There are numerous policy tools available to the government that can have a transformative impact without the need for spending.
As Malaysia strides towards enhancing its position in the global market, there are strategic, almost cost-free measures that the government can implement to significantly boost the nation's competitiveness. Drawing insights from years of consulting SMEs, I've identified ten pivotal actions that require no financial outlay yet promise immediate impacts on the ease of doing business in Malaysia, particularly for micro and small SMEs. These aim to simplify regulatory burdens, lower operational costs, and foster a more dynamic entrepreneurial environment.
The Ten Strategic Actions:
Increase Audit Exemption Limit: Elevate the audit exemption threshold, a recent proposal to raise this to RM 3 million is being considered, alleviating compliance costs and time for micro and small SMEs. This approach, mirroring practices in Singapore where the exemption limit its SGD 10 million (RM 35 million) and the UK where it is £10 million (RM 60 million), promises to streamline operations and financial management for emerging businesses.
Simplify Corporate Filing: Abolishing the mandatory requirement for Company Secretaries for micro and small firms, enabling online self-filing. This change would align Malaysia more closely with international practices, removing unnecessary financial and administrative burdens on nascent businesses.
Lower Incorporation Costs: Dramatically reduce incorporation costs from the current average of RM 2,800 to RM 200 following a simple online format for self-incorporation like the UK has which takes 15 minutes! This will encourage entrepreneurship and formalisation of micro businesses and stimulate a vibrant SME ecosystem.
Introduce an Automatic Company Strike-Off like the UK’s: This will remove the cost which runs into the thousands of ringgit, for closing a micro or dormant business and allow the government to accurately gauge economic activity. In the UK if the Annual Return isn’t filed on time a 30 day warning is sent out, failing which a further 30 days later the company is automatically struck off.
Reform Employment Legislation: Adopt a more flexible approach to employment akin to Singapore and the US model, allowing businesses to swiftly fire and hire at will allowing them to quickly adapt to technological advancements and market changes without the encumbrance of protracted termination processes or retraining mandates.
Legislate an Electronic Transactions Act that mirrors Singapore’s: Eliminating the need for attestations and notarising documents by recognising contacts made via email, WhatsApp and other mediums and accepting e-signatures as binding.
Introduce a Payment legislation similar to the EU’s: Mandating that all commercial invoices must be paid within 30 days. Depending on the nature of business and the contract this can be extended to a maximum of 60 days. Businesses that fail to maintain a healthy payments can lose their licence and be penalised (in the EU the penalty can be as high as RM 10 million).
Introduce a Business Credit Rating that all firms must display on their premises, website and social media: SSM could use the accounts filed to determine the business health (debt level and ability to meet trade credit obligations) as well as its invoice payment track record to award it between 1 and 5 Stars with a badge where the colour goes from Red (Warning!) to Green (Great!). Dormant companies would get a 0 and a Grey Badge to alert anyone getting to business with it of its status. This alone would put us ahead of most of the world in business transparency.
Remove Statutory Contributions for Micro Businesses: Exempt micro companies with fewer than 10 employees from mandatory contributions such as EPF, Sorsco, or EIS, until the employment of the 11th staff member or for a fixed time say 3 years. This exemption would support small businesses during their formative years, enabling them to scale and mature into sustainable enterprises.
National Tax Exemptions for Cottage, Artisanal and Creative Industries: Encourage traditional and handmade industries like batik, silver-making and soap making by offering a three-year tax holiday. This can be further supported by a 7 or 10 year reduced tax rate on any export sales if the revenue is retained in Malaysia. This incentive could bolster employment and promote Malaysian culture on the international stage.
Implementing these strategies would not only streamline the operational landscape for Malaysian businesses but also position them for accelerated growth and international competitiveness. By fostering a more business-friendly environment, Malaysia can unlock the full potential of its entrepreneurial spirit and innovative capabilities.