Facilitating Investment

Malaysia

Economic News

22 Jul 2010
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In addition to the massive investment in infrastructure and human capital development, an important feature of the Ninth Malaysia Plan (9MP) is its ambition to mitigate the red tape and bureaucracy that has sometimes hindered investment in the country.



Last week the Malaysian national news agency Bernama reported that Prime Minister Abdullah bin Haji Ahmad Badawi has ordered government agencies to manage the problem of red tape to avoid delays in the implementation of the investment and development projects of the 9MP. This is in keeping with the new strategy to hasten delivery at the local level, creating an environment that is more hospitable to investment and development.



The 9MP will be a catalyst for investment from sources both domestic and foreign. Any delays in delivery or approvals could hinder not only 9MP development projects, but further government plans to attract investment.



Citing the lengthy process of approving land applications and certificates of fitness for companies, the prime minister said to reporters during a two-day visit to Terengganu, "I have received a promise that the time taken to approve an application will be shortened and I am confident it can be done. If the delay is caused by too many government agencies being involved in the approval process, then we may need to reduce the number."



Cutting down on the bureaucracy necessary for development projects has been a persistent concern in recent years.



Malaysia is generally an attractive place for foreign investors. The country possesses a skilled and English-speaking labour force, solid legal framework and political stability. The government has put in place sophisticated infrastructure, high technology facilities as well as tax incentives to help spur investments from overseas.



A World Bank report released in late 2005, "Doing Business in 2006", rated Malaysia 21st out of 155 countries in terms of its friendliness and openness to business, ahead of many in the region.



However, the ranking was a composite of several sub-categories, and there are clearly some areas for improvement. Of particular concern was the long time necessary to obtain necessary licences and approvals. This is certainly a concern for international investors, who typically expect a fast turnaround on their investments.



Chief Secretary of Government Tan Sri Samsudin Osman told OBG that efforts to improve delivery of services and cut red tape are aimed at the "front line agencies" - the administrative bodies who have the most contact with the public and businesses, and those best placed to expedite licensing and approval. "The organisations that have a real impact on the pace and speed of development are at the level of the town councils, the city councils, the district councils and the land offices," he said.



Licences, certificates of fitness and land management issues are overseen by the myriad of different offices on the local levels. The federal government is making a concerted effort to ensure that these agencies facilitate, not hinder, investment. "This is very critical because developers want these things to be done very quickly; they can't afford to wait," Samsudin said.



In addition to this new focus on the front lines of investor relations, government agencies such as the ministerial task forces and the modernisation and administrative planning unit have been tasked specifically with overseeing the progress of development plans.



In recent years, the government had expanded its existing one-stop centres for investment such as the Malaysian Industrial Development Authority (MIDA), and provided service counters to provide greater accessibility and choice in obtaining government services. Procedures are to be re-engineered and simplified, and more such centres will be set up in the 9MP to speed up decision-making.



The work of bodies such as these would mean nothing, however, if the delivery systems were bottlenecked further down the chain. As Samsudin notes, "[The federal government] can have the best policies, but if these things are not carried through on all levels, with the speed required, then it creates a gap that hinders the pace of modernisation and development."



The new focus on the district and town level authorities is a step towards avoiding such barriers in the future. Increased oversight from the capital and inter-agency co-operation will streamline processes, and lead to the elimination of cumbersome regulations and procedures. Such developments would lead to faster business permits and licences, and an even more dynamic, investor-friendly environment will emerge.

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