KUALA LUMPUR: The mood among manufacturers for the first half of this year remains cautious, according to the FMM-MIER Business Conditions Survey carried out by the Federation of Malaysian Manufacturers (FMM) and Malaysian Institute of Economic Research (MIER).
The business conditions index, according to the them, dropped to 94, one point less than the second half of 2015.
However, despite the cautious outlook, manufacturers expect to maintain stable production levels and see an increase in employment in the first-half.
Although the general business conditions index showed that the gauge was at the lowest in the second half of last year, at 83, since the survey started in 2012, FMM and MIER reported that there has been a significant reduction in costs and 63% of the respondents have maintained headcount during the period.
“We are cautious as there are challenges, but we hope things will be better because instilling confidence is important,” said FMM president Datuk Seri Saw Choo Boon.
The depreciation of the ringgit remains the biggest challenge as the currency weakness has increased the cost of imports.
This would impact consumer spending as most goods consumed are imported.
Manufacturers have also been affected as components were imported from overseas.
“I think consumers and manufacturers have to find ways to adapt to the different levels of the ringgit, by being more selective about the things they buy.
“Manufacturers will have to look for alternative sources for imported components, such as searching for more cost competitive supplies or locally manufactured supplies,” said Saw.
The survey also found that the manufacturing industry lacked skilled manpower to support high value-added industrialisation.
Saw noted that manufacturing activities that are based on a high content of low skilled labour is not desirable for the economy because it will not help Malaysia become a high income, industrialised and developed nation.
“We need manufacturing to move into higher end products, engage in higher productivity activities, exploit full benefits of automation and use digital technologies.
“Digital technologies should not only be incorporated in a company’s manufacturing process but also in their sales, marketing and even the design of their product,” said Saw.
In order to attract more foreign investments and upgrade the manufacturing industry, manufacturers have to continuously develop a conducive environment.
For example, investors are particular about stable policies, efficient regulatory measures and good supply of skilled labour.
Saw mentioned that technical and vocational education is vital for Malaysia as the manufacturing sector requires vocational and technical skilled workers, such as operators and skilled craftsmen.
The semi-annual survey of business conditions in manufacturing gauges the business confidence in the local manufacturing sector.
The survey for the second half of 2015 had a total of 275 respondents nationwide.
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