Regulatory uncertainties clogging up economic arteries

by | Oct 9, 2021 | Local News, News | 0 comments

KUALA LUMPUR (Oct 9): Malaysia’s logistics performance has been declining, according to the World Bank, and this has more to do with the country’s inability to update the regulatory environment in the sector to international best practices.

According to the World Bank’s Logistics Performance Index (LPI) 2018, Malaysia’s logistical performance has dropped to the 41st rank in the world, behind even Vietnam in Southeast Asia.

The logistics sector is akin to the lifeblood of trade and clogging the arteries would mean obstruction to trade flows. This is the view of Ruben Maximiano, senior competition expert at the Organisation for Economic Cooperation and Development (OECD), who led the OECD Competition Assessment Reviews on Malaysia’s logistics sector.

Indeed, the importance of logistics to a country’s economy cannot be overstated. Hence why recent developments in Malaysia’s logistics sector are a concern to all stakeholders.

Malaysia’s slide in the world ranking of logistical performance has a lot to do with its regulatory environment, rather than its infrastructure, says Maximiano. While the country has spent a lot on its infrastructure, its regulations have not kept up with the world.

“In a competitive environment, many countries in the region have actually been doing some very good work in this field. And so, it is not that Malaysia is uncompetitive or hasn’t been doing traditionally a good job, it is just a matter of keeping up to date.

“If you want to continue to be the important hub that you’ve been and keep attracting investments in the future, you will need to upgrade your regulations to international best practices, because otherwise you will slip behind,” says Maximiano.

Recently, the focus on the directive by the Royal Malaysian Customs requiring integrated international logistics services (IILS) companies to have 51% Bumiputra equity by the end of the year highlights the regulatory problems in the sector.

What is the way forward for the logistics sector? What are the OECD’s recommendations?

Find out in the latest issue of The Edge Malaysia weekly.

Reference: https://www.theedgemarkets.com/article/regulatory-uncertainties-clogging-economic-arteries