The Federation of Malaysian Manufacturers (FMM) has urged the government to continue supporting industries with more initiatives and assistance following the drastic impact the Covid-19 pandemic had on the economy, which contracted by 17.1% in the second quarter of the year.
Its president Tan Sri Soh Thian Lai suggested that the government give an extension of loan moratorium and execute timely the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Bill 2020.
He added that these measures can help the economy recover quickly as businesses will be able to improve their revenue and sustain their workforce.
“The performance in the second quarter affirms the brutality of the impact of the global Covid-19 pandemic and the Movement Control Order (MCO) on the entire economy.
The Covid-19 pandemic and the subsequent MCOs had rendered manufacturers to be inoperable, some for a few months depending on their type of business activity, resulting in substantial drops in revenue, financial losses and severe trade challenges including disruptions to supply chains which had in turn impacted business sustainability, employment and productivity
“The performance of the economy in the second quarter as released by BNM is mirrored by the feedback from FMM members in a recently concluded survey where it reported a record fall in business activity in the first half of 2020 for manufacturers with sales performing dismally both local and exports, dampened production and capacity utilisation, record low capital investments and lacklustre employment opportunities.” Soh added.
He pointed out that the majority of its members saw their revenue and profits being negatively affected. resulting in many having to undertake several cost cutting measures including manpower cost reductions.
“Given the contraction in economic activities amidst the recovery from the Covid-19 pandemic, the outlook for the sector is equally critical going forward as industries continue to grapple with the uncertainties and high risk of economic vulnerability due to the soft domestic and global markets.
“The manufacturing sector continues to take on a very pessimistic stance in their projections on the prospects of their businesses for the rest of 2020. For most companies, overall business activities including sales both domestic and exports for the next six months is still expected to be low as they continue with their business revival and recovery,” Soh said.
He expected business recovery to take between four months to two years depending on the sectors and impact that Covid-19 has had on the business.
“Supply chains continue to be impacted with delays in deliveries from suppliers and with shippers experiencing increase in logistic and shipping costs, increase in raw material prices as well as shortages in supply.
“It is also anticipated that when the automatic bank loan moratorium period and the six-month wage subsidy period end in September 2020 for most companies, businesses will be faced with a double cost whammy which could severely impact their initiatives to revive their businesses,” Soh added.