Federation of Malaysian Manufacturers president Tan Sri Soh Thian Lai
KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) has called for more free trade agreements (FTAs) to allow companies to expand their foreign market access.
“If the country can sign more FTAs, our export sales and value could be further increased. Based on Malaysia’s total export in 2023 of about US$301bil, around 67% is through FTAs.
“This shows that market access is very important to local manufacturers. Our domestic market is too small, having a population of only 34 million.
“Signing more FTAs means that there will be more opportunities for small and medium enterprises (SMEs) to export,” FMM President Tan Sri Soh Thian Lai said at the release of its business conditions index survey here yesterday.
Among the top five challenges to business operations and growth for the second half of 2024 (2H24) are increasing competition (47%) and attracting new customers (39%).
Malaysia has signed 16 FTAs, comprising seven bilateral FTAs and nine regional FTAs. Earlier this year, the government announced that it planned to restart the Malaysia-European Union FTA talks after they were put on hold following eight rounds of negotiations in 2012.
“FTAs are a double-edged sword. On one hand, the country can export with lower duties with an FTA.
“On the other hand, the country will face an influx of imports. However, to strengthen Malaysia’s competitiveness, we need to have FTAs,” Soh said.
Going into 2H24, he said 52% of respondents identified expanding product portfolios as a key strategy to capture new customer segments and hedge against market volatility.
Additionally, 34% of businesses aimed to export to new countries to navigate the global economic challenges.
“Businesses can expand to new non-conventional markets like Africa, Latin America and the Middle East,” he said.
FMM noted the manufacturing sector is poised for continued growth in 2H24, bolstered by a global economic recovery and supportive domestic policies.
Notably, Soh opined that cost pressures are expected to ease, contrary to the findings of the survey, as high-cost inventories are depleted.
“Many manufacturers maintain inventory levels of between three and six months to meet order demands.
“Once the inventories bought at a higher cost are reduced, the cost of new raw materials supported by the strengthened ringgit would be on the lower side. Adjustments to the old inventories would likely take at least three months,” he said.
Meanwhile, Soh also noted that a minimum wage hike to RM2,000 from the current RM1,500 would be too high for the industry. The survey showed that 57% of respondents said they would support a modest increase to RM1,600, 14% favoured a minimum wage hike to RM1,700 and 13% favoured an increase to RM1,800.
“The SMEs will not be able to survive it. In 2012, the minimum wage was set at RM900 in Peninsular Malaysia and RM800 in Sabah and Sarawak. It has since been increased to RM1,500 for both regions,” he added.
