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Tuesday, March 25, 2014

Bleak outlook for 2014, 2015

Posted on 24 March 2014 - 05:36am
Eva Yeong

KUALA LUMPUR: The Chinese business community's economy outlook for 2014 and 2015 is said to be pessimistic as they only expect improvements in 2016, said The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM).

ACCCIM's survey on the economy for the second half of 2013 revealed that 64% of respondents felt pessimistic about the nation's economic performance this year due to poorer sales, lack of improvement in terms of collections from customers, decrease in new orders from local markets and deterioration in sales prices recorded during the second half of 2013.

The survey involved 345 respondents from the Chinese business community across all sectors including wholesale and retail, manufacturing, professional and business services, construction, real estate, finance and insurance, as well as tourism, shopping, hotels, restaurants, recreation and entertainment.

According to the survey, 60% of respondents believe that the Malaysian economy is expected to struggle going into 2015 and is only likely to perform better in 2016.

ACCCIM president Datuk Lim Kok Cheong said the pessimistic outlook is also due to a combination of several factors including the implementation of the goods and services tax (GST), subsidy rationalisation, electricity tariff hike, minimum wage policy, extension of retirement age and petrol price increase.

"All these things coming in together makes it challenging for the business community," he said.

"In year 2013, the business community was affected by several policies announced by the government such as minimum wage policy, the extension of the retirement age and petrol price increase due to fuel subsidies cut. This was followed by a rise in electricity tariffs this year and implementation of GST in the year 2015 and so on," he added.

Lim said these measures have led to an increase in cost of doing business, thus contributing to inflationary pressure on Malaysia. Businesses are also facing difficulties in managing rising costs against the inability of passing on these extra costs to consumers.

On the implementation of GST in April 2015, ACCCIM said survey respondents felt that the 6% rate is too high. Lim said 3% to 4% would be a more acceptable rate, with gradual increases to 6%.

Survey respondents also want more time to understand the GST system with 49% of respondents asking for a minimum one year learning period and 40% asking for a learning period of up to two years.

"Punitive action for the lack of compliance to GST requirements should only take place after the expiry of the learning period that is hoped to be granted to businesses," said Leong.

The association urged the government to consider the difficulties faced by businesses and provide more support in terms of business-friendly policies to help maintain competitiveness among Malaysian companies.

It suggested a reduction in the corporate tax rate, a freeze on all proposed increment in public utilities charges, constant review and gradual reduction of subsidies, prudence in controlling public expenditure and effective reduction of fiscal deficit and red tape.

"On the other hand, businesses would need to adjust their business strategy immediately for cost efficiency as well as improve strength and productivity," said Lim.

He added that businesses would also need to explore the international market and expand sales network in order to be more competitive.

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