Socio-Economic Research Centre (SERC) executive director Lee Heng Guie said bureaucratic obstacles, costs and time constraints in doing business need to be looked into.
He said foreign direct investment (FDI) net flows to Asean countries have seen Malaysia lagging behind, dropping by 3.7% from 2012 to 2015, and 6.7% from 2016 to 2019.
“We are still ahead of some Asean countries, but the ranking of other countries has improved. We cannot be complacent any more,” he said during a webinar on “2021: What’s on the Horizon?” today.
Lee said a number of Chinese companies are also relocating to Vietnam and Indonesia, the two countries in Asean which are leading in attracting FDI.
He said he was unsure whether the drop in investment in Malaysia was solely due to political instability, but Malaysia must do better by carrying out reform of its investment regulations and help ease doing business in the country.
Malaysia, he said, needs to reduce delays, improve transparency in the approval process, reduce paperwork, avoid duplication in providing information to agencies, and correct other inconsistencies.
He noted that 81.5% of investors had experienced these issues when dealing with state or local authorities.
“Federal and state agencies have overlapping powers and authority. The lack of coordination among ministries, agencies and departments frustrates businesses as they have to waste time and resources in dealing with conflicting regulatory requirements,” he said.
Lee urged the government to carry out economic and institutional reforms by addressing such weaknesses.
He also warned that Malaysia would remain behind because of low investments in developing information and communication technology, shortage of skilled manpower and brain drain.
Lee said SERC had lowered its earlier prediction of a 5% gross domestic product growth this year to 4% due to the second movement control order (MCO 2.0) as companies struggle to recover from the first MCO last year.
“I hope we won’t go lower than that,” he said, adding that Malaysia has to battle with a health crisis as the daily number of Covid-19 cases remain above 4,000.
On taxes, Lee advised Putrajaya to broaden the tax base to cover more areas but to “get feedback from stakeholders” first and plug leakages in tax collection from the shadow economy, which could be as high as 20%.
He said MCO 2.0 would dent retail spending, especially in the shopping malls, restaurants and small businesses in the run-up to the Chinese New Year celebrations and the delay in recovery of the aviation and travel industry.
He hoped Putrajaya would implement the 2021 budget spending programmes and cash assistance as planned and help to improve consumer and business confidence as private investment is expected to increase by 5.1% in 2021 after a slump of 14.3% last year.