MALAYSIA has made impressive leaps in the 2026 global competitiveness ranking, climbing eight spots from 23rd to 15th place in the 2026 International Institute for Management Development (IMD) World Competitiveness Ranking, marking its best ranking in recent years.
Malaysia’s competitiveness ranking published by the World Economic Forum was between 18th and 27th during the 2008-2019 period.
But are we better off? Why does it matter to Malaysia? How can we improve Malaysia’s performance to reach the 12th placing in ranking by 2030, a key milestone outlined under the 13th Malaysia Plan or 13MP and the Madani Economy framework?
These are typical questions asked by many groups every year when the global competitiveness rankings come out.
According to the IMD World Competitiveness Center, with its flagship World Competitiveness Ranking, “An economy’s competitiveness cannot be reduced to its gross domestic product or GDP, productivity or employment levels; it can be gauged only by considering a complex matrix of political, social and cultural dimensions”.
Economic competitiveness is synonymous with people’s quality of life, and governments play just as important a role as companies.
An improvement in a competitiveness ranking can still mean positive progress, but it often fails to capture the full reality of a country’s economic health, structural strength, or day-to-day well-being of its citizens. Rankings often focus on business ease or macro data rather than human welfare.
The overall rise in the competitiveness ranking in 2026 reflects significant gains across all four fundamental pillars of evaluation. The pillar of economic performance ranking was maintained at the fourth place in 2026; followed by government efficiency (ranked 14th vs 25th in 2025), business efficiency (ranked 16th vs 32nd in 2025); and infrastructure (ranked 33rd vs 35th in 2025).
The competitiveness ranking serves as a key barometer to assess where Malaysia’s stand is relative to its regional peers, allowing investors and analysts to measure our country’s structural strengths, policy outcomes, and long-term economic vitality against neighbouring countries.
Peer comparison competitiveness rankings highlight rising geoeconomic fragmentation, shifting global trade and investment policies, as well as regional dynamics which have compelled fast-rising economies to enhance their competitiveness through a conducive enabling environment, human capital and a level playing market, as well as a supportive innovation and digital ecosystem.
A higher competitiveness ranking implies that Malaysia has strong policy credibility, maintaining economic stability and resilience as well as drivers and enablers that directly determine and elevate its national productivity, leading to sustainable economic growth, generating better-paying jobs, creating greater wealth, better living standards and more happiness for citizens.
A more competitive and productive country offers greater returns on investment and attracts more investment.
This matters to both domestic and foreign companies as they look for a stable and modern business environment to make long-term investment decisions in Malaysia.
Foreign businesses now view economic fragmentation as a strategic tool to diversify investments, and hence, Malaysia must improve its national competitiveness.
Malaysia needs to enhance soft and hard infrastructure, accelerate digital and green transitions, simplify regulations, and strengthen workforce skills to attract these shifting global supply chains.
In 2021-2025, total approved investment increased substantially by a compound annual growth rate (CAGR) of 92.8% to average RM343.6bil per year.
Approved domestic direct investment or DDI expanded by a CAGR of 36.6% to an average of RM155.8bil per year, while foreign direct investment or FDI expanded by 56.2% per annum to an average of RM187.7bil per year during the period.
Realised private investment increased by a CAGR of 10.2% in 2024-2025.
The government uses the component parts of the competitiveness factors and sub-factors ranking to understand our country’s relative strengths and weaknesses at a more granular level, pinpointing specific areas for improvements or lag areas for focus such as bureaucratic friction, regulatory framework, technological infrastructure and education.
Within the pillar of government efficiency, the areas for improvement and continued focus are the legal and regulatory framework (ranked eighth), bureaucracy (sixth), transparency (15th), startup delays (15th), regulatory burden (11th) and labour regulations (10th).
Within the pillar of infrastructure, the areas for improvement are basic infrastructure (ranked 12th), technological infrastructure (13th), scientific infrastructure (30th), health and environment (47th) and education (44th).
The business community supports the prime minister’s call to the local authorities to expedite and streamline all approval processes and bureaucratic regulatory procedures in enhancing Malaysia’s global competitiveness ranking in the years to come.
More importantly, the gain in competitiveness ranking must translate into tangible realities for local enterprises. These tangible improvements are reducing operational friction (repeated submission of documents, remove duplicate business checks, and lower local compliance fees); reduce bureaucratic turnarounds and auto-tracking system; and digitalised service delivery on a single-window online portal, and can be accessible via desktop, mobile apps and iPad, and also safe digital payment.
This setup removes paperwork, speeds up response times, and automates business operations
Reducing red tape and making administrative procedures fast and transparent are often more effective than financial incentives because a tangle of regulations slow down business growth, waste time, and cost a lot of money. When government removes complex rules, it helps companies to start and grow faster without needing government money.
Efficient public service delivery is a vital foundation for a supportive and strong business environment and also a critical enabler for the ease of doing business. In complementing PEMUDAH’s taskforce to improve the ease of doing business in Malaysia, the Government Service Efficiency Commitment Act 2025 (known as the ILTIZAM Act or Akta 867) came into force on 1 December, 2025, aiming to cut bureaucratic red tape, reduce regulatory burdens by at least 25% over three years, and lift public service delivery efficiency.
We propose the following key approaches and tools to simplification and regulatory burden reduction:
Multi-level coordination matters
Better communication, coordination as well as strong cooperation between Federal, State, and Local Authority reduces red tape, speeds up project approvals, and lowers operating costs for businesses. This multi-level alignment creates a trusted, predictable, transparent, stable ecosystem that attracts investments.
Regulatory stock review, rationalization and administrative simplication
Critical review of existing regulations to ascertain that current laws work well and fit for purpose and achieve their intended objectives effectively. The traditional boundaries of regulatory framework are no longer relevant in a rapidly evolving technological and economic landscape, shaped by artificial intelligence and digitalization.
Regulatory rationalization and modernization entail the elimination of outdated or redundant regulations that are no longer deemed practical. These include repealing duplicative laws, eliminating outdated occupational or businesses licenses that no longer reflect current industry standards. User-friendly digital platforms and tools to automate manual processes help businesses save time and lower costs by aligning the rules and regulations with the AI regulatory tools.
Administrative simplification focuses primarily on reducing administrative complexity. It is proposed to streamline business licensing and renewal process through automatic renewal for selected low-risk licenses; piloting a 3-year license renewal from 1 year for the non-critical sectors; a formal grace period for delays caused by administrative processing; harmonization of core business licenses nationwide, especially local authority licenses.
Centralized dashboard and single-submission portal
An establishment of a centralised all-in-one digital licensing platform with consolidated license tracking and automated renewal reminders. Additionally, establish a centralised single-submission digital platform under all-in-one business portal with centralised dashboard, comprising consolidated view of active licenses, expiry dates, and renewal status, with automated reminders 90-120 days before expiry.
Adopt a “One-in, One-out” business cost principle
This approach requires the regulator to offset newly introduced regulatory or compliance costs on businesses by corresponding reductions in existing charges, taxes, or administrative burdens as well as the elimination of existing ones. Where direct offsets are not feasible, improvements in public service delivery efficiency should be implemented, supported by evidence-based assessments showing reductions in compliance time and administrative costs faced by businesses. This aims to control and reduce the overall regulatory stock as well as the total costs of regulations.
Stakeholders’ engagement, ex-post evaluations and post-implementation reviews
Engaging stakeholders and receiving feedback from those subject to regulations before implementing policies is essential. Stakeholders can provide practical difficulties faced by businesses, spot the regulation flaws and improve it.
Early and adequate engagement can take place both before and after regulation is adopted. A well prepared and effective stakeholders’ engagement builds strong trust, uncovers hidden risks, avoids major pushback, and ensures the delivery of tangible real-world impact.
Expand the use of Regulatory Impact Assessment across the Ministries and agencies, and require the publication of business cost implications before implementing major regulations.
In conclusion, adopting Good Regulatory Practices can improve Malaysia’s regulatory environment -- clear, fair, and smart rules. It produces better and more business-friendly regulations, ensuring regulatory outcomes are effective, transparent, inclusive, and ease of compliance cost without unintended consequences.
Lee Heng Guie is the executive director of the Socio-Economic Research Centre. The views expressed here are the writer’s own.
