KUALA LUMPUR: Malaysia fell one notch to 23rd place in the World Bank’s Doing Business Report 2017 (DB 2017) released on Wednesday, with a score of 78.11 among the 190 economies surveyed from 78.18 last year.
The International Trade and Industry Ministry (Miti) said in a statement that the country was initially ranked 18th in DB 2016, but the ranking for that year was revised to 22nd taking into account some changes in methodology.
Overall, the report ranks New Zealand as the most business friendly in the world, ahead of Singapore and Denmark (click here for story).
“Within Asean, Malaysia was ranked second after Singapore and ahead of economies such as Thailand (46th), Indonesia (91st), Japan (34th), China (78th), France (29th), Switzerland (31st) and India (130th),” Miti said.
The Doing Business study measures regulations affecting 11 areas of the life of a business. The DTF score measures the distance of each economy to the “frontier,” which represents the best performance observed on each of the indicators across all economies in the Doing Business sample since 2005.
The slight decline in Malaysia’s distance to frontier (DTF) score from 78.18 to 78.11 is mainly due to drop in performance in the Starting A Business and Paying Taxes indicators.
The DTF score for Starting A Business fell from 89.31 to 83.67, with the number of procedures to legally start and formally operate a company increasing from six to 8.5 procedures and the number of days increasing from seven to 18.5 days.
“Malaysia made starting a business more difficult by requiring that companies with an annual revenue of more than RM500,000 register as a GST payer,” the World Bank remarked in its Doing Business portal.
For Paying Taxes, the DTF score slid from 79.31 to 79.2 as the time taken per year to prepare, file returns and file taxes increased from 118 hours to 164 hours.
“Malaysia made paying taxes easier by introducing an online system for filing and paying the goods and services tax (GST) while also making it is more complex by replacing sales tax with GST,” the World Bank said.
On the other hand, Miti noted that Malaysia recorded improvements, among others, in the following indicators and sub-indicators in DB 2017: Getting Electricity (DTF score rose from 94.33 to 94.34), Getting Credit (score improved from 70 to 75), Starting a Business – cost (percentage of income per capita) (reduced from 6.7 to 6.2), Paying Taxes – number of payments per year (slashed from 13 to nine), and Trading Across Borders – cost to export (fell from US$321.20 to US$321) and cost to import (reduced from US$321.20 to US$321).
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Miti said Pemudah, the public-private sector Special Task Force to facilitate business, through its Focus Group on Starting a Business (which consists of private sector players and representatives from the Malaysian Administrative Modernisation and Management Planning Unit (Mampu), Companies Commission of Malaysia and Inland Revenue Department), will identify the necessary areas for further improvement.
The new Companies Act 2016, recently passed by Dewan Rakyat, once implemented, will bring about improvements in the business registration process, Miti said.
“This new act will simplify the incorporation process by dispensing multiple forms, common seals, memorandum & articles of association as well as appointment of company secretary at the point of incorporation becomes optional, hence reducing time and cost for starting a business. We believe this will further improve the ease of doing business in Malaysia,” the ministry said.
Likewise, the Focus Group on Paying Taxes, is engaging with the World Bank to understand further on the components of the time taken for Paying Taxes, and to identify, learn and adopt from best practices to improve Malaysia’s performance in this indicator, it added.
International Trade and Industry Minister Datuk Seri Mustapa Mohamed said: “We take note of the areas mentioned where improvements are needed, and we will continue to work to the best of our ability to be better. The Good Regulatory Practice initiative through the National Policy on the Development and Implementation of Regulations undertaken by Pemudah has seen positive outcomes since its launch in 2013. As at September 2016, a total of 154 regulatory proposals were received from ministries and agencies for MPC’s (Malaysia Productivity Corp) assessment,”
He said Malaysia continued to be recognised for its business-friendly policy and competitive economy.
“The weaknesses pointed in this year’s report will be addressed accordingly and hopefully through greater public-private collaboration we will be able to improve our ranking in the upcoming Doing Business Report,” he added.