Optimistic economic outlook among MLE business owners in Malaysia

 

6 January 2006. Owners of medium to large enterprises (MLEs) in Malaysia are optimistic about the local economy for the next 12 months, according to the first results from the 2006 Grant Thornton International Business Owners Survey (IBOS) released today. IBOS 2006 in Malaysia is a joint collaboration between Shamsir Jasani Grant Thornton and ECM Libra Berhad, which also sees Malaysia participating in the global survey for the first time.

Among the 30 countries surveyed, Malaysia ranks 16th on the optimism level, with favourable expectations exceeding pessimistic responses by 36%. Within the ASEAN region, business owners in Malaysia recorded higher business confidence than their Thai counterparts (9%) but fall short behind Singapore (64%).

In general, Malaysian business owners appear to be confident about their business prospects for the coming year with the results showing a positive expectation in turnover (58%), which is slightly above the global average. Optimistic results are also recorded in employment (44%), investment in plant & machinery (40%), profitability (35%), investment in new buildings (29%) and exports (24%). However, business owners are least optimistic about selling prices (18%). "The positive vibes, shown in the 2006 IBOS leads us to believe that private investments, which gradually picked up since 2003, is becoming more entrenched, in turn will provide a good breeding ground for more competitive and creative medium to large scale enterprises (MLEs)," said Dato' Kalimullah Hassan, Executive Chairman & Co-CEO of ECM Libra Berhad. "We believe that new growth areas in financial services, information and communication technology, tourism-related activities, shifting the ringgit from a peg to a managed float regime coupled with the synchronised upswing in the global economy are expected to magnify the upside potential for the economy." The Malaysian economy picked up speed in the 2nd half of 2005, and GDP growth forecasts have now been revised up to just over 5% for full year growth. The expansion is broad-based with both private consumption and investment doing well. "With the global economy having picked up in recent months, demand for Malaysia's exports is also now improving. This economic strength and the surfacing of some inflationary pressure had prompted some monetary tightening recently with Bank Negara Malaysia raising its key interest rate to 3%. However, the economy is expected to withstand higher interest rates and 2006 is very likely to be a good year for the economy," said Dato' N K Jasani, Managing Partner of Shamsir Jasani Grant Thornton.

 

* Business Expectations of MLE Business Owners in Malaysia For Next 12 Months

 

The IBOS survey highlights varying levels of business confidence around the world, with India clinching the top spot (93%) and Taiwan having a bleak outlook (-19%). Overall, the survey shows that businesses in 26 out of 30 countries are optimistic about their economy's performance. In 13 countries, optimism has actually improved over the last year. However, in a range of major G8 economics including the US, Canada, UK, France and Italy, the mood is now certainly less confident. Four of the biggest drops in confidence in the whole survey are in G8 countries.

This has been a year of uncertainty in some of the world's largest economies. Although all the hard economic growth indicators continue to be positive, there is an increased mood of pessimism, which is hitting confidence. Whether it is the ongoing legacy of the Iraq conflict in the US and UK; hurricanes in the US; racial tensions and unrest in France, social and political events certainly appear to have impacted the mood of the business world.

Some former powerhouses of the '60s, '70s and '80s though, such as Japan and Germany, appear to be significantly more confident about their prospects. The big winners of recent years - the major new economic powers of the emerging world, China and India, continue to soar in economic confidence.
The most optimistic business owners of all, for the third year, are in India with an optimism / pessimism balance of +93%; and in China, where business owners took part in the survey for the first time, the confidence score was a balance of +77%. Business owners in India continue to thrive and remain very optimistic. There are no signs of a slowdown in the economy. The growing reliance on the private sector and trade liberalisation - here just like in China - is providing fruitful for medium-sized enterprises who are taking full advantage and thriving as a result.