Amid soaring costs, manufacturers less optimistic on climate, survey shows

BY MELISSA CHI

NOVEMBER 28, 2013

PETALING JAYA, Nov 28 — Malaysian manufacturers expect a slump in business as the year comes to a close largely due to an expected spike in production costs, but they remain bullish on their expansion plans over the next three years, a survey has found.

According to the Business Conditions Survey for the second half of 2013, jointly conducted by the Federation of Malaysian Manufacturers (FMM) and the Malaysian Institute of Economic Research (MIER), business conditions were downgraded 10 points to 98 from the first half of the year.

Despite this, 42 per cent of the 394 respondents expect to expand their business in the next three years.

“If you look at the survey, the second half of 2013 has been harder than the first half, but looking forward there is some optimism,” FMM vice-president Datuk Saw Choo Boon told reporters here at Wisma FMM.

“I think people do expect the conditions to improve slightly and the biggest challenge I guess is the cost, they must [have] already factored in the impending rationalisation of subsidies, so that would be a big challenge.

“And of course the other big challenge is manpower whether it’s foreign labour, or getting people with the right skills, getting people with sufficient English proficiency, these will be a real challenge for the industry as it moves up the scale.”

The survey also found that the indices for local manufacturing sales and number of employees posted the biggest declines in the second half of 2013, with each dipping eight points from the first half of the year to 91 and 101 respectively.

Close to half or 48 per cent of respondents maintained sales, while 21 per cent improved on sales, with 31 per cent saying otherwise.

Although 68 per cent retained their manpower, only 16 per cent hired more, compared with 25 per cent early this year.

Business expectations of the next six months appear to be moderate and cautious.

“The expected business conditions index plummeted 27 points from the first half of this year to 106 in the second half, with only 28 per cent of the respondents anticipating a pick-up in business activity, down from 44 per cent in the first half of the year,” the report said.

All other expected indicators in the latest survey also tumbled, except for capital investment and cost of production.

The recent increase in fuel prices “greatly affected” almost 90 per cent of the respondents, with 45.7 per cent and 44.2 per cent indicating high and moderate impact respectively.

Of those who felt the impact, almost 90 per cent stated that the higher prices had spiked their logistics cost, while 72.3 per cent had to contend with more expensive raw materials and almost 50 per cent higher final prices of goods.

Another 49 per cent said that their competitiveness was affected, and 38.8 per cent had to increase employee allowances for mileage and fuel.

Almost 57 per cent of the respondents were in favour of the contentious goods and services tax (GST), but 33.5 per cent voted for 24 months for implementation instead of the 18 months from the date of announcement.

- See more at: http://www.themalaymailonline.com/money/article/amid-soaring-costs-manufacturers-less-optimistic-on-current-climate-survey#sthash.xHpaoQNP.dpuf