Supply chain bottlenecks to ease once Selangor and KL move to Phase 2 of NRP


THE transition of certain states to Phase 2 of the country’s four-phase National Recovery Plan (NRP) is likely to help alleviate some supply chain bottlenecks, but the impact on the real economy could be limited until the major states transition to more relaxed restrictions.

The combination of movement restriction orders, shutdown of major parts of manufacturing activity and standard operating procedures (SOPs) have hit the private sector and its employees hard with little to show for, as the number of infections continue to climb to a new record of 11,618 cases yesterday.

SME Association of Malaysia national VP Chin Chee Seong said Phase 2 states will have little impact as key economic centres, Selangor and Kuala Lumpur (KL) that account for about 40% of national GDP, are still facing supply chain disruptions.

“There is little impact as major economic areas in Selangor and KL are still under the Movement Control Order (MCO) and Enhanced MCO.

“Most businesses still face supply chain disruption, especially with new SOPs that require factories that are allowed to run to do Covid-19 antigen rapid tests on all workers twice a week,” he told The Malaysian Reserve (TMR).

The costs of doing two swab tests a week for every week are high, leading many factories to choose to close unless they have to fulfil client orders.

One manufacturer of sprayers for the oil palm industry told TMR that his company is spending some RM5000 a week on such test, but has decided to remain open as demand from the plantations industry for its products have been high and upstream planters look to mechanisation to help overcome the problem with manpower shortage in the industry.

A worker of a spare parts store in Kepong, KL, seen searching for used compressor from the shelves. Any bottleneck issues faced earlier could be eased a little in Phase 2 as manufacturers could produce more to fulfil clients’ orders, says economist

“While we can operate as we are classified under the agriculture sector with the Ministry of International Trade and Industry and have high orders, we have problems sourcing parts such as pipes for our sprayers because the suppliers, who are classified under non-essential sectors, are closed due to the EMCO,” the marketing executive said.

The reliability of the test kit is another concern. A furniture maker told TMR that a fear of potential infections at his factory led to a dozen workers testing positive in the first swab test, but a second test a few days later showed many of the “infected” workers had no trace of the virus at all.

“2021 will be a year to just hang on and hopefully see a rebound next year when the economy opens up,” he said.

The bottleneck problems appear to be widespread. The auto sector’s mouthpiece, Malaysian Automotive Association, on Tuesday stated the auto value chain was under performing due to the EMCO in KL and Selangor.

TMR earlier reported that the Federation of Malaysian Manufacturers president Tan Sri Soh Thian Lai expressed his concern about the uncertainty of achieving the NRP’s milestones before the essential economic sector list is expanded and workforce capacity is increased.

Instead of enforcing a nationwide lockdown, Soh proposed targeted lockdowns and prioritised vaccinations via the Public-Private Partnership Covid-19 Industry Immunisation Programme that should be carried out in states or areas with the highest number of infections.

“To minimise the impact on both the industry and economy, states/areas where the cases are lower and under control should be allowed to operate without any distinction between essential and non-essential sectors,” he added.

According to the points outlined under the NRP, Phase 2 will enable more sectors to operate such as manufacturing and electrical and electronics.

Under Phase 2, the working capacity in manufacturing will be increased from 60% now to 80%. That said, moving to Phase 2 would be a step forward nevertheless.

“It could be said that any bottleneck issues faced earlier could be eased a little in Phase 2 as manufacturers could produce more to fulfil clients’ orders,” Bank Islam Malaysia Bhd economist Adam Mohamed Rahim told TMR recently.

States have to achieve three objectives to move into Phase 2 including registering below 4,000 Covid-19 cases for seven consecutive days, having the rate of bed use in the intensive care unit stands at moderate levels, as well as 10% vaccination rates for populations that have received two complete doses.

To date, states have shifted to Phase 2 are Perlis, Perak, Kelantan, Terengganu, Sarawak, Pahang and Penang.

According to reports, Johor and Kedah are expected to transition soon. Johor Mentri Besar (MB) Datuk Hasni Mohammad and Kedah MB Muhammad Sanusi Md Nor cited the states have met several objectives of the NRP.