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The Asia Foundation
Addressing the Critical Issues Facing Asia - 60 Years
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Malaysia Business Environment Index 2012

New tool launched to measure local business environment

Kuala Lumpur and San Francisco, May 7, 2012 — The Asia Foundation, the School of Business at Monash University Sunway Campus, and RAM Holdings Berhad (RAM) today launched the 2012 Malaysia Business Environment Index, the only diagnostic tool designed  to measure the business-friendliness of local governments in the country. Malaysia aspires to become a progressive and high income nation by 2020. Against this backdrop, small and medium-sized enterprises (SMEs) are recognized by the government as an important engine of growth and innovation.

The 2012 Business Environment Index, or BEI, is a Malaysia-specific diagnostic tool to benchmark and rank local business environments that can be influenced by federal, state, and local policies and regulations. The index identifies high- and low-performing districts and reveals the successes and challenges faced by SMEs – experiences critical to a robust and dynamic private sector in Malaysia.

The BEI provides crucial empirical data to all parties interested in Malaysia’s private sector development. Dr Yeah Kim Leng, Group Chief Economist of RAM Holdings Berhad noted that, “Malaysia’s success in overcoming the middle-income trap hinges critically on the ability to unleash its entrepreneurial talents and innovation capabilities. High-level initiatives designed to foster a business-friendly environment like the Economic Transformation Programme (ETP), the Government Transformation Programme (GTP) have laid the right track; what is needed now is an enabling environment. We see the BEI as a tool to bridge the remaining gaps in information, perception and performance on the ground.”

In this first-of-its-kind survey in Malaysia, 635 randomly-drawn SMEs in six states and 11 districts were asked to share perceptions of their local business environment.  The 11 districts were then ranked in order of business-friendliness across nine areas of economic governance that are relevant to local economic growth in Malaysia, including entry costs, transparency, informal charges, property rights, and crime and security.

The complete report is available for download here. Explore rankings on the interactive data visualization site.

According to the BEI pilot study, Kemaman in the state of Terengganu ranks the highest in business-friendliness followed by Sepang in the state of Selangor. Ampang Jaya ranks the lowest while Petaling Jaya ranks the second lowest. Both districts are located in the state of Selangor. The BEI is a useful complement to the government’s Star Rating System in which Petaling Jaya and Ampang Jaya both scored among the highest – different from the BEI rankings. A key difference between the two complementary assessments is that the BEI relies on the perceptions of local business people while the Star Rating System focuses on the internal structure of government functions and captures the experiences of internal government officers.

Overseeing the survey’s methodology is Dr. Jane L.Y. Terpstra Tong, Senior Lecturer, Department of Management at Monash University Sunway Campus.  Dr. Tong said, “The 2012 Malaysia pilot BEI identifies good practices and highlights areas for improvement for local governments. The survey provides an economic baseline and strengthens the advocacy capacity of business leaders to engage local government officials.”

Designed by The Asia Foundation, the Malaysia BEI is the latest iteration of the Foundation’s efforts to measure the business-friendliness of local governments through its Economic Governance Index (EGI) initiatives.  The EGIs are already in use in countries across Asia, including Cambodia, Vietnam, Indonesia, Sri Lanka, Bangladesh, and now, Malaysia.

“The Malaysia BEI tells us what is working and what is not,” said Anthea Mulakala, Country Representative for The Asia Foundation in Malaysia. “This diagnostic tool identifies best practices and provides practical steps for success, which can be emulated by other districts. Across Asia, governments have embraced the Foundation’s indices as a sophisticated, empirical tool to measure local reform and business-friendliness.”

Read more about the Foundation’s programs in Malaysia and Economic Governance Index (EGI). For media inquiries, please visit the Press Room.

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