By Stephanie Jacob
Malaysia has emerged in 18th place out of 189 countries in the World Bank’s International Finance Corp (IFC)’s report on the ease of doing business in 2015. The report was released internationally this morning.
In the report, Malaysia is ranked 2nd in Asean behind Singapore, and 4th in Asia behind Singapore, Hong Kong and South Korea, noted the 2015 IFC World Bank Doing Business Report.
At 18th place, Malaysia is better ranked than Taiwan, Japan, Switzerland, France, Netherlands, United Arab Emirates and all the BRICs nations.
It is important to note that the World Bank changed the methodology for evaluation in the 2015 report by the. Prior to this report, countries were measured by percentile rank. However in the new methodology, ranking is now determined based on ‘distance to frontier (DTF)’ scores.
The frontier is represented by the best theoretical score of 100 for each of 10 indicators related to doing business. A country’s DTF score represents the gap between its performance and the best performance for each indicator.
Under the old system which measured percentile rank, Malaysia came it at 6th place in 2014’s report. However if the 2014 scores are re-calibrated under the new methodology, Malaysia’s ranking was in fact 20th. As such the 18th place under the 2015 report is in fact a two rank improvement.
In a press briefing, Ministry of International Trade and Industry (Miti) Secretary General Rebecca Sta Maria acknowledged that the new system had taken some digesting after the ministry was initially informed about the new system by the World Bank last Friday.
She said it was important to “draw a line between the two methodologies, to show that the system has changed so that there is no confusion of the rankings.” Sta Maria added that the government was happy to see an improvement in Malaysia’s position despite the new methodology.
According to MITI, the new methodology has two main goals, the first being to expand the focus of indicator sets that primarily measure the efficiency of a transaction or service to also cover the quality of that service. And the second is to expand the focus of the indicator sets that already measure some aspects of the quality of regulation to include recent good practices in the areas covered, such as for indicators like getting credit; protecting minority investors and resolving insolvency.
In a separate press statement, Miti Minister Mustapa Mohamed attributed the improvements as a reflection of the initiatives undertaken in the Government Transformation and the Economic Transformation Programmes, as well as the efforts by the Special Task Force to Facilitate Business (Pemudah).
Under the new methodology, Malaysia improved in five of the indicators. Namely in starting a business; dealing with construction permits, getting electricity; registering property and resolving insolvency.
Malaysia was closest to the frontier score under the ‘starting a business’ indicator, scoring 94.9 out of 100. While it was furthest from the frontier in the ‘resolving insolvency’ indicator at 65.61 out of 100.
Miti sec-gen Sta Maria said that improving further depends heavily on improving systems and efficiency further by continuing to move more systems and procedures online – a criteria that the evaluators focused on heavily.
Meanwhile, the Pemudah Private Sector co-chair Saw Choo Boon said “the private sector members of Pemudah welcome the improvement of ranking of Malaysia…possible though the commitment of the civil service and the support received by the private sector to the comprehensive transformation programmes.”
The new methodology is positive as it offers a wider perspective and more holistic approach which enables better improvements to be made to the business regulatory environment, said Saw. He added that he was confident that Malaysia will be able to achieve a top 10 ranking fairly soon.
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