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FMM: Manufacturing sector to remain cautious for the rest of 2022

FMM In The News: MALAYSIAKINI, Tuesday, September 6, 2022 - The manufacturing sector is projected to remain in a cautious mode as business activity is expected to slow down in the second half of 2022, said the Federation of Malaysian Manufacturers (FMM).

Its president Soh Thian Lai (above) said the manufacturing sector is taking a more pragmatic approach to the business outlook in the second half of the year as economic challenges remain unabated for now.

Based on the Business Condition Survey for the first half of 2022 conducted by FMM and the Malaysian Institute of Economic Research (MIER), he said the forward-looking indicators in the second half of the year showed a decline in the business condition index versus the first half, during which it had picked up some momentum.

"Business activity in the second half of the year is expected to slow down with local and export sales, together with production volume and capacity utilisation, to also shift lower for the rest of the year," he told a media conference today.

Soh highlighted the top three main obstacles for the manufacturing sector for the rest of the year were rising cost of raw materials, soaring labour costs and workers' shortage. 

In the meantime, he said the survey indicated that business recovery in the first half of the year showed some improvement despite the persistent external headwinds and domestic challenges, including rising inflationary pressure.

"Our survey showed that 39 percent of respondents said their business recovery to date is at pre-Covid-19 level, 32 per cent said they are below the pre-Covid-19 level, while surprisingly, 29 percent of our respondents believe their business is better than the pre-Covid-19 level.

"This indicates that reopening the borders and our government's effort in shifting towards the endemic phase of Covid-19 has enhanced business activity,  improved economic growth and boosted confidence among industries," he said.  

According to Soh, the main obstacles faced by the manufacturing industry over the last six months were the rising cost of raw materials, followed by the rising cost of labour and logistics.

Bring back GST

Meanwhile, commenting on the Budget 2023 wishlist, he said that most of the FMM members urged the government to introduce a reduction in the corporate tax, personal tax and moderation of energy costs such as electricity and natural gas for the manufacturing sector.

"Our members suggested that the corporate tax rate should be reduced to 20 percent," he added. 

In addition, the FMM members have proposed that the government consider reintroducing the Goods and Services Tax (GST) at a lower rate of four percent instead of the previous six percent.

"We think that the GST at four percent will enhance revenue and, at the same time, will not severely impact consumers.

“The majority of industry members are supportive of GST and would like to see its reintroduction in the future," Soh added.


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