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Manufacturing sector may face downturn next year amid external challenges, says FMM

Federation of Malaysian Manufacturers president Tan Sri Soh Thian Lai (Photo by Shahril Basri/The Edge)

Federation of Malaysian Manufacturers president Tan Sri Soh Thian Lai (Photo by Shahril Basri/The Edge)

FMM In The News: THE EDGE, KUALA LUMPUR, Thursday, December 1, 2022 - The Federation of Malaysian Manufacturers (FMM) is expecting the manufacturing sector to experience a downturn starting from November onwards, with the International Monetary Fund (IMF) forecasting slow growth in 2023.

FMM president Tan Sri Soh Thian Lai said during his opening speech of "FMM Industry 4.0 Conference 2022" that IMF has forecast a slowdown of 6% (2021) to 3.2% (2022) and 2.7% (2023) due to the cost-of-living crisis, tightening financial conditions, Russia-Ukraine conflict, US-China trade tension, the EU energy crisis, high inflation rate and the lingering Covid-19 pandemic.

Soh also added that the manufacturing sector no longer faces shortage, but oversupply, post-Movement Control Order.

"Malaysia is a trading nation," added Soh. "Any economic decline overseas, especially in Europe and the US, will affect us.

"We are worried that from November onwards, the economic downturn will severely impact Malaysia, so the Malaysian government must come out with better policies to assist the industries, especially SMEs (small and medium enterprises)," Soh explained.

"As such, we need to be proactive in getting ourselves prepared to face any abrupt downturn."

Nevertheless, Soh stated that Malaysia's economy remains resilient and unemployment is considered low, pointing out that Malaysia's gross domestic product growth exceeded Bank Negara Malaysia's expectations by expanding 14.2% in the third quarter from the previous quarter's 8.9%.

"This highlights Malaysia's resilience amid a challenging global environment," added Soh. "Growth in the manufacturing sector also improved, supported by better performances of domestic-oriented industries.

"Malaysian SMEs that [export] must look for other markets," added Soh. "That is why we emphasise on market access."

FMM vice president Jacob Lee further added that the supply chain has worsened again with the Russia-Ukraine conflict and the zero-Covid policy in China has hampered production and logistics within China.

Lee, who is also the chairman for FMM's Industry 4.0 & Digital Economy Committee, said: "In mitigating these challenges, Malaysian manufacturers would need to review their business strategies and plans, especially on the deployment of technologies.

"Today's conference is aimed at updating manufacturers on Industry 4.0 developments and current trends in manufacturing and challenges and issues that manufacturers need to take cognisance of."

Meanwhile, FMM continued to urge the government through several recommendations including reviewing the current Industry 4.0 National Policy and an allocation increase for the Industry4WRD Intervention Fund, in addition to relooking at the factory automation tax incentives, and reduced import duties for Internet of Things.

Soh also noted the previous government's 5G plans to invest RM50 billion in the next 10 years, arguing that a decade is too long.

"The government should have the 5G infrastructure ready in five years," said Soh. "Only then we are able to enhance more smart manufacturing."

He further argued that investors may reconsider investing in areas with limited 5G coverage, as Industry 4.0 uses big data analytics that relies on stable Wi-Fi, thus the government must implement 5G in all industrial parks with fast high-speed broadband.

Meanwhile, the 4G subscription remains high and Soh urged the government to ensure competitive 4G prices.

"A lot of industries want to implement 5G but at the moment, we are still unsure about what the cost structure of the 5G that impacts the industries will be."

FMM launched its one-day conference themed "The Digital Supply Chain" and the conference focused on increasing efficiency of supply chain and profits, while seamlessly connecting activities relating to planning, coordination, control and movements of raw materials, parts and goods to suppliers and end users.

FMM also launched the FMM B2B online portal, a web-based marketplace aimed at creating selling opportunities for local manufacturers, in addition to promoting products and services by connecting local and international buyers and sellers through the platform.

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