Kuala Lumpur, 12 September 2019 – IDEAS has published a policy paper titled “SMEs Compliance Costs in Malaysia” which explores how much it costs SMEs in Malaysian to comply with government regulations. The research is based on a survey of SMEs in Klang Valley, which finds that:
· Nearly 1 in 4 SMEs consider business regulations as one of their top 3 challenges, although other factors including understanding the customer and managing cash flow ranked higher as a challenge.
· The most burdensome regulations to comply with were labour laws, including minimum wage and work permits; land regulations, including billboard regulations; and tax compliance.
· The most time consuming was corporate tax compliance at 44 days of staff time.
· The survey also found that less than 23% of the SMEs had been consulted on the most burdensome regulations.
· Finally, the use of online platforms as a mode of payment for the most time-consuming regulations ranged between 7% and 35%, with the rest of payments being made over the counter or outsourced.
Commenting on the release of the paper, IDEAS CEO, Ali Salman said, “Empowering SMEs is very crucial for Malaysia’s development. Many among the B40 are employed by or own SMEs. Reducing the cost of doing business for SMEs – including reducing the cost of complying with government regulations, is a direct way of improving the income of the B40. It is clear from this survey that Malaysia’s SMEs face many challenges, including understanding customers and managing their cash flow. Complying with regulations may not be the biggest challenge, but it is something the government can most easily address. The government should consider how regulations can be simplified and support SMEs towards cost and time saving solutions, including greater use of online platforms.”
Small and Medium Sized Enterprises (SMEs) are a vital part of the Malaysian economy which contributed 37.1% to Malaysia’s GDP in 2017. 98.5% of business establishments in Malaysia are SMEs with 20.6% of SMEs are owned by a woman. In light of the upcoming Budget 2020 announcement, IDEAS’ new policy paper “SMEs’ Compliance Cost in Malaysia” provides a unique perspective of the cost of doing business for SMEs in Malaysia.
For this survey, in-depth interviews were conducted with 120 micro and small businesses in the services sector in Malaysia around the Klang Valley area to understand and calculate the compliance cost of the government regulations. Companies were asked about the time spent to comply with different regulations and the salaries of staff involved to calculate the total cost of regulations in terms of the contribution of labour. The costliest regulations to comply with were corporate tax regulation, minimum wage regulation, company billboard regulation, and worker’s visa and permit regulation.
The paper can be accessed from the IDEAS website here.