KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) today urged the government to strengthen the ringgit’s performance to mitigate the cost increases experienced by local manufacturers.
FMM president Tan Sri Soh Thian Lai said the cost of doing business has been on the uptrend due to the government’s announcement on the minimum wage and withdrawal of energy subsidies to industries.
“The electricity (subsidy) alone will take up around 30% to 40% cost increase ... increase in gas also around 60% to 80%, a big impact to the industries.
“The government, especially Bank Negara Malaysia, must strengthen our ringgit because it is so weak and 55% of the intermediate goods were imported for our processing, are paid using US dollar. If the USD is hovering between RM4.60 to RM4.70, it’s very difficult for the manufacturers to absorb the costs because of the weak ringgit,” he said during a press conference when releasing its ‘Business conditions survey for the first half of 2023’ results.
To a certain degree, he added manufacturers were willing to absorb the costs incurred due to stiff competition in the market. However, if the costs incurred gets too much to bear, some manufacturers would have no choice but to pass certain “percentage of the cost increases to the consumers”.
The survey found that most of the costs increased by up to 20% in H1’23 – with labour, machinery maintenance and raw materials as among the top three cost increases.
In view of the weak ringgit against the greenback, companies have also explored using alternative currencies for their imports and exports to lessen dependency on the US dollar.
He said that China’s renminbi or yuan is the foremost choice of most respondents as an alternative currency to the greenback for exports and imports, followed by European euro and Japanese yen.
Respondents of the survey he added had conveyed that the alternative selection of currencies was due to requests from foreign buyers and foreign sellers.
Commenting on the 12th Malaysia Plan announced by the Prime Minister Datuk Seri Anwar Ibrahim, whereby the government increased the expenditure ceiling by RM15 billion, bringing its total allocation to RM415 billion, Soh opined that the increased expenditure is “a good sign and decision”.
However, he noted that the yearly budget for the period should be executed and implemented accordingly with “no wastage or leakage”, Soh added that it has the possibility to spur optimism for the industries.
