Business outlook for 1H17 remains cautious, says FMM
KUALA LUMPUR: Malaysian manufacturers remain cautious over the business conditions in the first half of 2017 (1H17), plagued by lower local sales and higher production costs.
Federation of Malaysian Manufacturers (FMM) President Tan Sri Dr Lim Wee Chai said the lower expectations on business prospects was reflected by the Business Conditions Index, which fell to 100 from 102 in the second half of 2016 (2H16).
“Local manufacturers remain cautious on the back of uncertainties due mainly to weaker local consumption,” he told a press conference on the ‘FMM-Malaysian Institute of Economic Research Business Conditions Survey 2H16’ yesterday.
The survey revealed that despite the Local Sales Index for 1H17 and 2H16 remaining at 87, the reading was still lower than the 100-points threshold level.
The FMM-Malaysian Institute of Economic Research Business Conditions Survey 2H16 was conducted among 370 FMM members, nationwide, from Jan 6 to Feb 3, 2017.
The Federation has 2,800 members in the country, of whom 2,550 were involved in the manufacturing industry.
FMM Former President Tan Sri Sow Choo Boon, however, was optimistic that the weaker local sales could be offset by government spending on infrastructure projects.
“If foreign contractors who secure projects here use more local products, that would help boost sales,” he said.
Sow suggested that the government roll out new regulations to encourage more people, especially foreign contractors, to purchase Malaysia-made products for their projects.
“Maybe the government could promote the ‘Buy Malaysia Products First’ campaign, but we also have to ensure the product quality and pricing are competitive enough,” he said.
On the cost of production, the survey showed that the index rose to 165 for 1H17 versus 150 for 2H16.
Meanwhile, Lim said the minimum wages policy, higher transportation cost, energy cost and the implementation of the Goods and Services Tax (GST) were the major contributors to increased production cost.
To offset the cost, he said manufacturers could opt for automation, which would boost productivity and simultaneously reduce operating costs.
The survey showed that the automation level among 34 per cent of the respondents was between 31 and 50 per cent while the automation level with 20 per cent of the respondents was between 51 and 100 per cent.
The survey, however, showed that exports would remain steady and perform better for 1H17 as the index stood at 111 from 109 for 2H16, mainly due to the weakening ringgit and higher market demand. — Bernama