No taking the foot off the pedal


Malaysia aims to crack the World Bank’s top 10 rankings by next year

Malaysia has reached an enviable 12th spot in the World Bank’s Doing Business report. But much more work lies ahead to stay ahead of the fierce competition between nations and to move ahead of those still ahead of us.

If Andy Grove, the former chairman of Intel Corporation was obsessive about his management mantra being “Only the paranoid survive”, then the Malaysian government will surely want to take the same approach to the World Bank and IFC’s (International Financial Corporation) Doing Business report.

Because, while it can and should afford itself a pat in the back for moving up from 18th spot in 2012 to 12th in 2013, it knows the other countries it has moved ahead of have it in their crosshairs, while the 11 countries ahead of it are going to be doing their best to put more light of day between themselves and Malaysia.

The stakes are high. Increasingly, data and research show that faster job growth and rapid new business creation seem to go hand in hand with the countries that move steadily up the Doing Business rankings. It has also become a quick barometer used by foreign investors to gauge whether the infrastructure and government of a particular country is ready to facilitate business.

A quick backgrounder: Doing Business analyzes regulations that apply to an economy’s businesses during their life cycle, including startup and operations, trading across borders, paying taxes, and protecting investors. The aggregate ease of doing business rankings are based on 10 indicators and cover 185 economies. Thus Malaysia’s feat at being ranked 12, does show critics that the government’s efforts are bearing fruit. It may not be at the pace many Malaysian’s are demanding for but it is improving and moving forward.

The World Bank finds that Malaysia has improved its competitiveness in five areas of business in particular, which have led to its improved ranking: Getting electricity (from 59th to 28th); registering property (59th to 33rd); paying taxes (41st to 15th); trading across borders (29th to 11th) and dealing with construction permits (113th to 96th). The latter, albeit, is still not something to be proud of but stronger efforts are underway to tackle the maze of construction permits.

Where Malaysia clearly excels is in the category of “protecting investors” where we rank 4th in the world and even better, together with South Africa and the United Kingdom, Malaysia is ranked first in the category of “ease of getting credit”.

It is important to highlight that Doing Business does not measure all aspects of the business environment that matter to investors. For example, it does not measure the quality of fiscal management, other aspects of macroeconomic stability, the level of skills in the labor force, or the resilience of financial systems. Despite this, its findings have stimulated policy debates worldwide and enabled a growing body of research on how firm-level regulation relates to economic outcomes across economies. This year’s report marks the 10th edition of the global Doing Business report series.

In Malaysia, the results are used by Pemudah, The Special Task Force to Facilitate Business, as an independent gauge for how well it is doing to make Malaysia more business friendly, to both locals and international investors.

And, hardly waiting for the congratulatory messages to stop pouring in, Pemudah Co-Chairman Tan Sri Yong Poh Kon announces that Malaysia aims to crack the top 10 rankings by next year. Bold or overconfident, Yong acknowledges it won’t be an easy task but that Malaysia will work hard to achieve it.

He also knows other countries are working harder to catch up. Indeed the World Bank report highlights that local entrepreneurs in developing countries are finding it easier to do business than at any time in the last 10 years, highlighting the significant progress that has been made in improving business regulatory practices across the globe.

For instance, the World Bank report highlights that from June 2011 to June 2012, Sri Lanka implemented the most regulatory reforms among the eight economies covered in South Asia, helping to create a better environment for local entrepreneurs.

Infact, Sri Lanka ranked among the 10 economies globally that improved the most in the past year across three or more areas measured by the report. It marks the first time since 2005 that a South Asian economy has ranked so high. Sri Lanka launched a host of computerized systems that made it easier to open a business, register property, and export products through customs. It also strengthened its secured transactions system by establishing an electronic – and easily searchable – collateral registry. All this progress from a country that is still trying to heal the wounds of a long running civil war.

The fact that Sri Lanka is taking such efforts, along with other countries, clearly shows that efforts to ease the way for entrepreneurs to launch companies and create value has strong multiplier effects that ripple through an economy.

And with Malaysia firmly committed to creating one of the most conducive environments for businesses in the world, expect Pemudah and the various other parties involved to step up their pace in removing obstacles for business while putting in place regulations to safeguard economic activity and facilitate business operations.

Indeed, the World Bank notes that economies that rank highest are not those where there is no regulation, but those where governments have managed to create rules that facilitate interactions in the marketplace without needlessly hindering the development of the private sector. In essence it highlights, that Doing Business is about SMART business regulations — Streamlined, Meaningful, Adaptable, Relevant, Transparent.

Every nation knows this. The competition between them is relentless, there is no taking the foot off the pedal, definitely not in Malaysia.


 Photo credit: Flickr user sam_churchill


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