First results for Malaysia from the 2006 International Business Owners Survey (IBOS 2006) released today

 

26 May 2006. The first results for Malaysia from the 2006 Grant Thornton International Business Owners Survey (IBOS 2006) is released today at a launch event officiated by the Second Finance Minister, YB Tan Sri Datuk Seri Nor Mohamed Yakcop.

The survey in Malaysia is a joint collaboration between Shamsir Jasani Grant Thornton and ECM Libra Berhad, which marks Malaysia’s participation in the global survey for the first time. As the only survey of its type, the IBOS 2006 covers over 7,000 business owners of medium to large entrepreneurial businesses (MLEs) in 30 countries across all industry sectors.

Key findings released in the survey today include economic prospects and business expectations for 2006, constraints on growth and expansion, international trade, Chinese economic boom and stress among business owners.

“We hope these findings will provide a valuable source of global information to our business owners whilst at the same time, help our policy makers attune their regulations and policies to further spur the growth of this sector,” said Dato’ N. K. Jasani, Managing Partner of Shamsir Jasani Grant Thornton.

“The government has made good progress in improving the public delivery system to lower the cost of doing business and we are confident that the government will continue to fulfil its reform promises to help the corporate sector to become more competitive,” added Dato’ Kalimullah Masheerul Hassan, Executive Chairman and Co-CEO of ECM Libra Berhad.

Economic Prospects for 2006

This year’s survey reveals that businesses in most countries remain optimistic about their economic prospects for 2006. For the third year in a row, India tops the league table with the highest confidence level (+93%) whilst Taiwan is at the bottom this year (-19%).

Malaysia fared relatively well at +36%, ranking 16th on the optimism level which is close to the global average of +39%. This put Malaysian business owners ahead of their Thai counterparts (+9%) but behind Singapore (+64%).

Businesses in East Asia (this term refers to Mainland China, Hong Kong, Japan, Malaysia, Philippines, Singapore, Taiwan and Thailand) as a whole are fairly optimistic (+42%) although the levels of optimism vary extensively throughout the East Asian countries/territories.

Business Expectations for 2006

Prospects of another year of robust global economic growth underpin positive expectations for turnover, selling prices, exports, employment, profitability and investment in many countries.

Malaysian businesses are generally confident about their business prospects for the year, recording the strongest expectations for turnover/revenue (+58%). Although this result is slightly less than the global average (+61%), it is in line with East Asia as a whole (+58%). Positive expectations are also recorded in employment where a balance of +41% of Malaysian businesses reported an increase in employment in 2005, higher than both the East Asian (+35%) and global average (+31%). This trend is expected to continue in 2006 with +44% of Malaysian businesses anticipating an increase in employment.

Businesses in Malaysia are, however, less optimistic about profitability (+35%) than businesses globally (+46%) and least optimistic about selling prices (18%). This could be attributed to the increased pressure on profit margin over the past year as reported by the Malaysian companies (+32%). The squeeze stems principally from customer pressure to keep prices down (62%), followed by other main drivers such as increased domestic competition (54%) and increased cost of raw materials (52%).

In seeking to maintain or improve profit margins, businesses are most likely to aim for cost reductions. Almost 90% of companies globally indicated that they adopted this method, with well over 80% of respondents in virtually all countries following this route. For Malaysia, improving cash management is the most favoured method of alleviating this pressure.

Constraints on Growth and Expansion

Regulations or red tape is the most significant constraint on business expansion in this year’s findings. For Malaysian businesses, this is no exception. 33% of them cited regulations/red tape as the main hindrance to their expansion plans, putting Malaysia in the 18th position worldwide. Following closely behind is the lack of availability of skilled workforce (32%).

Shortage of orders/reduced demand is seen as less of an issue for Malaysian businesses (24%) than for their global counterparts (29%). Where shortage of working capital is concerned, this is more of an issue with East Asian companies as a whole (34%) than with Malaysian businesses (24%).

International Trade

Just over one third of businesses surveyed are exporters. The largest increases in the proportion of exporting businesses were in Hong Kong and the Philippines.

37% of Malaysian businesses report that they export; in line with the global average (36%). They are, however, slightly more likely to export than businesses in East Asia as a whole (32%).

With regards to barriers towards international expansion, Malaysian businesses are most restricted by general level of bureaucracy, red tape and regulations (33%) as well as political and social instability (28%).

Chinese Economic Boom

Mainland China is perceived by businesses in other countries as offering the best opportunities, but also posing the greatest threat. The survey found that one in ten countries worldwide outsourced or transferred their operations to another country, or plan to do so. For 31% of the business owners surveyed, Mainland China was the leading destination.

Overall, the “Chinese economic boom” has had a positive effect on Malaysian businesses. 33% of Malaysian companies report that it has increased businesses, well above the global average of 19%. Malaysia came in second only after Hong Kong in the global responses about the impact on business arising from the Chinese boom. However, the majority of Malaysian companies (balance of 2%) still perceive Mainland China to be more of a threat.

The findings also revealed that Malaysia is more likely to import from (24%) than export to China (13%). Compared to other countries, Malaysia is also much more likely to import than companies globally (18%).

Stress Among Business Owners

Most business owners around the world (57%) felt that their stress levels had increased over the past year, with Taiwan topping the stress chart for the second consecutive year. The least stressed people in the world this year are found in Sweden.

65% of business owners in Malaysia report that their stress levels have increased over the past year, higher than the global average (57%). This makes Malaysia the 7th most stressed nation in the world. However, the proportion of businesses reporting an increase is higher still in East Asia as a whole (77%).

In order to gain an insight into how business owners manage stress, the survey also asked about holidays (excluding public holidays) taken. On average, business owners in Malaysia take 10 days per year, below the global average of 15 days.