Weak competition, red tape hindering business growth, says World Bank Group

kl skyline — A senior economist at the World Bank Group said a lack of competition continues to hold back business growth in Malaysia. (Envato Elements pic)

KUALA LUMPUR:

Malaysia’s business environment has improved over the past decade, but weak competition and regulatory inefficiencies are growing challenges to the country’s ambition to achieve high-income status, according to the World Bank Group.

Its senior economist of finance, competitiveness and investment Mariana Vijil said inefficiencies in the business environment have declined compared with earlier years and are broadly in line with Malaysia’s level of development.

However, she said, signs of weak competition remain in several sectors despite the overall improvement.

“About half of the businesses in food manufacturing and one-third in retail services report being able to raise prices without losing customers,” she said at the launch of the World Bank’s 32nd Malaysia Economic Monitor report here today.

She said this has implications for the cost of living and highlighted the need to strengthen market competition as Malaysia moves towards high-income status.

Vijil said reducing inefficiencies in the business environment could lift gross domestic product by at least five percentage points.

She said regulatory bottlenecks were also slowing business expansion and investment decisions, with delays in approvals and inconsistent implementation of regulations continuing to affect firms across different states.

For example, she said, construction approvals in some states could take more than two years due to overlapping requirements and weak coordination between agencies.

Vijil said these delays were driven by inconsistencies among federal, state and local authorities as well as inefficiencies in government-to-business services.

She said reducing friction in these areas is essential to support faster business growth and higher productivity.

Talent outflow and weak innovation

Vijil said Malaysia is also facing broader structural challenges linked to innovation and talent retention.

She said technology generation and commercialisation have not improved significantly in recent years, while patent applications have been declining and startup formation has been weak.

She said there are signs that Malaysian inventors are being hired by foreign firms that offer higher-quality job opportunities.

Vijil added that Malaysia has a relatively low proportion of startups compared with peer economies despite having a strong talent base.

She said addressing these issues would require reforms to strengthen competition policy, improve regulatory processes and support innovation and skills development.

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Weak competition, red tape hindering business growth, says World Bank Group

Mariana Vijil, a senior economist at the World Bank Group, says Malaysia must address competition gaps, regulatory inefficiency and innovation constraints to support growth.