2025
ACCCIM’S PRESS RELEASE ON THE RELEASE OF ACCCIM MALAYSIA’S BUSINESS AND ECONOMIC CONDITIONS SURVEY (M-BECS) REPORT (2H 2024 AND 1H 2025F)
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) released its signature survey report, “Malaysia’s Business and Economic Conditions Survey (M-BECS)”, covering performance for the period July-December 2024 (2H 2024) and expectations for January-June 2025 (1H 2025).
The survey was conducted between 18 November 2024 and 15 January 2025, receiving a total of 630 responses, with micro, small, and medium enterprises (MSMEs) making up 88.3% of the respondents.
The ACCCIM President, Datuk Ng Yih Pyng, said that the businesses maintained a cautiously optimistic view on the economic and business prospects. Continued high cost of business operating costs remained the most critical concern, with the implementation and proposed rollout of a multiple cost-increasing measures this year further weighing on business costs. These include higher minimum wage, mandatory EPF contributions for all non-citizen workers, a multi-tiered foreign worker levy, the implementation of e-invoicing, the rationalisation of RON95 petrol subsidy, as well as the proposed hike in electricity tariffs.
Key Summary of the M-BECS Findings
Most businesses have a neutral view on Malaysia’s economic and business conditions, expressing concerns over increasing business costs as well as compliance requirements and regulations. The heightened external uncertainties surrounding the US trade tariffs policy and its knock-on effect on global economic growth and trade, have clouded the prospect of Malaysia’s export sector and ensuing negative spillover on domestic economy.
(a) In 2H 2024, over half of the respondents (59.2%) held a neutral view on economic conditions while maintaining a neutral outlook for both 1H 2025 and 2H 2025. On a positive note, respondents expect a gradual improvement in outlook, with 31.7% feeling more optimistic about 2025 compared to 17.3% in 2024. Fewer respondents (19.2%) have a worse outlook for 2025 compared to 24.6% in 2024.
(b) Likewise, a majority of respondents (56.3%) had a neutral view on business conditions in 2H 2024, 51.9% for 1H 2025 and 49.5% for 2H 2025. For 2025, 32.5% of respondents foresee a better business outlook, up from 19.5% in 2024. Nonetheless, 20.2% expects a worse business performance in 2025.
(c) Neutral cash flows and debtor conditions were reported by most respondents in 2H 2024 and 1H 2025. In 2H 2024, more respondents reported worse cash flow conditions than better ones, but a turnaround is expected in 1H 2025.
(d) The top five (5) factors that have adversely affected business performance in 2H 2024 were: (i) High operating costs and cash flow problem (as voted by 50.0% of respondents); (ii) Increase in prices of raw materials (41.3%); (iii) The Ringgit’s fluctuation (40.2%); (iv) Lower domestic demand (39.0%); and (v) Changing consumer behaviour (36.8%).
(e) Domestic and foreign sales showed improved performance and outlook, though over 35% of respondents reported a weaker sales performance in 2H 2024.
(f) Cost of local and imported raw materials continued to increase in 2H 2024 and is expected to maintain an upward trend in 1H 2025.
(g) Domestic price levels increased, while export price levels mostly remained stable in 2H 2024. In 1H 2025, businesses are expected to increase their prices.
This survey explored two key issues: (i) China’s Impact on Malaysia’s Businesses, and (ii) Cost-Related Assessment.
A. China’s Impact on Malaysia’s Businesses
Overall, a majority of respondents indicated a mixed to positive impact from China’s investments and businesses on domestic economy. Close to one-third each of respondents reported a positive impact and mixed impact, respectively, while 14.5% of total respondents indicated negative impact.
Encouragingly, over half of respondents (59.0%) stated that China’s companies have transferred technology and knowledge to Malaysian counterpart, surpassing that from other foreign investors. Specific investments from China, such as in artificial intelligence (AI), green investment, information and communication technology (ICT), and advanced materials, are expected to benefit Malaysia.
However, there were concerns about China’s talent hiring practices in Malaysia, with 36.3% of respondents indicating that these companies primarily fill key positions with talent from China.
While there are positive impacts, such as supporting national economic and industrial development, there are also threats like market erosion and the crowding-out effect on domestic businesses.
In this regard, businesses hope the Government will continue to provide support to navigate the challenges. Among the recommendations were: (i) Encouraging joint ventures with local partnerships (65.1%), (ii) Addressing unfair trading practices (44.3%), (iii) Prioritising companies with higher local content (39.2%); (iv) Set conditions to diffuse technology and skills to local firms (39.0%); and (v) Further facilitate market access for Malaysia’s products (38.5%).
President Datuk Ng emphasised the importance for Malaysian businesses to forge strategic partnerships with Chinese investors and business partners, not only to share mutual benefits in domestic market but also to leverage the collaboration as a springboard for expansion into the international markets. By working together, businesses can tap into new growth opportunities, enhance their competitiveness, and gain access to wider market channels globally.
B. Cost-Related Assessment
As the Government plans to rationalise the RON95 petrol subsidy by mid-2025, 61.6% of respondents believe that such a move will adversely affect their businesses, with 30.0% expecting a high impact and 31.6% anticipating a moderate impact. Businesses are still managing the impact of diesel subsidies rationalisation that has begun in June 2024. ACCCIM hopes for a gradual approach to any subsidy rationalisation. With a bunching of operating costs, retargeting of RON95 subsidies rationalisation must not result in a free float of fuel price as its knock-on effects on businesses costs and consumer prices will be wider and larger.
Another cost-related concern is additional increases to personnel expenses, which account for as much as 30% of total costs for most respondents. Higher minimum wage, the proposed implementation of mandatory EPF contributions for non-citizen workers, and a multi-tiered levy for foreign workers, as announced in Budget 2025, are anticipated to place further financial strain on businesses. A majority of respondents (65.9%) expect these three measures to increase personnel costs by up to 20%, while over one-fifth (20.2%) foresee an increase exceeding 20%. A simple calculation suggests that these three measures would incur an additional cost of RM267 per headcount of non-citizen worker per month, an increase of 15.9% compared to 2024.
ACCCIM is deeply concerned that increased employment cost and business operating costs, and may be burdened by the proposed hike in electricity tariffs in 2H 2025, can trigger domino effects on the whole supply chains, particularly impacting the manufacturing sector, including capital and energy-intensive industries and SMEs, hurting exports competitiveness, fuelling domestic inflation pressures, and dampening economic growth.
More than half of respondents have expressed that the Government can consider to implement the following measures that to ease the cost of doing business, including providing corporate tax rebates for MSMEs (57.2%), increasing allocations for soft loans and grants (56.5%), and raising the preferential tax threshold for SMEs (51.6%). These measures would help businesses to navigate the challenging economic environment.
