ACCCIM has conducted the bi-annual Malaysia’s Business and Economic Conditions Survey (M-BECS) for the period Jul-Dec (2H) 2019 and Jan-Jun (1H) 2020F to gauge Malaysian businesses’ expectations about economic and business conditions and prospects as well as to solicit feedback on the issues and challenges faced by business community. The survey, which was carried out in December 2019 till mid-February 2020 has received 864 responses.

Weakening Business and Economic Prospects in 1H 2020

The weakening economic and business conditions in the second half-year of 2019 are expected to continue in 1H 2020, with 37.4% of total respondents having pessimistic views about economic prospects compared to 20.3% forecasted in the previous survey and also business prospects’ pessimism also jumped to 35.6% from 19.0% forecasted previously.

Businesses’ increasingly pessimism reflects the business community’s and investors’ lingering concerns about global and domestic economy prospects, as the negative spillover effects of the COVID-19 outbreak has dampened the tourism and related services amid cautious consumer sentiments, disrupted global supply chains and caused shortage of raw materials for some industries.

Table 1: Comparison of economic and business prospects between “M-BECS 1H2019 and 2H2019F” and “M-BECS 2H 2019 and 1H 2020F”

The percentage of businesses expect to increase capital expenditure in 1H 2020 reduced to 55.1% from 58.1% of respondents in 2H 2019 while 40.6% will maintain their existing capital investment level. Given lingering concerns about economic prospects and domestic political environment, more respondents may adopt a wait-and-see approach; not planning to increase capital spending and even consider to reduce capital investment.

With the elevated global recession risk inflicted by the COVID-19 outbreak, ACCCIM urges the Government and implementing agencies to expedite the implementation of RM20.0 billion Economic Stimulus Package, particularly to ensure the timely disbursement of funds to the affected businesses and individuals.

“Government policies” have emerged as business community’s top concern influencing the business performance. 3Cs (Clarity, Consistency and Continuity) are what investors and businesses need for certainty and better planning.

The Government is in the midst of drawing up new economic and industrial development plans to chart Malaysia’s future economic direction and development path. These plans while ambitious but must also be realistic in implementation. Policy flip-flops should be avoided as it hurts businesses and worrying investors. ACCCIM welcomes regular engagements and consultations with the chambers and industry associations to formulate business-friendly and practicability measures and regulations.

Political stability is of great importance in building a coherent and sustainable economic development path. Unstable political environment would undermine investors’ confidence, deter investment decision by both local and international investors on wary about policy continuity. Rampant political bickering, conflicts and infighting would distract the Government’s efforts to manage the economy and address business issues.

In this critical juncture, the Government needs to strengthen domestic economic and financial resilience to weather against external headwinds, address cost of living and cost of doing business, and rectify structural weaknesses that impacting our competitiveness.

In this survey, we asked ACCCIM members to provide feedback and views on two topical issues: (A) Digital Transformation and Industry 4.0; and (B) Foreign Workers (FWs).

As expected, 72.2% of total respondents have acknowledged that their business will be impacted if they do not undertake digital transformation and embrace Industry 4.0 over next three years. The respondents cited “Lack of budget/funding”, “Lack of skilled and talented workers” and “Unsure about the positive impact and return on investment after incurring high fixed investment costs” as top three factors hindering them to adopt digitalisation and automation.

In this regard, the industry players urge the Government to reduce import duty and sales tax on heavy machinery and equipment used for automation and rapidly improve the digital infrastructure connectivity between urban and rural areas in order for businesses to unlock the potential in automation and digitalisation.

It is widely agreed that foreign manpower is a necessary input to complement domestic workers. About 62.7% and 60.9% of respondents in the manufacturing and construction sector respectively are facing shortage of FWs. More than 60% of respondents in these two sectors indicated that they need foreign workers in 2020 and 2021.

While the industry supports the reduce over-dependency on low skilled workers over time, Malaysia needs to institutionalise a well-managed foreign worker management system. A holistic and clear foreign manpower system is needed to regulate the management and deployment of foreign workers to support the economy and business community. Amongst the proposals, include having A Single Ministry/One-stop Agency vesting with the authority to address all issues concerning FWs.

ACCCIM believes that Malaysia’s economic and financial fundamentals are resilient to weather the storm ahead. We will continue to work together with the Government, Ministries and agencies to sustain domestic economy and investment.

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