Chinese firms down on Malaysia’s prospects, survey shows

By Clara Chooi
August 29, 2012
Latest Update: August 30, 2012 02:19 am

ACCIM said many of its members have been hit by shrinking orders and rising costs. — Reuters picACCIM said many of its members have been hit by shrinking orders and rising costs. — Reuters picKUALA LUMPUR, Aug 29 ― Malaysia’s Chinese business community have poured cold water on the government’s goal to move Malaysia out of the middle-income trap, with a staggering 72.9 per cent saying they are unhappy with the state of the economy ahead of the 13th general election, a nationwide survey has found.

Many small medium enterprises and small medium industries (SME/SMI) have also “appeared not” to have benefited from the Najib administration’s many initiatives, leading to their pessimistic outlook of the country’s economy for the year ahead, the Malaysia Associated Chinese Chambers of Commerce and Industry (ACCCIM) survey said.

According to the survey report, which gathered feedback from local Chinese businesses on the economic situation for the first half of 2012, the major factors adversely affecting business performances during this period included the increase in operating costs and prices of raw materials, government policies such as the implementation of a minimum wage, shortage in manpower, and domestic competition.

“Many businesses have become less optimistic, on the back of shrinking new orders and production, as they feel the pinch from weakening global demand, while efforts by the government at the macro level may not yet have filtered down to them.

“They are being squeezed by rising costs of doing business,” ACCCIM president Datuk Lim Kok Cheong said at a press conference today.

The survey polled 374 respondents mainly from the wholesale and retail sectors (24.3 per cent); manufacturing (19.5 per cent); professional and business services (14.2 per cent); construction (8.8 per cent); tourism, shopping, hotels, restaurants, recreation and entertainment (5.3 per cent); transportation, forwarding and warehousing (5.1 per cent); finance and insurance (5.1 per cent); and others (17.6 per cent).

Some 81 per cent were domestic market oriented, while the remaining 19 per cent focused on “both domestic and export” markets (12.6 per cent) or just export markets (6.4 per cent).

In summary, the survey found that for the first half of 2012, the Malaysian economy had only experienced little growth following slight dips in sales performance, production volumes, inventories and payment collections, a drop in orders from both the local and overseas markets, weakening local sales prices, a soft employment market and a drop in investment in new resources or plans.

“The increase in operating costs and prices of raw materials has become the greatest concern among businesses.

“The increase of one percentage point in EPF (Employees Provident Fund) contribution for workers earning under RM5,000, the imposition of a one per cent feed-in tariff and impending implementation of minimum wage are perceived to aggravate operating costs and affect the businesses of SMEs,” said Lim.

According to the survey, 55.9 per cent of respondents polled believed that the government’s recently introduced minimum wage policy would only bring about negative effects on the businesses, despite raising the general income of Malaysians.

“The government is advised to undertake further research and dialogues with the industry players, and finally implement different wage structures according to the different sectors and regions in Malaysia, to take into account the differences that are prevalent in various businesses and different living standards,” the survey report said.

It said that 70 per cent of respondents had said they would be more supportive of a wage floor policy if the wage structures differed according to sectors and regions.

At the same time, Lim said employers were also pre-empting more cost increases when another ruling — the extension of the private sector retirement age to 60 years — is implemented.

“Wage costs are now expected to further increase for businesses through the extended retirement age of the older staff,” he said.

The survey also found that despite the widespread concern felt by Chinese businesses here towards the euro zone crisis, 45 per cent said it had not impacted their businesses.

“They were shielded somewhat by stronger domestic demand, on the back of higher fiscal spending through various handouts and the implementation of projects under the ETP (Economic Transformation Programme), and various economic corridors,” the report said.

The Najib administration is expected to call for polls within months, hoping to ride on a feel-good factor arising from its reported plan to disburse another round of RM500 cash handouts to lower-income households nationwide.

The Malaysian Insider reported last week that the move, to be slotted under Budget 2013, is expected to boost the ratings of Datuk Seri Najib Razak and his Barisan Nasional (BN) coalition ahead of the federal polls.

The RM500 paid out to nearly five million families at a cost to taxpayers of RM2.6 billion earlier this year saw Najib’s approval ratings shoot up to 69 per cent, largely due to a surge of support among poorer households.

But the aftermath of violence that erupted between police and demonstrators at the April 28 Bersih rally for free and fair elections saw his popularity slide to 65 per cent last month.

Najib will table the Budget on September 28 and besides the fresh handout, he is expected to announce other measures to boost domestic spending and the economy in a bid to head off a worsening economic outlook as he prepares to call his first elections.

The economy grew at a surprising pace of 5.4 per cent in the second quarter, blowing away economists’ expectations and potentially giving rise to a feel-good factor ahead of the general elections.

But the good news is not expected to last, as the global outlook is likely to affect Malaysian exports.

Malaysia’s surprisingly strong second-quarter economic growth, despite weakening exports, was largely due to the buffer of ongoing construction projects and increased spending attributed to civil servant salary hikes and government cash handouts, say economists, which could point to uneven growth in the months ahead.