FMM Sabah expects gloomy manufacturing outlook for 2H

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KUCHING: Overall sentiments about business conditions in the manufacturing sector for the next six months is on a downward trend and manufacturers may continue to adopt cautiousness amid Covid-19 pandemic, amid the economic and political uncertainty.

According to the Federation of Malaysian Manufacturers (FMM) Sabah in its Quick Survey results, 45 respondents from the manufacturing sector in the state tracked the business conditions in general and expectation for the next six months in 2020.

Chairman James Ha Haw Yew in a statement said over 60 per cent respondents reported between 25 per cent to 50 per cent drop in revenues and production volume while 57 per cent of the respondents experience between 25 per cent to 50 per cent slip in orders due to Covid-19 and post Movement Control Order (MCO).

Another 22 per cent and 17 per cent of the respondents reported over 50 per cent decline in revenues and production volume respectively.

Less than 10 per cent of respondents said increase in all the three categories of business – revenues, production volume and orders.

Most respondents that voted increase stated the rise between 26 per cent to 100 per cent while the rest said less than 25 per cent increase.

The business activity is expected to remain gloomy for the next six months of 2020 with 67 per cent of the respondents indicating that Covid-19 will pull revenues and orders down with 25 per cent to 50 per cent reduction.

More so, the production volume is expected to suffer the same fate with 73 per cent of the respondents anticipated 25 per cent to 50 per cent of lost.

Slightly less than 20 per cent of the respondents foresee that the drop to reach between 51 per cent to 100 per cent for all three categories.

The index for expected employment remained positive with 64 per cent of the respondents plan to maintain the current number of workers while only 20 per cent of the companies are thinking of downsizing theirs.

Many companies are putting employment plans on hold for the next three to six months of 2020 with only 11 per cent of the respondents expected to hire new workers.

As expected, most (77 per cent) of the of respondents reported shortage of cash flow, while complaint on shortage of supplies inputs materials due to Covid-19 taken second at 55 per cent.

However, only 47 per cent of the companies experience difficulty in transporting finished goods or products and 44 per cent of the respondents reported encounter issue on shipping of finished goods or products compared to 54 per cent said otherwise.

It is possible that some respondents do not ship goods in so much that they are not affected by it.

On the business development services needed, respondents were asked to plot the eight services listed according to priority.

Findings of the quick survey showed that 83 per cent of the respondents voted advice on government incentives, assistances and grants as the first priority.

Added to that, companies put the same emphasize on advice continuity planning and business advice on diversification on product and sales channels with 50 per cent and 45 per cent responses received, respectively as first priority.

Between 35 per cent to 37 per cent voted online business management training and online worker training and legal advice on application of labour regulations as the first priority.

The second priority received most vote is on advice on export and logistics restrictions and requirements at 35 per cent responses. Based on the survey, 10 per cent of the respondents are interested to expand their business in Kota Kinabalu Industrial Park and required a total of 71 acres of lands for that matter. Only 24 per cent of the respondents reported to have logistics issues namely, Brunei closed boarder to foreign transporters, late clearance of container, longer shipping time, slow in getting container out from the port, not able to transport goods and restriction of travel to areas such as Tenom and Keningau during MCO period.

In the quick survey, FMM highlighted two allocations mentioned in the New Deal Package namely RM60 million digital transportation of small and medium enterprises (SMEs) and RM21.8 million aid package for rental rates discounts, grants for micro enterprises, incentives for rural cottage industry.

Respondents then were asked to respond how good they know about the package. The survey revealed that most (60 per cent) of the respondents were not clear about the New Deal Package as announced by the then Chief Minister and companies need more information about the Package.

Twenty-six per cent of the companies said that they will less likely to benefit from the package while 13 per cent of the respondents expect to benefit from the Package.

Reasons for companies that said they will less likely to benefit were the aid less impactful and focus more on individual wellbeing, stringent requirements by bank for loan application, lack of coordination and effort to ensure effected businesses received clear information on the package.