Longer recovery for manufacturing sector

The manufacturing sector’s output in April contracted 37.2% YoY, after declining 4.1% in March 2020

by DASHVEENJIT KAUR/ pic by MUHD AMIN NAHARUL

MALAYSIA’S manufacturing sector will not recover soon following continuous contraction as the economy grapples with the spiral effects of the Covid-19 pandemic, according to the Department of Statistics Malaysia (DoSM).

Chief statistician Datuk Seri Dr Mohd Uzir Mahidin (picture) said the government has to consider mobilising other possible economic sectors to compensate for the short-term losses of the manufacturing sector such as agriculture, household-related services and small-scale construction activities.

“With the current global supply and demand disruptions, it is opportune for us to give more focus on food-based agriculture products such as rice, fruits, vegetables, poultries and dairies which are largely imported at this juncture,” he said in a virtual press conference after releasing the Malaysian Economic Statistics Review Volume 2/2020.

Mohd Uzir believes that with the pool of talents — especially high-quality graduates the country will continue to produce — as well as modernisation and innovation of opportunities, the agriculture sector can be explored, backed up by the private and public sectors.

According to the latest data released by the DoSM, the manufacturing sector’s output in April contracted 37.2% year-on-year (YoY), after declining 4.1% in March 2020.

The latest statistics review showed that the manufacturing sector recorded a significant decline due to the halt in non-essential economic activities and the below 50% for factory utilisation capacity rate.

It is important to know that the manufacturing sector has always been one of the key drivers of Malaysia’s economy with the share to GDP in 2019 stood at 22.3%.

“The major disruptions to the global value chain have pulled down Malaysia’s trade performance for April 2020, which recorded the largest decline since September 2009 during the global financial crisis.

“Meanwhile, as the manufacturing output deteriorates for the first time, Malaysian unemployment rate spiked to 5% as the number of unemployment went up 48.8% in April 2020 due to closure of operations for most businesses during the Movement Control Order,” Mohd Uzir added.

He also believes the present global uncertainties would more likely eliminate any chance of investment from abroad.

Malaysian exports declined 23.8% to RM64.9 billion, making it the largest one since the global financial crisis. The country’s total trade value reduced by 16.4% YoY to RM133.3 billion.

“Meanwhile, Malaysia’s imports also recorded a drop of 8% to RM68.4 billion, resulting in a trade deficit for the first time since October 1997, at RM3.5 billion.

He said now more than ever is the time to realign the focus towards stimulating domestic investments by encouraging more local businesses to invest in industries with high potential to expand, namely health, manufacturing of medical supplies and pharmaceuticals, as well as information and communication technology-related namely e-commerce and gig economies.

“Besides, emphasis should be given to restore tourism-related industries encompassing accommodation, and food and beverage by increasing more investments in this area,” he added.

According to him, the manufacturing sector is strongly dependent on the demand from the rest of the world, whereby almost 69% of the manufacturing’s output is exported.

Furthermore, the drop in the manufacturing sector was due to the disruption in domestic-oriented industries.

The decrease in manufacturing sector was mainly from non-metallic mineral products, basic and fabricated metal products (-62.7%), electrical and electronics products (-34.1%), and petroleum, chemical, rubber and plastic products (-21.4%) subsectors.

The manufacturing sales stood at RM75.8 billion, plunging 33% compared to RM113.1 billion a year ago. The sales growth of month-on-month went down by 31.2% (RM34.3 billion) and in terms of seasonally adjusted, the sales value registered a decrease of 29.5%.

“Rapid revitalisation of this sector is vital to invigorate the overall economic performance,” Mohd Uzir said.

Additionally, he said as tourism is an important sector that employs 23.5% of the workforce with a contribution of 15.2% to the economy, a helping hand should be raised to ease the predicaments of this sector during this trying time to let them flourish again.

“While international tourism activities might not happen anytime soon, a lot of innovative measures can be undertaken to encourage domestic tourism, propelling the demand of this sector.

“As the supply and demand chain evolves, this sector can be slowly reinstated to its former glory. In this regard, all efforts should be geared towards restoring the confidence of doing businesses in Malaysia for a swift economic recovery,” he added.