Malaysia Ranked 9th for Global Business Complexity

Malaysia is the 9th most complex country for multinationals to do business in globally, and the 3rd most complex in Asia, according to the Global Business Complexity Index (GBCI) 2020 report.

he report, compiled by T the TMF Group, a global administrative support services company for international business expansion, said that one of the drivers of Malaysia’s high complexity was the incorporation process for foreign businesses, which could take up to a month.

The Global Business Complexity Index analyses key areas of business administration and compliance across 77 jurisdictions – from the time it takes to incorporate, to changes in tax legislation, to policies around wages and benefits, through to the challenges of opening a bank account. Over 250 different criteria were factored into the 2020 rankings.

Sharon Yam, TMF Group’s Managing Director for Malaysia, said that incorporation in Malaysia involved obtaining licences for all business premises. Licences are also required for operating in some industry sectors which will affect the required share capital.

“Malaysia offers a wealth of opportunities for international businesses. There is clearly an appetite to attract more investment into the country. However, investors in Malaysia must be able to navigate its changing social, political and economic landscape. The country’s legislation has a large impact on day-to-day business operations as well,” she said.

As part of a drive to make Malaysia a more attractive place to do business, the government launched a digital submission platform for audits and financial statements. “While its use is not compulsory, the government is encouraging the companies to use it by giving an annual rebate of RM5,000 per year.

“This is part of the Malaysian government’s strategy of simplifying processes to attract foreign direct

TEN MOST COMPLEX JURISDICTIONS

investment which has helped move the country forward. We can expect to see the country’s business complexity to start reducing as a result,” added Sharon Yam.

Malaysia’s business environment had a number of plus points which helps in their global positioning. As a former British colony, Malaysia’s legal system is based on UK law making the legal environment readily understandable to many multinational firms. Its accounting practices are internationally aligned, including adherence to the International Financial Reporting Standards (IFRS), a common set of rules and regulations for financial statements that are understandable to businesses operating globally.

The report stated that in Asia, only Indonesia (1st) and China (6th) represented a larger challenge for multinational firms looking to establish and operate local subsidiaries. On the opposite end of the scale, Hong Kong and Singapore are the continent’s simplest jurisdictions for business. Taiwan, India and South Korea held the 16th, 17th and 18th position respectively.

Beyond Malaysia’s borders, six of the 10 most complex jurisdictions are in South America, with Brazil, Argentina and Bolivia ranked 2nd, 3rd and 4th respectively. Greece, which occupied top spot last year, has made some improvements, and is now ranked 5th most complex this year.

On the other end of the scale, the 10 least complex jurisdictions to set up or operate in are those found in the Western hemisphere, with Curacao leading the way, followed by the United States of America, Jamaica, Denmark and the British Virgin Islands.