KUALA LUMPUR: Malaysian businesses see many positives emerging this year, despite some gloom in the economy.
Research by Grant Thornton shows the outlook on key indicators in Malaysia is strong, with businesses planning for increases in employee salaries, revenue, exports, selling prices, and employment.
According to the Grant Thornton International Business Report (IBR), 86% of businesses in Malaysia expect to offer salary increments to their employees in 2017. This marks Malaysia as having the most proportion of businesses in the Asean region that expect to offer employees a pay rise this year.
Also, Malaysia has the most proportion of businesses in the Asean region 34% – that expect an increase in exports for the year ahead. This is an increase of 22 percentage points from the third quarter of 2016.
Malaysian businesses also expect revenue to increase by 36% in 2017, from 26% in the third quarter of 2016, according to the findings of Grant Thornton’s most recent quarterly global survey of 2,600 businesses in 37 economies.
“Selling prices and profitability are also expected to increase over the next 12 months. The proportion of businesses expecting an increase in selling prices has gone up to 20% from 4% in Q3 2016. More businesses are expecting an increase in profit, from -4% in Q3 2016 to 24%,” says the IBR.
In addition, 24% of businesses say they expect to hire new staff in 2017, compared with -2% of businesses in the third quarter of last year.
However, a major negative highlighted by the IBR is that business optimism in Malaysia fell to net -36% in the fourth quarter of 2016, the lowest quarterly figure since 2010.
“This is a decrease of 24 percentage points (pp) from -12% in Q3 2016 and this puts Malaysia’s business optimism level as the lowest in the Asean region at the end of Q4 2016,” according to the IBR.
But the drop in business optimism in not just in Malaysia. Business optimism among Asean economies fell 10pp in the fourth quarter of last year to net 39%.
Indonesia fell 10pp from 98% in Q3 2016 to 88% in Q4 2016; the Philippines fell 4pp from 84% in Q3 2016 to 80% in Q4 2016; and Thailand fell 2pp from 18% in Q3 2016 to 16% in Q4 2016. Singapore , however, remained at -28% in Q3 and Q4 of 2016.
Globally, the IBR says, business optimism at the end of Q4 2016 stood at net 38%. This was an increase of 5pp from Q3 and the highest level since Q3 2015.
Grant Thornton Malaysia’s country managing partner N K Jasani says: “Globally, the increase in optimism reflects a view among the business community that uncertainty over the outcome of major events like the EU referendum and the US presidential election is now behind them.
“Knowing the results will allow businesses to have a clearer steer on key issues such as taxes, jobs and trade policy.
“In Malaysia however, business optimism level suffered a huge decline due to our weak ringgit performance, and this links to our country’s economic uncertainty.”
He said exchange-rate fluctuations topped the list as Malaysia’s biggest constraint to business expansion, with 76% of business executives highlighting this as a challenge. This is an increase of 34pp from 42% in Q3 2016 and is the highest in the Asean region.
Business executives, he said, pointed to economic uncertainty as the second-biggest constraint to business growth and expansion in Malaysia, with 60% from 46% in Q3 2016 highlighting this challenge as hindering growth opportunities for business. This is also the highest in the Asean region.
“Lack of skilled workers is the third-biggest challenge facing business expansion in Malaysia, with 36% from 24% in Q3 2016 of business executives concerned about this matter,” he revealed.
Saying there will be challenges in 2017, including the impact of further rate rises from the US Federal Reserve, Jasani advised Malaysian ministries, such as Finance and Trade as well as authorities such as the Malaysian Investment Development Authority, Inland Revenue Board and Customs, to be dynamic in helping Malaysian businesses grow and prosper.
They should strive to eliminate the “red flag” and promote efficiency.
“In this context, therefore, no new taxes, foreign workers’ levies or new form filling requirements should be introduced for the next one year. As a nation, we must be pro-business and pro-growth,” Jasani added.