Kuala lumpur: Prime Minister Datuk Seri Anwar Ibrahim's call for an immediate crackdown on illegal foreign-run businesses nationwide is seen as crucial by economists, as these operations pose a threat to micro, small, and medium enterprises (MSMEs).

According to BERNAMA News Agency, Prof Emeritus Dr. Barjoyai Bardai from the Malaysia University of Science and Technology (MUST) highlighted that illegal business practices distort market competition and undermine the level playing field essential for MSME resilience. He emphasized that MSMEs are particularly vulnerable due to their thin margins, and informal competitors can crowd out legitimate businesses, affecting the most fragile segment of the economy, the micro and small enterprises.

Barjoyai pointed out that illegal operators often avoid taxes and disregard licensing requirements, labor regulations, and other compliance costs, granting them a structural cost advantage. This allows them to offer lower prices and expand more rapidly, unencumbered by the regulatory demands faced by legitimate businesses. He discussed these challenges in response to Anwar's remarks about foreigners allegedly misusing tourist and student visas for business activities in Malaysia.

He further explained that illegal business activities create a fiscal burden, as operators frequently fail to declare income, remit corporate or personal taxes, and may evade the Sales and Service Tax along with other indirect taxes. This tax evasion is commonly linked with informal economic activities and the under-reporting of income, leading to significant fiscal leakages.

Barjoyai added that the government incurs additional costs for enforcement, investigation, and prosecution in dealing with such activities, while legitimate businesses shoulder higher regulatory costs. He also noted that profits generated by illegal operators could be transferred abroad through informal channels, keeping them outside Malaysia's financial system.

The economist emphasized the challenge for policymakers to bolster enforcement against illegal business activities without discouraging legitimate foreign investment. He noted Malaysia's openness to foreign direct investment under relatively liberal policies and sector-specific participation rules. Anwar has proposed a multi-agency approach involving various departments and agencies to address the issues at hand, which could be enhanced through an integrated digital enforcement platform using artificial intelligence for monitoring.

Barjoyai stressed that the issue transcends immigration enforcement and should be considered an economic governance challenge, involving the expansion of the informal economy, MSME competitiveness, fiscal leakages, and regulatory framework integrity. A calibrated response should combine firm enforcement, institutional reforms, and investor-friendly policies to sustain growth and reinforce confidence in the rule of law.

Meanwhile, Nivaas Ragavan, president of the Kuala Lumpur and Selangor Indian Chamber of Commerce and Industry, expressed growing concerns among SMEs and business owners regarding the issue. He noted that Malaysian businesses comply with various regulatory requirements, and illegal operations bypass these, creating market distortions that disadvantage legitimate operators. Feedback from the chamber indicates the need for continued attention from enforcement agencies, especially in cases involving nominee arrangements or businesses operating without necessary permits.

Ragavan emphasized that Malaysia should remain open to genuine foreign investors and entrepreneurs who contribute to job creation, knowledge transfer, and economic growth, ensuring all businesses operate legally and transparently on a level playing field.