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To keep up with digitalisation and overcome this lack, 43% of the respondents are looking into training programmes to reskill or upskill their employees.
Despite escalating operational costs, some businesses in Malaysia are remaining optimistic — as recorded in the UOB Business Outlook Study 2024, nearly three in 10 businesses believe the current business environment is very positive.
The positive outlook is reflected in Malaysia’s projected full-year gross domestic product (GDP) growth of 4.6% from 3.6% in 2023, fuelled by stronger consumer spending and robust investment activities.
Apart from rising operational cost, high inflation and economic slowdown were also factors which impacted businesses in 2023. Nearly four in five businesses in the region were impacted by rising operational cost, with three in 10 impacted by high inflation.
In terms of performance, more than one in five businesses expect a vastly improved business performance in 2024. Diving deeper, cost reduction will be a top priority, as indicated by 36% of respondents. This was followed by:
- Sourcing for new customer base (30%),
- Digitalising the business to achieve business efficiencies (29%),
- Developing new sources of revenue (25%), and
- Finding new business partnerships for collaboration (24%).
Interestingly, the study also recorded a desire to improve profitability (67%) and grow revenue (63%) are fuelling interest in overseas expansion among nearly eight in 10 businesses in Malaysia. Other motivations included building reputation as an international business (51%), leveraging the company's regional or global network (33%), and taking advantage of opportunities for products and services (27%). More specifically, ASEAN and Mainland China are key markets for future expansion. Within ASEAN, Indonesia, Singapore and Thailand are top destinations.
However, inadequate financial support and lack of knowledge pose as the biggest barriers for overseas expansions.
By sector, the inadequate financial support was largely felt by consumer goods (59%) and wholesale trade (50%).
Digital adoption landscape
According to the study, nearly eight in 10 businesses have adopted digitalisation, with most having digitalised multiple departments. The most digitalised sectors were manufacturing & engineering (87%) and real estate & hospitality (84%).
As a result, over one in two businesses have achieved considerable or great success with digitalisation. Currently digitalised processes include:
- Sales (40%)
- Payroll (38%)
- Marketing (37%)
- Accounting (36%)
- Inventory management (33%)
Top impact areas recorded from digitalisation were improved productivity and profitability.
Looking ahead, more than seven in 10 businesses in the region are planning to spend more on their digitalisation efforts in 2024, with most budgeting an increase of 10% to 25%.
However, in terms of challenges for digitalisation, most of the respondents indicated lack of digital skillset among employees (40%) — an issue most faced in manufacturing & engineering (57%) and consumer goods (49%); followed by being too expensive to implement (35%) — most impacting manufacturing & engineering (47%) and tech, media & telecom (39%), and concerns over cybersecurity issues (33%).
In addressing these challenges, the survey revealed the top areas of support employers are requiring for digitalisation:
- Tax incentives or rebates (50%)
- Training programmes to reskill or upskill employees (43%)
- Connections to the right technology and solution providers (41%)
- Access to knowledge and expertise in the area (39%)
- Easier access to funding or grants (38%)
The study also explored the state of fintech adoption in Malaysia. In this regard, most businesses believe that fintech impacts their skill requirements. That being said, only over one in two have invested in training or hiring new staff.
In response, 51% invested in training or hiring new staff, 45% plan to train or hire new staff, and 3% to not do anything.
The Business Outlook Study involved 525 business owners and key executives from SMEs and large enterprises in Malaysia.
Lead image / UOB Business Outlook Study 2024
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