06/09/2022 04:19 PM

KUALA LUMPUR, Sept 6 (Bernama) -- The manufacturing sector is projected to remain in cautious mode as the business activity is expected to slow down in the second half of 2022 (2H 2022), said the Federation of Malaysian Manufacturers (FMM). 

President Tan Sri Soh Thian Lai said the manufacturing sector is taking a more pragmatic approach to the business outlook in 2H 2022 as the economic challenges remained unabated for now.

Based on the Business Condition Survey for the first half of 2022 (1H 2022) conducted by FMM and the Malaysian Institute of Economic Research (MIER), he said the forward-looking indicators in 2H 2022 showed a decline in business condition index versus 1H 2022 during which it had picked up some momentum.

"Business activity in 2H 2022 is expected to slow down with local sales, export sales, together with production volume and capacity utilisation to also shift lower for the rest of the year," he told a media conference, today.

Soh highlighted that the top three main obstacles for the manufacturing sector for the remainder of the year were attributable to the rising cost of raw materials, the rising cost of labour and the shortage of labour force.

In the meantime, he said the survey indicated that business recovery in 1H 2022 showed some improvement despite the persistent external headwinds and domestic challenges, including rising inflationary pressure.

"Our survey showed that 39 per cent of respondents revealed their business recovery to date is at pre-COVID-19 level, 32 per cent said they are below the pre-COVID-19 level, while surprisingly 29 per cent of our respondents believe their business is higher than the pre-COVID-19 level.

"This indicated that the opening of the borders and government's effort in shifting towards the endemic phase of COVID-19 had enhanced the business activity and improved the economic growth and confidence for all the industries," he said.

According to Soh, the main obstacles faced by the manufacturing industry over the last six months were the rising cost of raw materials, followed by the rising cost of labour and logistics cost.

Meanwhile, commenting on the Budget 2023 wishlist, he highlighted that most of the FMM members urged the government to introduce a reduction in the corporate tax rate, personal tax and moderation of energy costs such as electricity and natural gas for the manufacturing sector.

"Our members suggested that the corporate tax rate should be reduced to 20 per cent," he said.

In addition, the FMM members have proposed that the government consider reintroducing the Goods and Services Tax (GST) with a lower rate of four per cent instead of the previous six per cent.

"We think that the GST at four per cent will enhance the revenue and at the same time will not severely impact the consumers. The Majority of the industry members are supportive of the GST and would like to see its reintroduction of GST in future," he added.


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