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FMM PRESS STATEMENT: Appeal for Manufacturing Industries in All Non-Essential Sectors to Open At 50% Capacity To Prevent Companies from Closing Down Permanently

Kuala Lumpur, July 21, 2021 – The Federation of Malaysian Manufacturers (FMM) is appealing to the Government to allow manufacturing industries in all non-essential sectors to re-open at 50% workforce capacity regardless of Phase 1 or Phase 2 of the National Recovery Plan (NRP) that they are located in before companies close down permanently.

As we are aware, five states and three federal territories namely Kedah, Selangor, Negeri Sembilan, Melaka, Johor and the Federal Territories of Kuala Lumpur, Putrajaya and Labuan remain in Phase 1 of the NRP with only 12 essential sectors allowed to operate at a workforce capacity of 60% while the other states have transitioned to Phase 2 in stages starting from July 5, 2021. The fact remains however, that industries in many non-essential sectors comprising micro, small and medium enterprises (MSMEs) as well as industries that are part of global supply chains with export commitments have remained closed for about two months since May 25, 2021. Under the NRP Phase 1, many critical sectors such as the iron and steel, non-metallic mineral industries, rubber-based product manufacturers (with the exception of rubber gloves), machinery & equipment (with the exception of food and health related sectors), etc continue to be closed. Factory closure is killing these industries as they are running out of reserves to keep them going despite the financial assistance from the Government in the form of wage subsidies and the automatic loan moratorium.

Manufacturers in the non-essential sectors, especially the MSMEs, are in a dire state of affairs and are already severely impacted from this prolonged business closure. This is evident from a recent survey conducted by FMM on the impact of the lockdown on business operations. Of the industries in the non-essential sectors and their supply chains that responded to the survey:
  • 93% said total sales, i.e. domestic and export sales were reduced;
  • 82% said exports were reduced mainly by up to 30%;
  • 93% said cash flow was reduced;
  • 32% said overall operation costs had increased;
  • 35% said logistics costs had increased;
  • 21% have requested staff to take unpaid leave; 23% undertook pay cut; 4% retrenchment and 23% other employment related measures.
  • 60% experienced backlog in export, and 58% in local sales shipments.
  • Supply chain challenges: 75% faced supplier payments issue, 53% logistic surcharges and 43% delayed collection of shipments
  • Customer-related challenges: 60% faced cancellation of orders, 24% with requests for discounts/rebates and 32% faced late delivery penalties
  • Government related challenges: 24% faced multiple inspections, 41% delays in getting MITI’s approval and 13% with the police
  • Business Recovery: 77% said business recovery status will worsen; 49% said that business recovery will be further delayed by 6 to 12 months
  • Short to Medium Term Employment: 56% will freeze jobs; 39% cut benefits; 34% reduce work hours/days; 22% will cut pay further and 17% more in the medium-term; and 8% would be retrenching further or in mid-term. 24% were not taking any measures yet;
  • Company Financials: 35% expect increased difficulties with new financing; 28% were facing tighter financing terms, 24% have rescheduled loans again with another 10% going to reschedule while 19% have restructured their loans again with another 20% going to restructure due to the prolonged business closure.
  • Impact on Supply Chain: 69% expect higher supply prices, 49% loss of customers, 36% tighter supplier credit, 35% longer credit for customers and 25% with customers requesting discounts/rebates;
  • Automation of Operations. 42% may defer automation projects depending on the health of cash flow and sales
From the survey it can be concluded that the non-essential sector sales are severely impacted and the businesses are immensely constrained in their cash flow given that orders, both pending and future orders are interrupted with no certainty on when operations will be allowed to resume. On the other hand, suppliers are expecting to be paid on time, wages to employees have to be paid in full even if no actual work was performed, utilities and rental payments are due, logistics cost has increased due to cancellation/postponement of shipments and/or cargo stuck at ports, penalties imposed on delay of delivery, etc. This has put most businesses in the non-essential sectors in an extremely precarious situation with the risk of collapse resulting in high unemployment if restrictions on business operations continue indefinitely. There is also fear that if they are not allowed to open up operations immediately, many will not be around to help rebuild the economy once businesses are allowed to open.

We also note that from the daily updates, the National Covid-19 Immunisation Programme (PICK) has gathered pace exponentially and similarly, the Program Immunisasi Industri COVID-19 Kerjasama Awam Swasta (PIKAS) for the manufacturing sector by the Ministry of International Trade and Industry (MITI) has seen greater number of company registration and vaccination rates. As of July 14, 2021, it was reported that 10,522 companies involving 903,244 employees have registered under the PIKAS with 101,117 having received their first dose. The numbers indicate that the industry wants their employees to be vaccinated swiftly so that they are able to resume operations with continued adherence to the Covid-19 Standard Operating Procedures (SOP) and eventually return to some level of normality as in pre-pandemic conditions. With this strong move by the industry, we believe that the Government should be confident in allowing all industries to resume operations given that all efforts are already underway by industries to have their workers vaccinated including state/private arrangements for vaccination where companies will bear the full cost of vaccination.

In this regard, FMM reiterates its call on the Government to immediately allow all non-essential sectors to resume operations at 50% workforce capacity or higher if they have achieved higher levels of vaccination company-wide with continued strict adherence to SOPs and Covid-19 testing of workers.

Tan Sri Dato’ Soh Thian Lai
President, Federation of Malaysian Manufacturers

About FMM
The Federation of Malaysian Manufacturers (FMM) has been the voice of the Malaysian manufacturing sector since 1968. Representing over 10,000 member companies (3,000 direct and 7,000 indirect) from the manufacturing supply chain, FMM is actively engaged with government and its key agencies at Federal, State and local levels. FMM is also well-linked with international organisations, Malaysian businesses and civil society. Apart from benefitting from FMM’s advocacy, FMM members enjoy value-add services, including training, business networking and trade opportunities as well as regular information updates.

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