M’sia slips one spot in doing business ranking

> Hiccups in GST led to drop, more time needed for the system to smooth out

KUALA LUMPUR: Malaysia dropped to the 23rd spot in World Bank’s ease of doing business ranking among 190 economies from 22nd last year, partly due to issues related to the implementation of the Goods and Services Tax (GST).

This had led to Malaysia reporting a weaker scoring in starting a business segment, with a ranking of 112, as companies with an annual revenue of more than RM500,000 have to be registered as a GST payer.

The scoring and ranking are based on 10 different indicators including getting credit, trading across borders and enforcing contracts, to name a few. It was also based on feedback from accountants, engineers and lawyers.

Despite the drop in ranking, World Bank Group Global Knowledge and Research Hub in Malaysia country manager Faris H. Hadad-Zervos said more time is needed for the GST system to run smooth and reach its maturity.

“Given that this has been the first year of introduction of GST, naturally it will create an additional few steps that were reflected in DB (doing business) that we hope over time will smooth out,” he told a press conference on the release of Doing Business Report here yesterday.

Malaysia’s distance to frontier score was down from 78.18 to 78.11, according to the “Doing Business 2017: Equal Opportunity for All” report.

Faris highlighted that Malaysia continues to maintain its strong performance in several areas of doing business. It was one of the top 15 performers globally in dealing with construction permits.

Besides that, Malaysia retains its spot as the third best economy in terms of protecting minority investors.

“For example, Malaysia sets the best practice in terms of information that companies must share in order to enter into transactions with related parties,” he said.

Faris also applauded Malaysia’s effort to implement two reforms in the past year, namely the strengthening of credit reporting by providing consumer credit scores and the introduction of an online system for filing and paying GST.

Malaysia was the second best performer among Asean economies’ rankings, just after Singapore, which ranked as the second best country to do business in.

The other top-ranked economies globally are New Zealand (1), Denmark (3), Hong Kong (4) and South Korea (5).

Faris said Malaysia performed particularly well in the paying taxes indicator segment, which was expanded to include measures of postfiling processes relating to tax audits and tax refunds.

“Malaysia performs well on this measure. For example, it takes about five hours to comply with a corporate income tax audit, compared with the regional average of 18 hours,” he added.

This time around the Doing Business report also considered gender equality aspects for three sets of indicators, namely starting a business, registering property and enforcing contracts.

On a separate note, Pemudah (The Special Task Force to Facilitate Business) which was set up in 2007 to improve the ease of doing business in the country, said it will focus on accelerating the implementation of identified initiatives and accommodate the changes in the methodology to improve the country’s ranking and realise the ambition of being one of the top 10 economies.