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Increasing costs hurting Malaysia’s recovery, says new survey

Increasing costs hurting Malaysia’s recovery, says new survey

Hikes in commodity prices and supply chain disruptions caused by Covid-19 lockdown measures are hampering Malaysia’s economic recovery, according to the latest FMM-MIER Business Conditions Survey.

A twice-yearly joint initiative by the Federation of Malaysian Manufacturers (FMM) and the Malaysian Institute of Economic Research (MIER), the survey found production cost continued to climb in the first half of 2021 and are expected to rise further in the second half.

Some 72% of the respondents to the survey said they had incurred higher costs in the first half of 2021, representing the highest figure since the second half of 2016. Only 7% said they had reduced their costs in the first six months of the year. Increases in costs are likely to be passed on to consumers.

With this in mind, SME associations have urged the government to increase its efforts to lower inflation and the general costs associated with running a business, including reducing the price of raw materials and the cost of transport and air cargo.

 

Wage subsidies plea

Respondents to the FMM-MIER survey also wanted to see a cut in the corporation tax rate, cheaper gas and electricity and an extension of wage subsidies in all sectors of the economy.

An August survey by the SME Association of Malaysia found that most SMEs are vulnerable and are likely to shut down if the economy remains closed and lockdowns continued.

It found that 54% of SMEs have temporarily closed or ceased their operations. Additionally, 45% of businesses will consider temporary or permanent shutdowns if they are unable to start operations immediately.

The association expects 200,000 more enterprises to temporarily or close their operations for good by the end of October. And about 2.6% of the respondents to the survey are already in the process of winding up their business.

 

Poor local sales expected

While many are hopeful of a recovery in the fourth quarter, businesses are not especially optimistic about the outlook for the second half of the year. Some 59% say they are expecting poor local sales in the second half of this year.

FMM president Tan Sri Soh Thian Lai commented: “Weak sales are dampening the outlook for production and capacity utilisation. Correspondingly, 55% of the respondents are planning to reduce their production and capacities soon.”

The prolonged restriction on movements because of the pandemic and shortages of labour seen in many sectors have also had a significant impact on business operations, he added.