ACCCIM president Datuk Ng Yih Pyng.
PETALING JAYA: Businesses remain cautiously optimistic about economic conditions in the first half of 2026 (1H26), although high operating costs continue to be their main concern.
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) said in a statement yesterday that business conditions in 2H25 had gradually stabilised, while business sentiment had improved. It noted the Business Condition Index showed signs of improvement, reaching 89 in 2H25.
Meanwhile the Business Sentiment Index rebounded to 107.3, signalling a positive business outlook for 1H26.
The survey also reflected easing policy uncertainty, supported by measures in Budget 2026 and the positive impact of lower interest rates.
ACCCIM president Datuk Ng Yih Pyng said: “Companies are operating carefully, focusing on resilience and sustainability rather than aggressive expansion, while small and medium enterprises (SMEs) face the challenge of margin compression and cash-flow stress.”
High operating costs remained the top factor affecting business performance in 2H25, cited by 54.5% of business respondents, followed by higher raw material prices and weaker domestic demand.
“In 2024 to 2025, the government implemented a series of policy changes, beginning with a minimum wage hike and the rationalisation of petrol, diesel, electricity tariffs, municipal water tariffs and Employees Provident Fund contributions for foreign workers.
“Taken together, these measures have resulted in a bunching of costs, significantly increasing cost pressures on businesses,” ACCCIM said.
Some businesses initially believed they could pass the higher costs on to consumers. However, amid weaker overall demand, many chose to absorb these costs instead, and consumer spending grew by about 5%.
“Businesses, therefore, welcomed the government’s move to reduce the sales and service tax implementation, initially at 8%, later reduced to 6%, alongside a higher rental exemption threshold.
“As operating costs continue to rise incrementally, businesses are expected to increasingly pass costs through, with a larger share ultimately borne by consumers,” ACCCIM said.
ACCCIM also commended the government’s recent recalibration of several tax and regulatory measures, albeit noting the delays in tax refunds remain widespread.
The survey revealed 22.3% of respondents waited seven to 12 months, while 20.6% waited 13 to 24 months, and 22.9% waited more than two years after filing.
ACCCIM’s survey proposed several tax refund reforms, which included a maximum refund duration of three months, lowering the tax estimation threshold to 50% from the current 85%, tiered compensation for delayed refunds, compensation linked to Bank Negara Malaysia’s overnight policy rate and the implementation of automatic tax offset mechanism for delayed refunds.
“The speedy tax fund refunds would help to provide cash flow relief to SMEs, who have been struggling with increased business costs.
“It can also help businesses to pay debt, and reinvest for capital expansion,” executive director of Socio-Economic Research Centre, Lee Heng Guie, told StarBiz.
Earlier on, ACCCIM referenced Singapore’s successful implementation of automatic tax offset mechanism for delayed refunds. “The system used automatically refunds the overpaid tax immediately,” it said.
ACCCIM’s survey also highlighted the limitations in the technical and vocational education and training (TVET). “Businesses are willing to hire, but skills relevance and cost considerations remain key factors,” it said.
Other challenges included insufficient industry-specific skills and inadequate government support, prompting a mismatch between overall supply of TVET graduates and industry demand across different fields.
The survey highlighted nearly half of respondents (47.4%) are also unaware of existing TVET schemes. Lee, therefore, stressed the need to reduce stigma and align TVET wages with non-TVET roles, citing examples from Germany and Australia where TVET graduates are well-compensated.
ACCCIM’s proposed solutions include a one-stop portal for TVET incentives, integration of fragmented training platforms and double tax deductions for hiring certified TVET graduates.
ACCCIM’s survey was conducted between early December 2025 and early January 2026, with 817 business responses. The findings are based on a majority of SMEs and reflect real, on-the-ground business conditions and sentiment.
