Shortage of orders hits growth – need for effective stimulus
Kuala Lumpur 20 February 2009 – Malaysian business growth is suffering from reduced demand, with 58% of businesses reporting it as a major constraint. In fact, 49% of Medium and Large Enterprises (MLEs) globally rank it as a constraint on expansion a rise from 31% in 2008. 25 of the 36 economies surveyed in the Grant Thornton International Business Report (IBR) placed reduced demand at the top of the league of business constraints.
More surprising in the current global economic climate is that red tape (30%) continues to outrank shortage of finance (27%) as a constraint on expansion plans. Last year’s biggest constraint, availability of skilled workforce, has predictably dropped out of the top three.
Dato’ N.K. Jasani, Managing Partner of SJ Grant Thornton said, “The countries most concerned about reduced demand were Japan (78%), Italy (70%) and Vietnam (64%). Malaysia at 58% shares 5th position with France and Spain.” He highlighted that, “These survey was conducted in December 2008. The results may be even grimmer if it was carried out now in February 2009 with sentiments drastically affected by the realities of reduced demand and low levels of production and employment.”
Effects on MLEs
Dato’ Jasani elaborated, "The world is feeling the impact of falling demand as consumers have become increasingly concerned about job security. Every MLE in every market has been affected differently by the economic downturn, often by circumstances completely beyond the control of the management team. MLEs must remain confident and that they are in control of their destiny. That means being proactive, taking time to understand the specific issues affecting their business, and developing strategies that allow them to respond quickly to changes in the market place."
Source: Grant Thornton IBR 2009
Government Stimulus
“Governments all over the world have announced and legislated on stimulus budgets to spur economic activity. Much in limelight have been the initiatives taken by the U.S, China, Japan and the U.K. These actions have raise concern on the time lag before the effects materialize and the ballooning use of tax payers’ funds to bail out cash strapped banks. Our Malaysian Government has also taken steps by announcing the First Stimulus Budget of RM7 billion. The Deputy Prime Minister cum Finance Minister has also mentioned a Second Budget Stimulus will be announced in first half of March 2009. We must now ensure that there is matching of activity in business sectors and regions most affected. There must also be “value for money’ expenditure with minimum bureaucracy and wastage.”
Dato’ NK Jasani Managing Partner,
SJ Grant Thornton (pix)
Key Focus
As correctly stressed by many prominent economists, and emulated by President Barrack Obama for the U.S., the key focus for the stimulus should be creating and sustaining employment. The same will result in well being of the people, create demand and revival of economic cycle. Dato’ Jasani added, “For our nation also, emphasis in the Second Budget Stimulus should be sustaining of employment. Particular focus should be given to re-employing people who are laid off by the electronic, manufacturing and export sectors. The second emphasis should be for permanent benefits to our nation and people.
Two-pronged Thrust
The Malaysian Government should adopt a two-pronged thrust whilst stimulating the weakened economy also creates permanent infrastructure facilities for the nation. The same should include urban train system, or LRT, fast track expansion and improvements for the Klang Valley. Similar systems should also be implemented for other urban centres like Penang, Ipoh, Malacca and Johore Bahru. Our Federal Government should also take this stimulus budget initiative to have electricity and piped water facilities available to all Malaysians including in rural East Malaysia. Further reduction in electricity and cost of doing business would also assist in retaining companies that would otherwise close or re-locate to lower cost centres.”
Whilst much of the world is feeling constrained by the shortage of orders and reduced demand, there are a few economies where the availability of skilled workers continues to be an issue with Australia (47%) and South Africa (41%) identifying this as their greatest business constraint. However, this scenario would be changing in light of the falling economic activity.
Other MLEs continue to feel constrained by red tape with Mexico (66%) and Poland (45%) ranking this higher than all other constraints. In fact Latin America is the only region where red tape (49%) continues to top the business constraints league, ahead of shortage of long term finance (47%) and cost of finance (42%).
End.
For further information please contact:
Charmane Koh
Executive, Corporate Communications
T +03 2692 4022
M +017 3384563
E charmane@gt.com.my
Notes to editors:
About SJ Grant Thornton:
SJ Grant Thornton is a leading accounting and consulting firm in Malaysia. We are a member firm within Grant Thornton International Ltd and provide assurance, tax advisory and compliance, corporate finance, corporate restructuring and management consulting services.
The firm operates from its main office in Kuala Lumpur and its other offices in Penang, Johore Bahru and Kuantan.
About IBR:
The Grant Thornton International Business Report is an annual survey of the views of senior executives in privately held businesses all over the world. Launched in 1992 in nine European countries the report now surveys over 7,200 MLEs in 36 economies providing territory, regional and global trend data on the economic and commercial issues affecting a sector often described as the 'engine' of the world's economy. Data for eight key industry sectors will be available for the first time in 2009.
This will be the fourth time the Malaysian firm is participating in the Global Report, now in its seventh consecutive year. For its previous involvement, the full results were launched in July last year by YB Tan Sri Muhyiddin Yassin, Minister of International Trade and Industry Malaysia.
The research is conducted by Experian Business Strategies Ltd. Grant Thornton International donates US$5 to UNICEF for every completed IBR questionnaire, a donation of over US$39,000 in 2008.
To find out more about the Grant Thornton International Business Report, please visit www.internationalbusinessreport.com
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