Thursday 28 Mar 2024
By
main news image

This article first appeared in The Edge Malaysia Weekly on August 27, 2018 - September 2, 2018

CEOs are feeling better about the current state of the Malaysian economy as the country enters a new dawn with a change of government, although they remain cautious about the prospects for their firms going forward. Reflecting this is the latest Vistage-MIER CEO Confidence Index which, at 107.1, is at its highest level since 2Q2011.

The latest Current Economic Conditions Index rose to 107, its highest since 2Q2011, indicating that CEOs are clearly more confident about the domestic economy recently than they have been in more than seven years. Some 25% of the 625 CEOs who responded believe that the domestic economy improved in 3Q2018, up from 17% in 2Q2018 and 15% in 3Q2017.  The percentage of those who opine that the economy has performed worse lately has dipped to 18% this quarter, compared with 42% a year ago and 25% last quarter. The Expected Economic Conditions Index rose to 146, suggesting that the economy is expected to do better in the coming months, with the majority of CEOs favourably projecting this.

They are, however, bracing for a more cautious outlook for their firms in the near term, as uncertainties continue to prevail in the internal and external environments. They are adjusting their plans for fixed investment downwards in the coming months, as indicated by the index for planned fixed investment, which lost four points on the quarter to 140 in the latest survey.  Some 46% of CEOs are planning to increase capital expenditure soon, down from 49% in the last quarter. Both indices for expected revenue and profit also declined, albeit marginally, from the prior quarter, presaging a slight slowdown in both for the rest of the year. Some 60% and 51% of CEOs are projecting higher revenue and profit soon, down from 61% and 52% in 2Q2018, respectively. Recruitment is expected to take a breather in the months ahead. The latest index for expected employment, at 136, is down four points from 2Q2018, with 45% of CEOs contemplating increasing their headcount before the year is out, down from 48% in 2Q2018 and 42% in 3Q2017.

New orders in the coming months are expected to slow down, particularly those from abroad.  Some 54% of CEOs are projecting higher local orders, down from 2Q2018’s 56%. Those who are anticipating an increase in export orders dipped to 34% this quarter, compared with 54% in 2Q2018. While most CEOs will be maintaining their current sales prices locally, those planning to revise theirs upwards soon totalled two percentage points more than the previous quarter’s 32%.

 

Top three concerns as Malaysians

The results of the 3Q2017 survey showed that the top three concerns of CEOs, as Malaysians, were corruption, the weak ringgit and the political situation. A year on, concerns over the new government (capability, competency, efficiency, integrity, transparency) top the list, while corruption and the weak ringgit continue to be their other main concerns.  Of the many other concerns the respondants raised, the more common ones include: the domestic economy (stability and growth); the efficiency of the Sales and Services Tax in replacement of the Goods and Services Tax; the national debt; government expenditure and new government policies; foreign direct investment (FDI); geo-political issues; the global economy (especially the US-China trade war); and investor confidence.

While many CEOs remain concerned over the political situation in the country, they are also apprehensive over the lack of domestic demand and low consumer purchasing power, the rising cost of living and cost of doing business, competitiveness, education, employment (including unemployment and foreign labour), minimum wage, as well as racial and religious matters.

 

Top three business wishes for Budget 2019

In conjunction with the tabling of Budget 2019 on Nov 2 , CEOs have put forth their wish lists in the latest survey.  Their top three proposals include: providing more assistance and support to businesses, especially small and medium enterprises, through business financing, grants, subsidies, incentives and rebates; lowering the SST; and lowering income and corporate taxes.

There were also calls for the budget to focus on automation, health, education and human capital (including foreign labour, talent retention and development). Incentives should also be in place for FDI, research and development, start-ups and high-tech businesses, agriculture, women entrepreneurs and re-investment of new technologies. Some CEOs suggested that the GST be retained at a lower rate and housing be made more affordable.

 

Top three personal wishes for Budget 2019

The top three personal wishes of CEOs for Budget 2019 are primarily related to health, education and tax. Their suggestions include having a better education system/support via an increase in education fund, benefits and rebates, and more funding for better healthcare, especially for senior citizens. A reduction of or exemption of personal income tax also made it to the top three on the wish list. CEOs also hope for improvement of public transport,  a reduction in car and property taxes/prices and the cost of living. Higher tax benefits/incentives, deductions, reliefs, rebates and exemptions (for example, for spouse, children, parents, middle-incomers, life and medical insurance) and the abolishment of tolls were also recommended.

 

Business and personal confidence  pre- and post-GE14

The change of government has generally boosted CEOs’ confidence. Their level of confidence post-GE14,  professionally and especially personally, was higher than pre-GE14. Most (43%) ranked their pre-GE14 business confidence level at an average of 3, but post-GE14, a bigger majority (49%) grew in confidence, ranking their level a notch higher at 4. On a personal level, a majority of CEOs (34%) graded their pre-GE14 confidence level at 2, but post-GE14, the ranking of most CEOs (50%) rose to a high of 4.

 

Impact of 0% GST

The GST, zero-rated since June 1 , has had a more positive impact on CEOs personally than on a business level to date. Some 43% rated the impact on their businesses as neutral, while another 42% responded positively. Sentiments were more upbeat on a personal level, with 59% saying it has impacted them positively so far, while 33% remained neutral.

 

Hiring of foreign workers

The stricter enforcement on the hiring of foreign workers has had no impact on most CEOs’ businesses. Almost 36% made this claim while 24% and 21% indicated the impact on them as moderate and significant, respectively.  Some 18% were minimally affected.

 

Personal savings

Apart from the mandatory savings in the Employees Provident Fund, most (30%) CEOs set aside 6% to 10% of their personal income as savings annually. A quantum of 0% to 5% and 11% to 15% are reserved for savings by 23% and 19% of the CEOs, respectively. While 12% estimated theirs at 16% to 20% while 16% save more than 20%.

 

Investment in business software/applications over the next 12 months

On the types of business software/applications that CEOs will invest in over the next 12 months, most express interest in data analytics/business intelligence, customer relationship management  and e-commerce, with 45%, 40% and 37% responses, respectively. Some 28% will likely invest in enterprise resource planning while 26% have accounting/financial management systems in mind. Human capital management and cybersecurity garnered 17% of responses each.

 

Digital free trade zone (DFTZ)

In the 2Q2017 survey, 30% of CEOs thought  the DFTZ could benefit them/their businesses while 26% believed otherwise and 44% had little knowledge of it. The latest survey found that 53% of CEOs have not registered yet or do not intend to register for the DFTZ, although 71% would like to know more about it.

 

Investment in the next six months

In the next six months, the top three investments that CEOs are planning are equities, fixed deposits/cash and local real estate, with responses totalling 42%, 41% and 34%, respectively.  Some 27% are interested in unit trusts/mutual funds/private retirement schemes while 9% are considering foreign currencies and 8% foreign real estate. Cryptocurrency and private equity received 7% of the votes each while 6% are planning to invest in gold and/or silver. Only 5% are looking into fintech (equity crowdfunding, peer-to-peer).

 

About the CEO Confidence Index

Since its inception in 2003, the CEO Confidence Index, a quarterly survey of Vistage members in Malaysia, has become a leading indicator of what the leaders of small and mid-sized companies are thinking about and planning for the future. These insights provide a leading indicator for employment, capital expenditure, sales and revenue trends. Each quarter, Vistage International polls its membership in Malaysia, the US, Canada, the UK and Australia.

 

About Vistage Malaysia and MIER

Vistage Malaysia is a licensee of Vistage International, the US, the world’s leading chief executive leadership development organisation, providing unparalleled access to issue resolution and better performance through monthly peer advisory groups, one-on-one business coaching, expert speaker presentations, and extensive online connectivity, spread over 1,800 cities in 20 countries with more than 22,000 members worldwide.

Vistage Malaysia has more than 700 members with a combined annual revenue of RM60 billion and employing over 100,000 people. Member companies grow, on average, 2.2 times faster than they did prior to joining Vistage. In 4Q2005, Vistage Malaysia entered into a strategic alliance with the Malaysian Institute of Economic Research (MIER) to co-brand the CEO Confidence Index.

MIER is an independent, private, non-profit organisation devoted to economic, financial, and business research that would serve as a think tank for the government and private sector by providing an objective and impartial understanding of socio-economic issues of national, regional and global importance.

 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.

      Print
      Text Size
      Share