KUALA LUMPUR (Oct 2): Malaysia’s business sentiment improved in the third quarter of 2025 (3Q2025), supported by easing global trade uncertainties after the conclusion of the US-Malaysia trade deal, although concerns over rising costs and weak economic conditions persist, according to a RAM survey.

The RAM Business Confidence Index rose to 48.4 in 3Q2025 from 40.0 in the previous quarter, signalling reduced pessimism for the months ahead, but still below the neutral threshold of 50, RAM said in a statement.

The survey, conducted between Aug 25 and Sept 10 with 126 firms, found that the cost of doing business (79%) and the weak economy (72%) remained top challenges.

Among government reforms, the introduction of e-invoicing (37%) and the expansion of the sales and service tax (34%) were viewed as the most significant hurdles, particularly for small and medium enterprises (SMEs), while electricity tariff changes also drew concern.

By contrast, the recent minimum wage hike and diesel subsidy removal were seen as less burdensome.

On the impact of policy reforms on their businesses, the survey noted that only 35% of respondents said they were coping well. Among those struggling, 46% reported moderate difficulty while 16% faced significant challenges.

SMEs were hit harder than others, with 23% experiencing significant difficulty, compared to just 6% of both microenterprises and corporates.

“Fiscal reforms such as e-invoicing and the expansion of SST are crucial steps to strengthen Malaysia’s revenue base. However, our survey findings show that businesses, particularly SMEs, are struggling to transition and adapt to the new regulatory environment,” said RAM Holdings group CEO and executive director Chris Lee Wai Kit.

On top of that, the RAM survey highlighted barriers to digitalisation and automation, with lack of expertise (60%) and high upfront costs (53%) cited as key obstacles.

According to the survey, respondents stated that Budget 2026 should prioritise greater support for digital adoption, along with lower corporate tax rates, more tax reliefs and increased grants, especially to aid environmental, social and governance compliance.

“As we head into Budget 2026, it will be important for policymakers to strike a balance between broadening the tax base and supporting business resilience, which will be key to lifting business confidence and sustaining Malaysia’s long-term competitiveness”, he added.