This article first appeared in The Edge Financial Daily on August 6, 2019

KUALA LUMPUR: While more Malaysian businesses expect the second half of 2019 (2H19) to be challenging, the number of businesses that held optimistic views regarding their prospects and the economy for 2020 have also increased, a survey by the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) showed.

About 26.3% of the 924 respondents involved in the survey said they were optimistic about their prospects in 2020, compared with 2019 (14.1%), while the number of those with pessimistic views about 2020 fell to 16% from 29.6% in 2019.

The improved business optimism is reflected across all sectors, according to the survey which was conducted from May to early July.

Meanwhile, business expectations for 2020’s economic outlook have strengthened significantly from 2019 with 24.9% of respondents being “optimistic” about 2020 compared with 13.5% saying they were optimistic about 2019; 58.1% holding “neutral” views about 2020 versus 54.7% about 2019, and 17% being “pessimistic” about 2020 versus 31.8% about 2019.

Socio-Economic Research Centre executive director Lee Heng Guie said most businesses experienced softened business performance in 1H19, following the extended weakening trend in 2H18, adding that businesses that were surveyed continue to keep a vigilant view about business and economic conditions in 2H19.

He elaborated that conditions for both the business and economic prospects are still surrounded by external uncertainties such as the ongoing Sino-US trade war and its reverberating effect on trade and services; slowing global economic growth; and the health of the US and China economies.

“Going into next year, we observe that businesses are probably hopeful on a stabilised external environment, as well as domestic policy landscape and direction,” said Lee.

The survey also revealed that in 1H19, more respondents (58.8%) increased their capital expenditure compared with the preceding six months.

The remaining 6.1% and 35.1% of respondents, on the other hand, have either maintained or lowered their capital investment spending.

“The increase in capital expenditure may be partly aided by the goods and services tax and income tax refunds, which totalled RM17.1 billion as at end-April 2019,” said Lee.

“Going forward, the percentage of businesses planning to increase capital expenditure is expected to maintain at a relatively high percentage (55.5%) for 2H19, suggesting that businesses may be starting to have a clearer approach about business strategy and planning ahead and intend to invest for the long term,” he added.

The survey also showed that 42.7% of respondents indicated that they either have invested or plan to invest in Malaysia over the next 12 to 24 months, while 57.3% have no intention to invest over the next 12 to 24 months.

Interestingly, government policies — which were previously ranked last out of the top five factors influencing and impacting business operations and the domestic business environment — are now named the second-most important factor by 43.4% of respondents.

“This reinforces ACCCIM’s view that it is important for the government to consistently foster a stable and conducive business environment for economic growth and business investment,” said the survey.

“Besides the 3Cs (clarity, consistency and continuity), businesses want a competitive tax regime, investment-friendly business environment and a supportive regulatory landscape,” Lee elaborated, adding that they are also looking for a more efficient public delivery service.

Other factors that affect operations and the environment are domestic competition (44.8%); lower domestic demand (43%); higher raw material prices (38.3%); and the ringgit’s fluctuations (36.1%).