Business activities should remain stable

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The tightening of containment measures linked to Covid-19 puts even more strain on the manufacturing sector

by NUR HANANI AZMAN / photo by MUHD AMIN NAHARUL

ALMOST half or 48% of businesses in essential sectors have been affected by the blockages although they have been authorized to operate in phases 1 and 2 of the national recovery phase (PRN).

The 19th edition of the FMM-Malaysian Institute for Economic Research survey on business conditions revealed that business activity collapsed in the first half of 2021 (1H21) amid the tightening of containment measures linked to Covid -19 which put a strain on the manufacturing sector.

Another 15% was affected by PNR Phase 1 (NRP1), NRP2 and the Enhanced Movement Control Order (EMCO), while 13% were affected by EMCO alone.

The PNR1 and the EMCO also reached 12% of the people questioned. As a result, 44% said their businesses could only be maintained for one to six months.

Of these, 22.4% estimated the sustainability of their business to be one to three months, while 21.5% estimated that their business could last four to six months.

A durability period of more than 12 months is the assessment of another 12% of respondents. Only 19% were not affected at all.

Due to bottlenecks and manpower capacity restrictions on activities and operations, 55% of those surveyed had their orders canceled due to inability to deliver, while 40% had their order contracts 2H21 revised and 38% had to incur storage and demurrage costs for their cargoes stranded at the port / airport.

The current gloomy business conditions are expected to continue into 2H21 as the Covid-19 pandemic continues to cast uncertainty on the economy.

President of the Federation of Manufacturers of Malaysia, Tan Sri Soh Thian Lai (Photo) said commercial activity in 2H21 should remain as low as in 1H21.

“The expected business activity index fell to 60 from 87 points previously, with 55% of respondents predicting that their activity will be slow for the rest of the year as well. Only 15% are convinced that their activity will soon resume.

“The expected indices for local and export sales have fallen to 51 and 68 respectively, implying that domestic and foreign demand will likely remain weak over the next few months as well. 59% of respondents expect weak local sales. in 2H21, with the same expectations of half of those who export, ”he said in a statement yesterday.

Weak sales are clouding the outlook for production and capacity utilization.

The two expected indices for these indicators have fallen from the previous survey to 62 and 60 respectively, suggesting that a decline in production and capacity utilization can be expected in 2H21.

The expected cost of production index rose again. At 166, he deduces that production will soon be more expensive, with 72% of respondents predicting this for 2H21.

He said a slowdown in capital spending (capex) is underway for now, as shown by the expected index for capital spending which fell to 81 in the latest survey.

“While 37% of respondents plan to reduce their investment spending in the near future, 18% plan to increase theirs.

“Employment should remain stable over the next few months, as indicated by the expected employment index which, at 87, was this time below the level of optimism,” he added.

This implies that jobs in the manufacturing sector will be more difficult to find in the coming months.

A quarter of respondents plan to downsize, while 12% plan to increase their workforce and the remaining 63% will maintain their workforce.

With the exception of cost of production, all other current and prospective indicators from the latest survey fell below 2H20, a sign that 1H21 had been a very difficult time for manufacturers.

Soh added that the majority of those polled believed that employers should ensure all their employees are fully immunized, including booster shots in 2022, and require all new employees to be immunized before starting to work. work.

“Other government assistance required in 2021/2022 – corporate tax reduction tops the list, followed by rebates on electricity and natural gas and the extension of the targeted wage subsidy to all workers in all sectors.

“The delay / reduction of regulatory costs, including new laws and regulations in the works with an impact on costs, ranked fourth on the list, while the fifth most popular suggestion was the reduction of statutory costs (license, rent receipt, valuation) “, he declared.


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