MORE than half of Malaysia’s exports could not be completed on schedule as non-essential services were shut for the movement-control order (MCO) to curb Covid-19, said manufacturers.

Federation of Malaysian Manufacturers (FMM) president Soh Thian Lai told The Malaysian Insight that it may take the export sector more than a year to recover from the setback.

“The export sector has been greatly affected and an estimated 60% of exports could not be met due to the MCO,” Soh said.

“The situation is very uncertain now. Export orders are also dependent on international demand but this has been severely affected as well.

“We may need more than a year for Malaysia’s export sector to recover.”

According to industry players, the sectors most affected by the MCO include electronics, transportation, machinery and equipment, oil and gas, chemical products and palm oil-related industries.

Even though many of the affected services are listed as “essential” – with restrictions eased in the second and third phases of the MCO – they were only allowed to operate with 50% manpower, impacting on businesses substantially.

“Also, not all levels of the supply chain were allowed to resume, so production cannot be maximised during the MCO,” he said.

Even though Senior Minister Ismail Sabri Yaakob said all levels of the supply chain related to essential services are allowed to operate, one third of applications were rejected by the International Trade and Industry Ministry, while another one third are kept in view (KIV).

International Trade and Industry Minister Mohamed Azmin Ali said only about 45% of the economy was running during the first and second phases of the MCO.

Azmin also said: “Through a two-pronged policy, the government wants to both fight the Covid-19 virus and revive Malaysia’s economy”. 

Soh said manufacturers are also facing a shortage of raw materials, issues involving half-finished products and the restricted movement of consumers.

“Both supply and demand (customers’ spending power) are now issues.”

Soh said manufacturers need income and cash to keep their businesses alive and it would be good if the government could allow more sectors to resume operations.

However, he said the effects of exports on SMEs should be relatively small compared with the manufacturing sector.

Demand still there

SME Association of Malaysia president Michael Kang echoed Soh’s view, saying SMEs in the country are performing relatively well due to the support of domestic demand.

“SMEs don’t export much and they form most of the supply chain.

“They are generally doing well because the economy is starting to reopen. As long as SMEs continue to operate and move goods around, they will survive, unlike in the United States and Europe,” he said.

Kang said as long as the bigger clients of SMEs, such as exporters, are unaffected, such businesses are unlikely to feel the global headwind.

However, economist Hoo Kee Ping said mass unemployment is still possible if major exporters experience too huge a reduction in orders.

Malaysia’s SMEs also cannot be compared with those in China’s Dongguan City, many of which were forced to close for good due to the Covid-19 lockdown there, Hoo said.

“Construction, oil and gas, agriculture and other sectors are all still operating because the demand is there.”

Association Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) SME committee chairman Koong Lin Loong said while the global economy is facing difficulty, there is still demand for Malaysian products.

“When the economy is good, luxury products will sell very well but when the economy is bad, it is the essentials that will sell. Even overseas, the attitude has changed and they are prioritising rebuilding their countries.

“Because of the focus on rebuilding, there will not be a total collapse. Certain sectors will be weaker but sectors focused on rebuilding the country will emerge stronger,” Koong said.

SMEs will now have to consider making adjustments to their businesses in the medium to long term to retain workers, he said.

Sectors involving items now considered essential because of the Covid-19 pandemic, such as healthcare goods, masks, gloves, medicine and medical tourism, may experience growth.

He said as the government begins opening up more sectors, capacity will increase, which will mitigate the outbreak’s economic impact. – April 23, 2020.