Virus to bug Malaysian manufacturing industry
O Too early to determine impact but supply chains, industrial production will be affected, say economists
PETALING JAYA: The manufacturing sector will likely feel an impact from the outbreak of the novel coronavirus in China, but it is still too early to measure it, an economist tells SunBiz.
“Supply chain disruptions could potentially derail growth in the manufacturing segment,” she said in an email response.
InterPacific Securities Sdn Bhd head of research Pong Teng Siew said while it is difficult to make a call, it will likely be tough going for Malaysian manufacturers, particularly in the short term.
“What we do see is that this will affect manufacturers’ output in the short term. Having fewer people moving about and shopping will lead to slower consumer purchases and that might affect manufacturers’ sales.
“Industrial production also could be affected as supply chains get disrupted. Sometimes the components made by Malaysian exporters are just one of a number of inputs into a final product that will be made by manufacturers outside the country, so if they slow down in production they don’t need parts from here which will slow down production here,” he said.
He noted that the impact from this disruption could be seen as early as in the February manufacturing results.
Malaysia’s Industrial Production Index (IPI) growth in December 2019 slowed down to 1.3% from 2% in November 2019, due to a slump in the mining index.
Manufacturing sales in December 2019 expanded 5.2% to RM76.1 billion from RM72.3 billion a year ago, on the back of the increase in transport equipment & other manufactured products (7.7%), petroleum, chemical, rubber and plastic products (5.9%) and electrical & electronics products (2.7%).
At a briefing last week, Deputy International Trade and Industry Minister Ong Kian Ming said it is too early to estimate the impact of the Wuhan coronavirus on the manufacturing sector on Malaysia’s trade, as manufacturing activity during the Lunar New Year period is very low.
He added that there will be some disruptions in China’s and the global supply chain as a result of the coronavirus, which may prevent manufacturing activities from taking place in China, but exactly what negative effect it will have is not known yet.
Unisem (M) Bhd was the first Malaysian manufacturer to announce that it is stopping all operations at its plant in Chengdu, China, on directives received from local authorities over concerns about the spread of the virus.
Having said that, the semiconductor manufacturer stressed that the plant closure will not have a material effect on the net assets of the group for the current financial year ending Dec 31.
BSL Corp Bhd CEO Richard Ngiam Tee Wee foresees more negative impact from the virus outbreak, as factories in China have stopped running for longer than expected and migrant workers are not able to return to work.