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FMM calls for non-essential sectors to reopen at 50% capacity

FMM In The News: THE STAR, KUALA LUMPUR, Wednesday, July 21, 2021 - : Manufacturers in non-essential sectors, which had seen sales plummet and cashflow nearly dried up due to the Covid-19 restrictions, appealed to the government to let them resume operations at 50% workforce capacity.

The Federation of Malaysian Manufacturers (FMM) had on Wednesday appealed for the reopening regardless if their operations are in phases one or two of the National Recovery Plan (NRP) before they have to close down permanently.

“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,” FMM president Tan Sri Soh Thian Lai said in a statement.

In a recent survey conducted by FMM on the impact of the lockdown on non-essential sectors and their supply chains, 93% of them said total sales, that is domestic and export sales had reduced; 82% said exports were reduced mainly by up to 30% and 93% said cash flow was reduced;

Soh said Kedah, Selangor, Negeri Sembilan, Melaka, Johor, Kuala Lumpur, Putrajaya and Labuan remain in phase one of the NRP with only 12 essential sectors allowed to operate at a workforce capacity of 60%.

The other states have transitioned to phase two in stages starting from July 5.

Soh pointed out 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 one, 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 severely impacted from this prolonged business closure,” he said.

Below are the highlights of the survey from the non-essential sectors:

• 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 sale.

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