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34.2 pct of manufacturers surveyed believe business can sustain for more than 12 months

FMM In The News:  BERNAMA, KUALA LUMPUR, Wednesday, August 19, 2020 - Up to 34.2 per cent of the respondents of a recent survey conducted by the Federation of Malaysian Manufacturers (FMM) and Malaysian Institute of Economic Research (MIER) believed that their business could sustain for more than 12 months, thanks to the initiatives introduced under the Economic Recovery Plan (PENJANA).

FMM president Tan Sri Soh Thian Lai said 45-64 per cent of the respondents found that five out of the 40 initiatives under PENJANA were useful.

“The five initiatives are tax deduction/capital allowance for COVID-19 related expenses, special reinvestment allowance from 2020-2021, tax reduction to implement/ enhance flexible work arrangement.

“The others are wage subsidy until September 2020 and reduction in work week, as well as extension of accelerated capital allowance on eligible capital expense, including information and communications technologies (ICT) equipment until Dec 31, 2021,” he told press conference after chairing the FMM-MIER Business Conditions Survey for the first half of 2020 (1H 2020) briefing here, today.

The survey was conducted from July 2-31, 2020, covering 549 manufacturers nationwide. 

The government announced PENJANA on June 5, 2020 to relieve the cash flows of businesses by offering remissions or penalties for late tax payments despite the pessimistic business outlook for the second half of 2020 due to COVID-19 pandemic.

Based on the survey, 71.6 per cent of the respondents believed that their businesses would recover to pre-COVID-19 levels between four months and two years time.

Commenting on the findings, Soh said manufacturers, who are involved in tourism, aviation and hotel industries, might need a longer time of about two years to recover.

On outlook for 2H 2020, the survey, however, showed that manufacturers were taking a pessimistic stance on their businesses prospects, with all forward-looking indicators falling to the lowest level since the commencement of the survey in 2012.

According to the FMM-MIER Business Conditions Index, which tracks the Malaysian manufacturing sector’s business confidence, the index for expected business activity for 2H 2020 fell to its all-time low of 76, down below the growth-neutral threshold level of 100.

The index for expected business activity for 2H 2019 was 101.

“That indicates that business activity will be scaled down in the coming months,” it said.

The survey also showed projections on local and export sales in the next six months dropped to 71 and 69, respectively, both down from 101 in 2H 2019.

“Production volume index fell to 78 for 2H 2020 from 105 in 2H 2019, while capital investment index also dipped to 83 from 108 in the same period last year, with 36 per cent contemplating lowering their capital expenditure for 2H 2020,” it said.

To assist the business recovery in the country, Soh urged the government to extend the blanket moratorium until Dec 31, 2020 to solve the cash-flow problem among the businesses.

“As the targeted moratorium only focus on micro and small and medium enterprises, some of the mid-tier companies are listed companies, so they would be excluded from the target moratorium group,” he said.

He believed banks have sufficient liquidity to reintroduce the blanket moratorium until year-end, so that businesses have enough cash flow to avoid retrenchment.

Although the survey showed that retrenchment is the last resort for the businesses, 42 per cent of respondents said they would implement it on 10-20 per cent of their staff from 2021.

“Up to 25 per cent of respondents said they are implementing the exercise on up to 30 per cent of their staff from now till December 2020, while 17 per cent had reduced the headcount by 10-30 per cent as at July 2020,” it said.

To increase the productivity in the next six months, 61 per cent of the respondents said they would implement lean management system, while 49 per cent said they would conduct training and upskilling classes.

“In terms of technology, 59 per cent of the respondents would adopt automation, while 41 per cent would embrace digitalisation in their businesses,” it said.

Meanwhile, Soh also urged the government to conclude the the Regional Comprehensive Economic Partnership (RCEP) and ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) soonest, as well as look for non-traditional destinations as market expansion strategy for the local businesses.

He added that as the manufacturing sector contributed to about 33-35 per cent of the gross domestic product and manufacturing products accounted for 85-87.5 per cent of the total exports of about RM800 billion annually, the government needs to give more focus on the manufacturing sector for it to continue generating more income for the country.


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