Reform trends and

options for Malaysia

Sylvia Solf
Justin Yap
October 31st, 2007
Global reform trends: Eastern European and
Central Asian countries reformed the most

Countries with at least one positive reform in 2006-7 (%)

E. Europe
+ Central
Asia

OECD
78.6%

62.5%

58.8%
Middle East 62.5%
+ N. Africa
35.5% 45.8%
Latin America South Asia East Asia
+ Pacific
+ Caribbean
52.2%

Sub-Saharan Africa
Eastern Europe surpassed East Asia
on the ease of doing business

136
Average rank, ease of doing business

107

96
87

76 77

22

Hig h n
i c om
e OECD
: Eu ro p e &Ce n tra lAs
a
i Ea s
tAs
a
i &Pa c fc
i L a tn
i Am
ecir a &Ca rib b e a n Mid d le Ea s
t&No rth Afc
ri a So u th As
a
i Su b -Sa h ara n Afc
ri a

Eastern East Asia & Latin America Middle South Asia Sub Saharan
High income
Europe Pacific & East & Africa
OECD
& Central Asia Caribbean North Africa
 Where does Malaysia stand in each topic?

Topic Malaysia’s Rank World’s best

Starting a business 74 Australia

St. Vincent & the

Dealing with licenses 105
Grenadines
Employing workers 43 United States

Registering property 67 New Zealand

Getting credit 3 United Kingdom

Protecting investors 4 New Zealand

Paying taxes 56 Maldives

Trading across borders 21 Singapore

Enforcing contracts 63 Hong Kong, China

Closing a business 54 Japan

 Investors benefit from strong protection

Disclosure requirements for related party transactions are among the

world’s strictest

10
9
8.7 Singapore

Hong Kong, China

Malaysia
Disclosure Index
Director Liability Index
Shareholder Suits Index
Total Investor Protection Index
 Collateral and bankruptcy laws support
access to credit

Malaysia compared to global top 10 in ease of Doing Business

10 10
9 9 9
8 8 8
7 7 7
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 Malaysia’s reforms improved ease of doing
business in 2 areas

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

1.
Fiji Indonesia Lao PDR Malaysia Micronesi Mongolia Thailand Timor Tonga Vanuatu Vietnam
China
a Leste

x
Starting a
business 9 9 9
Dealing with
licenses 9 9
Employing
workers

x
Registering
property

Getting credit 9 9 9 9
Protecting
investors 9 9
Paying taxes 9 9
Trading
across
borders
9 9
Enforcing
contracts 9 9
Closing a
business 9
Reforms sped business start-up…

•Time decreased by 6 days due

to greater efficiency in Vietnam, 50
Taiwan, China, 48
processing name search
applications and company
registration certificates at CCM

China , 35
Thailand, 33

Malaysia, 24

Mongolia, 20

Hong Kong, China, 11

Singapore, 5

Sin ga po re Hon g Kon g,Chin a Mo ng ola

i Mala a
siy Tha a
li n d Ch n
i a Taiwan Ch
, ni a Vie n
t am
 … and reduced time to pay taxes

• Less administrative
burden thanks to
automated tax filing and
payment system. 190 hours

Time (hours per year)

•Finance Act of 2006 will
further improve Malaysia’s 166 hours
ranking in paying taxes.
The Act decreases the
income tax rate for
businesses in two stages.
Effects will be seen in next
year’s report.

DB 2007 DB 2008
 What next? Administrative reforms popular and
effective

Number of positive reforms

Starting a business 39

Paying taxes 31

Registering property 27

Trading across borders 24

Getting credit 22

Getting licenses 15 Easier entry regulations, simpler tax

systems, faster property transfers
Enforcing contracts 14 among the most popular reforms in
Closing a business 10
the world (2006/2007)

Protecting investors 10

Employing Workers 8
 Opportunities for reform in Malaysia:
Reducing start-up cost

Denmark Denmark
0

New Zealand NewZeala nd

0.1

Ireland Ire al nd
0.3

United States Unite d Sta te s

0.7

Singapore Austra ail

0.8
United Kingdom Unite d Kin gdom
0.8
Australia Sin gapore
0.8

Canada Canada
0.9
Iceland Ic ela nd
2.7
Hong Kong, China Hong Kong,Chin a
3.1
Malaysia Mala aysi
18.1

0 2 4 6 8 10 12 14 16 18 20

Cost to start a business (% income per capita)

Simplifying licensing procedures for building a
warehouse (ongoing reform)

Number of procedures to build a warehouse

in top 10 economies and Malaysia

25
23

19 19
18
16
14

11 11

7
6

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Dealing with licenses in Singapore:
Ranked 5th in the world
Speeding up property title transfer

144

Number of days to register property

in top 10 economies and Malaysia

54
42
38

21
17
9 12
2 4 5

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Registering property in 2 procedures, 2 days

1. Obtain certified copies of companies’ documents from Ministry of Commerce

2. Parties submit application for registration at the Land Office
How to jump 14 places by reforming 4 areas
Starting a business : from rank 74 to 16
•Introduce electronic name search/reservation
•Introduce single company ID for commercial,
tax, and social security registration and merge
registrations
•Implement lower flat registration fees

Dealing with licenses : from rank 105 to 4

•Consolidate planning and building permits
•Implement one stop shop for approvals
•Conduct joint inspections/delegate inspections
to private professionals (architect/engineer)

Registering property : from rank 67 to 14

• Simplify formalities at the stamp office
•Introduce flat fee and eliminate valuation visits ⇒ Malaysia’s new
•Improve efficiency of land registry global rank: 10

Paying taxes: from rank 56 to 16

•Allow for online filing of social security and
labor contributions
 Why does it matter? Business friendly regulation
leads tomore registered businesses and start-ups

Business Density Business Entry

(registered firms per capita) (new firms in % of registered firms)

Easiest Most difficult Easiest Most difficult

Countries ranked by ease of doing business, quintiles

Source: Doing Business database

 …Which means more formal employment

Informal Sector Unemployment

(% of GDP) (% of labor force)

Easiest Most difficult Easiest Most difficult

Countries ranked by ease of doing business, quintiles

Source: Doing Business database, WDI

Thank you
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