Cost of sales to rise 2% on electricity


Cost of goods sold, or the cost of sales for local manufacturers, is expected to increase between 1% and 2% following an additional surcharge of 1.35 sen/kWh effective July 1, 2018.

Federation of Malaysian Manufacturers (FMM) president Datuk Soh Thian Lai (picture) said the additional surcharge, which is under the imbalance cost pass-through (ICPT) mechanism, will indirectly cause a 6% jump in electricity rate for manufacturers.

Soh said the industry calls for a one-year grace period before implementing the new surcharge that will increase their operational cost.

“The cost of doing business for us is increasing every year. Let the industry continue with the current rate (without the additional surcharge) and the government may take action after one year when everything is stabilised,” Soh said after the en-bloc signing ceremony of Malaysian Anti-Corruption Commission’s (MACC) corruption-free pledge by FMM members in Petaling Jaya yesterday.

Soh said the manufacturing sector is currently experiencing a slowdown due to the trade war sentiments between the US and China.

The headline Purchasing Managers’ Index (PMI) was below the neutral 50 threshold in June, but rose to 49.5 from 47.6 in May.

Soh said the uncertainties caused by the trade wars have a slowdown effect on global trade, thus impacting Malaysian manufacturing sector’s PMI numbers.

Soh also highlighted that the manufacturing sector is also affected by the currency factor as 70% to 80% of raw materials are imported into the country.

“If the currency is hovering more than RM4 (versus US dollar), it will have an impact first on manufactured goods as the cost will not come down.”

FMM, with a total membership of 10,000 members as of June 30, 2018, signed the MACC’s corruption-free pledge concurrently throughout the country involving 235 companies.

The signing ceremony also marked the federation’s 50th anniversary since its inception in 1968.

Transparency International Malaysia (TMI) recently revealed the estimated cost of corruption to the country is about 4% of gross domestic product value each year since 2013. Quoting TMI, Soh said corruption had cost RM46.9 billion in 2017.

He claimed that the recruitment of foreign workers among manufacturers had involved commissions and procedures that were prone to corrupt practices.

MACC deputy chief commissioner on prevention Datuk Shamshun Baharin Mohd Jamil, who witnessed the signing ceremony, applauded the move as it signalled the industry’s commitment towards a clean business act.

Both Shamshun Baharin and Soh agreed that the pledge taken by the manufacturers would be a start for greater awareness towards zero corruption culture.