LEGEND has it that Phrygia, later a part of the Persian Empire, was without a king. An oracle there proclaimed that the next man who entered the city driving an ox-cart should become its king.
Gordias, a peasant farmer, did so and was immediately crowned king.
In gratitude, his son Midas consecrated the ox-cart to the Phrygian god Sabazios. He hitched it to a post with so complex a knot that it was impossible to see how it was fastened. Another oracle had declared that anyone who could loosen the Gordian knot would become ruler of all of Asia.
As that was his ambition, Alexander the Great, who had arrived at Phrygia in the fourth century BC, sought unsuccessfully to untie the knot. In desperation, with one fell swoop of his sword he sliced it in half. True to prophesy, Alexander went on to conquer Asia. Like Alexander, Malaysia too must cut through its Gordian knot of business complexity if it wants to become an Asian trade and investment hub.
The latest global business complexity index report ranks Malaysia as the third most complex country (out of a sample of 77 countries) for multinationals to do business in Asia. In contrast, Hong Kong and Singapore are regarded as having the simplest jurisdictions for businesses. Globally, the report ranks Malaysia as the ninth most complex after Brazil, Argentina, Bolivia and Greece.
Worldwide, the United States and Denmark rate among the 10 least complex countries.
Much has been done to make Malaysia a more attractive place for trade and investment. Pemudah, or the business facilitation committee, continues to cut red tape. The manufacturing sector has been liberalised, allowing 100 per cent ownership by foreign businesses in domestic companies.
The extent of liberalisation of the services sector is also large.
Handsome investment incentives await foreign investors who choose Malaysia as their destination. One-stop centres for investment processing, aggressive trade and investment promotion, provision of high-tech industrial parks and free-trade and digital zones, and the adoption of international regulatory good practices are hallmarks of the government's drive to attract foreign direct investments (FDIs).
Additionally, the government has launched a digital platform for submitting financial statements. It even offers an annual rebate of RM5,000 to induce companies to use that platform. The country's legal system and internationally acclaimed accounting practices are the other key elements of its business-friendly ecosystem. However, there is still much work to be done to loosen business complexity.
In its 2020 report, the World Bank ranks Malaysia in the ease-of-doing-business index at 12 out of 190 economies. We are a top-two global performer in processing construction permits and in the protection of minority investors. And we secured the top four global position in electricity supply. These are commendable achievements.
However, overall, we are still far away from the top spot. We fared poorly on the other World Bank indicators, chiefly, starting a business, paying taxes, international trade, resolving insolvency, getting credit, enforcing contracts and registering property. That is why over the past 10 years, we have been consistently below the 30th rank on business efficiency in the International Institute for Management Development World Competitiveness Yearbook.
Over the last 10 years, we have dropped 40 per cent to the 53rd position for the indicator on the extent of foreign control in domestic companies. The government should, therefore, quickly translate into reality its commitment to further liberalise the services sector. For example, foreign investors do not have full ownership of their investments in oil and gas, telecommunications, financial services, such as insurance, and transportation.
We need to promote good governance and jack up our Corruption Perceptions Index ranking, which currently is 61 out of 180 countries. And we need to offer end-to-end assistance to FDIs to help overcome coordination problems across the three tiers of government — federal, state and local. The Gordian knot of business complexity can be sliced through with the same desire that Alexander had in becoming king of Asia.
The writer is a professor at the Putra Business School
