Need Systematic Approach To Identify Inputs, Risk, Intervention - MoF

KUALA LUMPUR, Oct 9 (Bernama) – A more systematic approach is required to identify critical inputs, monitor concentrated supply risks and coordinate early intervention in mitigating adverse impact resulting from geopolitical uncertainties, according to the Ministry of Finance (MoF).  

This is in addition to the government’s responses that helped address immediate financing and supply pressures on manufacturing following the West Asia conflict, it said in its Economic Outlook 2027 report released today.

“The immediate priority is to enhance visibility over critical inputs and concentrated sources of supply.

“A targeted supply chain mapping programme should identify common upstream suppliers, source country concentration, inventory coverage, lead times and the availability of technically acceptable substitutes,” said MoF.

It said that the programme should focus on industries with both extensive production linkages and high exposure, including refined petroleum, basic chemicals, electronic components and selected machinery industries.

A shared risk dashboard could then support early warning signals and more timely coordination and necessary action to be taken by government agencies as well as the industries, it said.

MoF cautioned that Malaysia’s deep integration with global energy, logistics and production networks leaves its manufacturing and trade sectors vulnerable to disruptions, which can spill over to downstream industries.

“While immediate measures provide necessary short-term support, long-term policies should focus on increasing domestic value creation in critical production segments and deepening complementary manufacturing networks within ASEAN,” it said.

Over the long term, the ministry said Malaysia should strengthen its domestic and regional capacity in selected intermediate products where supply is highly concentrated and feasible alternatives remain limited, rather than pursue broad-based import substitution.

“Consistent with the New Industrial Master Plan 2030 (NIMP 2030), support for petroleum and chemicals products, as well as electrical and electronics (E&E), should prioritise higher-value-added activities, technological upgrading and supplier development in areas where Malaysia can build competitive capabilities,” it said.  

Geopolitical tensions in West Asia, which resulted in trade restrictions and disruptions to major shipping routes, have increased uncertainties for global manufacturers.

For Malaysia, the most direct exposure to potential disruptions in the Strait of Hormuz lies in its crude oil supply chain, where nearly 40 per cent of the nation’s crude oil requirements transit through the chokepoint.

The effects extend beyond direct energy imports, with the Federation of Malaysian Manufacturers' June 2026 survey identifying freight and logistics costs as the key constraint affecting manufacturers, followed by raw material shortages as well as higher energy and fuel costs.

Petroleum refining recorded the largest estimated production cost effect among manufacturing industries at approximately 21.9 per cent, reflecting its direct exposure to the assumed shocks and the transmission of cost pressures through domestic production linkages.  

Despite the geopolitical uncertainty, Malaysia's manufacturing sector remained robust, with manufacturing value-added expanding 6.6 per cent in the first half of 2026, while total trade rose 22.4 per cent to RM1.80 trillion.

-- BERNAMA