Malaysian businesses threatened by spiralling operating costs

High operating costs were the major cause of concern for business owners in the second half of 2024, according to a survey conducted by the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM).

Also impacting their business performance were cash flow problems (50% of respondents), increase in prices of raw materials (41.3%) and the fluctuation of the ringgit (40.2%).

Lower domestic demand (39%) and changing consumer behaviour (36.8%) were the two other factors that affected sentiment, according to the survey.

Conducted between November 2024 and January 2025, the survey received 630 responses, with micro, small, and medium enterprises making up 88.3% of the respondents.

It was published in ACCCIM’s ‘Malaysia’s business and economic conditions survey’ that covered performance for the second half period of 2024 and expectations for the first half of this year.

ACCCIM president Ng Yih Pyng said businesses generally maintained a cautiously optimistic view on the economic and business landscape.

“Although the high business operating costs remained the most critical concern, the implementation and proposed rollout of multiple cost-increasing measures this year will further weighed on business costs,” Ng said.

“They include higher minimum wage, mandatory Employees Provident Fund contributions for all non-citizen workers, a multi-tiered foreign worker levy, implementation of e-invoicing… as well as the proposed hike in electricity tariffs,” he said.

The report noted that most businesses have a ‘neutral’ view on Malaysia’s economic and business conditions, expressing concerns over increasing business costs as well as compliance requirements and regulations.

It also said a majority of respondents indicated a ‘mixed-to-positive’ impact from China’s investments and businesses on the domestic economy.

Close to one-third each of the respondents reported a ‘positive’ impact, while the same number thought the impact ‘mixed’, while 14.5% of them indicated a negative impact, according to the survey.

ACCCIM’s report said nearly three in five respondents (59%) stated that China’s companies have transferred technology and knowledge to Malaysian firms, surpassing that of other foreign investors.

While there are positive impacts, such as supporting national economic and industrial development, there are also threats like market erosion and the crowding-out effect on domestic businesses.

Businesses surveyed hoped that the government would continue to provide support to navigate the emerging challenges.

Among the recommendations were encouraging joint ventures, addressing unfair trade practices, prioritising companies with higher local contents, setting conditions to diffuse technology and skills to local firms as well as facilitating market access for Malaysia’s products.

“It is important for Malaysian businesses to forge strategic partnerships with Chinese investors and business partners not only to share mutual benefits in the domestic market, but also to leverage the collaboration as a springboard for expansion into international markets.

“By working together, businesses can tap into new growth opportunities, enhance their competitiveness and gain access to wider market channels globally,” he pointed out.

The survey was prepared by ACCCIM’s unit Socio-Economic Research Centre in collaboration with Universiti Tunku Abdul Rahman.

GDP growth has positive impact, says PM

Malaysia’s 5.1% gross domestic product (GDP) growth in 2024 and Bursa Malaysia’s positive performance had indeed benefited the country, according to Prime Minister Anwar Ibrahim.

He said investor confidence also pushed the FBM KLCI to increase by 12.9% to reach 1,642 points in 2024, the highest level since 2020. FBM KLCI represents the top 30 companies by market capitalisation on the Bursa Malaysia Main Market

The Prime Minister said :“In terms of macroeconomic achievements in 2024, we can feel a little relieved. The first, growth. Second, low inflation of 1.8%. Third, gross fixed capital formation (GFCF) increased by 12%, which means investment growth increased by 12%,” said Anwar, who is also the Finance Minister.

He said the achievement also benefited the Malaysian people, creating job opportunities for 120,000 people, enabling the government to increase the salary retirement system and assistance schemes.