MGT7203e

ISSUES IN GLOBAL BUSINESS

 
INTI International University
 
 
Programme Code: MBA-LS
 
 
Session: APRIL 2021

 
Assignment Title: Individual Assignment
Submission Date: (Week 6) MAY 2020
TABLE OF CONTENTS

A) INTRODUCTION
B) PESTEL ANALYSIS
 POLITICAL
 ECONOMIC
 SOCIAL
 TECHNOLOGICAL
 ENVIRONMENTAL
 LEGAL

C)  STRATEGIES

E)  CONCLUSION

F)  REFERENCES
A)  INTRODUCTION

From good corporate governance perspective, ruling government has to be

rotated once every 5 years, and it has to be elected or chosen based on
performance basis within the 5 years’ time frame. According to James Chen (2021),
governance means set of rules, policies, controls and resolutions which have been
designed to manage the organization in effective manner. Therefore, with proper
rules and policies in place, elected government will be able to manage the country
effectively and efficiently by proper allocation and distribution of taxpayer money on
annual basis.

Moreover, good governance ensure the ruling government lead by Prime

Minister follows appropriate and transparent decision-making process to protect the
main stakeholder who is the people in that particular country. The purpose of
corporate governance is crystal clear, to promote trust, transparency, and
accountability to develop the country in short and long term by attracting potential
investor, having financial stability and integrity and maintain peace and harmony to
ensure future economic growth (OECD, 1999).

Based on Malaysia scenario, on 9th May 2018, for the first time Malaysia has a
new government after 14th General Election was announced later on that day. It was
the historic moment for new government called Pakatan Harapan who was led by
Tun Dr Mahathir Mohamad after defeating Barisan Nasional with very close contest.
Many economist and political analyst believe with the formed of new government,
‘Malaysia Baru’ or New Malaysia will be restored and able to develop further as a
country in term of economic, social and of course the main objective to promote
integrity, transparency, accountability and emphasizing the rules of law in managing
the country.

After one year era of administration, according to Dr Mahathir, the target is to

consolidating, rehabilitation and resetting the nation with the main objectives to
review all the mega projects under previous ruling government and of course the
reduce corruption on ensuring the money will be well spent for the people.
Additionally, it is very hard to evaluate the performance of the new government and
many believes it would require at least 2 terms to reform and transform the country
so called ‘Malaysia Baru’.
 B) PESTEL ANALYSIS

From political point of view, the new government has been formed consist of
multiple political parties mainly are Bersatu, Keadilan, Warisan, Democratic Action
Party and Amanah in total of 113 seats after 14 th General Election on 9th May 2018.
Many analysts believe due to difference objective and vision, it would be difficult to
all the parties under Pakatan Harapan to form very solid government particularly in
reforming Malaysia towards ‘Malaysia Baru’. (M. Moniruzzaman et al, 2018)

As a prime minister at that point of time, who is Dr Mahathir Mohamad, would

a very big tasks and challenge in ensuring everyone is one the same page so they
can focus on primary tasks on developing the country particularly in making big
decision for the country. After a year plus, we can see backward trend and slow
progress, and most of the people believe are far from happy as the people demands
stability and higher economic growth.
 In term of economic growth, many economist believes by reintroducing Sales
Service Tax (SST) replacing Goods Service Tax (GST) is a bad move by Pakatan
Harapan, and it is better to maintain GST and benefited for the long run. Most of the
country in the world particularly, developed nations have implemented GST in quite
ages and at the moment in total of 160 countries have implemented GST as part of
their tax system, thus it would be backward move for Malaysia to reintroduce SST
which is so called traditional tax regime (Customs, 2014). Even if Malaysia is rich
with natural resources, with GST, the government can balance their income and not
solely rely on oil revenue to develop the country, thus, even GST will impact more on
lower income earner, with proper allocation and distribution of taxpayer money by
focusing on B-40 or lower income earner would be a great strategy. Thus, with GST,
government will have more funds in funding the operation and of course, able to
invest more in research and development of the country. (Star, 2019)

From employment rate perspective, due to cancellation and deferring of most

of mega project it has caused the slowdown of economic growth and this majorly will
cause higher cost to be incurred due to deferment and also will reduce job
opportunity related to the project. Two of the mega project which has been deferred
and aborted are East Cost Rail Line and gas pipelines connecting east coast
Malaysia-Klang Valley and high speed rail project connecting Malaysia-Singapore.

On spending habit, most of the people believe by reintroducing the SST,

goods and services price will lower from theoretical point of view, the fact is the
people still needs to pay the same value for the same goods and price. Even as
mentioned by KPMG (2018), SST may hike cost of doing business based on their
assessment and due to this all businesses would need to charge more to end
consumer and will cause the increase of price goods and services. Therefore, it will
reduce purchasing power of the people and lower down tax collection from indirect
tax segment.
 From social perspective, it would involve more on people particularly shared
of belief and attitudes of the population. Factors to be determined are perception and
cultural, health consciousness, growth population, age distribution and career
attitudes. On perception, many political analyst believe the new government fails to
monitor on perception and cultural believe of the people particularly when the
country is multiracial. (BBC, 2020)

Due to trend is moving towards digitalization and population is growing year

by year, the country needs more facilities and infrastructure advancement to support
the growth of population and due to deferment and cancellation of the project have
disappointed the people on demanding more public facilities and infrastructure
particularly on moving Malaysia towards developed country in year 2020. (Straits
times, 2018)

From career attitudes perspective, more on more people are educated and
graduated from university, thus, the attitude on the people is more focusing on
service industry regardless in private companies or in government agencies. This
demands required fund or investor to create more job opportunities to the public
particularly the country needs technical expert from overseas to guide and provide
us knowledge to advance to the next level.

Our current technology level if we compare with other developed countries,

Malaysia has lacked behind after change of government and needs to do more on
catching up our Asean countries neighbour. World are looking more on advanced
technology particularly on digital economy on cashless and paperless way of doing
business and also innovation on electric vehicle industry. Even now, more
companies have invested more on notebook and networking, so their employees
would be able to work from home, virtual meeting using google meet and zoom and
of course interact with each other digitally. According to ASEAN Briefing (2020),
more and more big companies from United Stated consists of Tesla, Google and
Amazon have attracted to invest in Indonesia due to their transformation towards
Digital Economy.
 In term of environmental, according to the Star (2018), Pakatan Harapan has
more specific policies stated in their manifesto which to focus on increasing
renewable energy through renewable to 20% from 2% currently towards 2025. As
we can see very minimal effect on this area due to no proof statistic on the data and
also short term of administration of the new ruling government since 9 May 2018.
However, this policies will be more effective when it becomes mandatory to all public
listed company to comply on Corporate Social Responsibilities on annual basis.

For legal side, based on Pakatan Harapan’s manifesto is to restore rule of

law in term of fighting against corruption, manipulation, and to reform the structure
most of the independence government agency such as Malaysian Anti-Corruption
Commission, judiciary and legislature system, Royal Malaysian Police and of course
to appoint non-politician to chair all the government linked companies in Malaysia.
(Buku Harapan, 2018). However, the progress on the reformation is very
disenchanted due to the appointment of politician to lead Malaysian Anti-Corruption
Commission, and of course, still no result for all on-going court cases involving
corruption. (The Star, 2019)
C) STRATEGIES TO RESOLVE THE ISSUES

On the issue to overcome all the issues above I believe, it is very clear that the
Malaysian people demands more from the new government to reform the country as
for the 2 years of performance evaluation is considered under par. Based on the
analysis, most of the mega projects are deferred or aborted mainly due to lack of
funds or revenue to finance the project and the economist believe is due to
reintroduction of Sales Service Tax.

From people perspective the reintroduction of SST will increase lower income
purchasing power and the price of good and service will reduce. However, based on
the current trend the price of goods and service particular to all necessity goods, the
price has not been impacted after changes because all necessity goods have been
categorized as zero rated of 0%. (Malaymail, 2018)

Furthermore, based GST revenue collection is very huge due to wider tax base
and of course able to tax more on good items particularly. Estimated revenue for
GST is approximately around RM45 billion per year compared to SST roughly
around RM21 billion. This is considered as very huge drop, and to sustain this the
government needs to find alternative source of income on direct taxes of corporate
and individual tax through Lembaga Hasil Dalam Negeri (LHDN) to cover the
shortfall and of course to cut cost on revising most of the project cost either defer or
abort. (Ringgitplus, 2018).

In conclusion on this, GST needs to be restored due to more efficient and

transparent tax system compare to SST and able to tax in the black market. With the
change of government, people expect with more money, new regime can spend
more on the people of course to expedite the development of the country and due to
lack of funds, most of development has been disrupted. (The Edge, 2020)
 Another strategy on having a strong government to govern the country is to
have stability in political parties. Based on new government composition of parties,
each of leader will have difference view and agenda on reforming the countries and
this will cause disagreement in making decision. Many political analysts believe,
reforming the country not only changing the government but of course to look on the
substance and people who will be leading the country. There will be no difference if
both government and opposition will be headed by the same person, and with the
same person the ideology and methodology will not be reformed. (The Edge, 2020)

Additionally, strong government also required strong one party to lead the
country. Previous government was led by United Malays National Organization
which the composition of parliament is highest compare to their allied. On this strong
majority, would be easier for the prime minister to lead and make major decision on
innovating new policies, and of course to develop the country.

In conclusion, to avoid on this, anti-hopping act needs to be enforced for states

and parliamentary level. This act is important to ensure the stability and focus of the
government to manage and develop the country and can focus towards people
needs and demands. Moreover, it has been proposed by President of Malaysian Bar,
Mr Salim Bashir that urged the government to urgently enact anti-hopping legislation
to prevent on switching parties before the time of next election. (Malaymail, 2020)
D)  CONCLUSION

In conclusion, the reformation agenda, new government requires time and

stability on improving current structure, developing the country and of course
difference leader will have difference method and strategy to develop the country.
Even it is good to rotate the government, the rule of law particularly on anti-hopping
act needs to enforce urgently to ensure the government elected can do their job
properly and to minimize all political matter at their side.

We are still hopeful of better Malaysia, and with incoming General Election
everyone will hope for the best to ensure the new future government able to perform
better and give more to the people based on development of infrastructure, facility,
better employment rate and of course to achieve as high income nation towards to
achieve status as developed country.
E) REFERENCES

Food Waste: key facts, policy and trends in the UK. [ONLINE] Available at :
https://commonslibrary.parliament.uk/research-briefings/cbp-7552/#:~:text=Food
%20waste%20policy%20and%20legislation,-The%20UN%20Sustainable&text=As
%20waste%20(including%20food%20waste,of%2033%25%20reduction%20by
%202025. [Accessed 27 September 2020].

https://www.investopedia.com/terms/c/corporategovernance.asp

http://graphics.eiu.com/files/ad_pdfs/KPMG_final.pdf

http://www.agc.gov.my/agcportal/uploads/files/Publications/FC/FEDERAL
%20CONSTITUTION%20ULANG%20CETAK%202016.pdf

https://www.theedgemarkets.com/article/one-year-after-may-9-opinion-piece-edge

https://home.kpmg/my/en/home/media/press-releases/2018/08/sst-may-hike-cost-of-
doing-business-for-several-sectors.html

https://www.aseanbriefing.com/news/indonesias-digital-economy-attracts-
investments-from-us-tech-giants/

https://asianews.network/2018/09/05/singapore-malaysia-to-defer-high-speed-rail-
project/

https://www.straitstimes.com/asia/east-asia/chinese-mega-projects-to-be-deferred-
mahathir

https://www.thestar.com.my/news/nation/2018/04/15/pakatan-manifesto-on-
environmental-protection-more-specific-say-activists

http://gst.customs.gov.my/en/gst/Pages/gst_ci.aspx

https://focusmalaysia.my/top/manufacturers-group-gst-a-better-tax-regime-than-sst/

https://journals.iium.edu.my/intdiscourse/index.php/id/article/download/1121/746
https://www.thestar.com.my/business/business-news/2019/10/04/experts-support-
return-to-gst

https://iopscience.iop.org/article/10.1088/1757-899X/227/1/012062/pdf

https://www.straitstimes.com/asia/east-asia/chinese-mega-projects-to-be-deferred-
mahathir

https://asianews.network/2018/09/05/singapore-malaysia-to-defer-high-speed-rail-
project/

http://kempen.s3.amazonaws.com/pdf/Buku_Harapan.pdf

https://www.malaymail.com/news/malaysia/2018/07/24/will-the-sst-lead-to-lower-
prices-well-it-depends/1655207

https://ringgitplus.com/en/blog/personal-finance-news/gst-to-sst-understanding-the-
facts-and-figures.html

https://www.theedgemarkets.com/article/political-stability-key-macroeconomic-
stability-and-growth-%E2%80%94-serc

https://www.malaymail.com/news/malaysia/2020/08/03/malaysian-bar-says-time-for-
anti-hopping-law-to-prevent-lawmakers-from-jump/1890662