Government projects will take up slack caused by euro zone crisis, say manufacturers
UPDATED @ 05:48:09 PM 14-06-2012
KUALA LUMPUR, June 14 — Federation of Malaysian Manufacturers (FMM) members are banking on domestic demand and government infrastructure projects to cushion the effect of Europe’s economic problems.
FMM president Tan Sri Yong Poh Kon said business conditions are expected improve in the next six months despite rising concerns over external economic developments and rising costs of production.
This, said Yong, was based on findings of the federation’s survey with the Malaysian Institute of Economic Research (MIER) titled “FMM-MIER Business Conditions Index”, which polled 386 FMM members nationwide.
“Nearly three in five respondents (59.8 per cent) indicated that the euro crisis has a negative impact on their companies,” Yong (picture) said.
But, he said, the FMM-MIER BCI was still expected to move up from its current 96.8 points to 120.2 points in the next six months.
The survey’s index value above the growth-neutral threshold level of 100 points indicates an improvement of positive outlook, while that below the threshold level indicates a worsening or negative outlook.
“Nearly three in 10 (28 per cent) respondents indicated they believe the current level of general business activity is higher compared to six months ago, while nearly a third (32 per cent) indicated otherwise,” he said.
“It shows the Economic Transformation Plan (ETP), projects in the pipeline are being eagerly anticipated by manufacturers. The MRT (Mass Rapid Transit) will benefit manufacturers, generally they are optimistic,” Yong told The Malaysian Insider later.
Maybe manufacturers don't feel it (effects of economic uncertainty) yet. Let's see what happens in six months' time," he added.
The survey results also indicated that two in five (40 per cent) respondents are expecting a higher level of general business activity, and that one-third of respondents (33 per cent) are anticipating higher local sales in the next six months.
"Of concern, however is that nearly two-thirds of respondents (64 per cent) are expecting higher productions costs...the cost could rise at a faster rate," he said.
Yong said that Putrajaya's minimum wage plan will likely drive up wage costs by up to 60 percent companies in the east coast and 20 to 30 percent for companies in the Klang Valley.
56.5 per cent of 386 FMM members polled feel that the implementation of minimum wage will "severely" affect their businesses, as opposed to 32.4 per cent of respondents who said it would leave a slight impact.
Malaysia’s first private sector minimum wage will be gazetted on July 1, giving most employers until the beginning of next year to comply with the controversial plan which businesses say will threaten up to four million jobs due to cutbacks and closures.
This means that the move, seen as part of a slew of concessions to workers ahead of impending federal polls, will take effect on January 1, well ahead of the mid-2013 deadline for Datuk Seri Najib Razak to hold general elections.
The Human Resources Ministry said yesterday it has begun training enforcement officers nationwide to ensure the base wage policy is met by employers.
The floor wage of RM900 and RM800 per month for the peninsula and east Malaysia respectively was announced on the eve of Labour Day by Datuk Seri Najib Razak who also said employers will be given six months to meet what he called a “game-changer to transform the labour market.”
But the prime minister made a concession to “micro-enterprises,” giving them a year to comply with the requirement which will let allowances or fixed cash payments be calculated as part of a worker’s wages.
The government also tabled today the Minimum Retirement Age Bill setting the floor age at 60 for the private sector in a move that follows the revival of studies into unemployment benefits which may see employers bear 40 per cent of the cost.
But these moves have angered employers especially small-medium enterprises (SME) who say that up to 80 per cent of operational companies are at risk of folding due to added labour costs from the impending introduction of floor wages even as the global economy stutters.
SMEs, who make up 99 per cent of operational companies and employ 59 per cent of the labour force, or seven million workers, are the most labour-intensive, with 15 per cent of manufacturing costs coming from human resource.
Headwinds from the euro-zone crisis and a cooling Chinese economy have hit Malaysian exports, slowing growth to 4.7 per cent for the first three months of the year, the third consecutive quarterly drop since Q2 2011.