FMM: Let manufacturing industries in non-essential sectors open at 50%

THE Federation of Malaysian Manufacturers (FMM) has appealed for the Government to allow manufacturing industries in all non-essential sectors to reopen at 50% workforce capacity.

This is regardless of whether they are in Phase 1 or Phase 2 of the National Recovery Plan (NRP).

Kedah, Selangor, Negri Sembilan, Melaka, Johor and the Federal Territories of Kuala Lumpur, Putrajaya and Labuan remain in the first phase of the NRP with only 12 essential sectors allowed to operate at a workforce of 60%.

Industries in many non-essential sectors comprising micro, small and medium enterprises (MSMEs) as well as industries that are part of global supply chains with export commitments have remained closed for about two months since May 25.

“Factory closure is killing these industries as they are running out of reserves to keep them going despite the financial assistance from the Government in the form of wage subsidies and the automatic loan moratorium,” said FMM president Tan Sri Soh Thian Lai.

Tan Sri Soh Thian Lai

“Manufacturers in the non-essential sectors, especially the MSMEs, are in a dire state of affairs and are already severely impacted from this prolonged business closure.”

Recent survey conducted by FMM on the impact of the lockdown on business operations indicated that:

  • 93% said total sales (ie domestic and export sales) were reduced;
  • 93% said cash flow was reduced;
  • 21% have requested staff to take unpaid leave and 23% undertook pay cut;
  • 75% faced supplier payments issue, 53% logistic surcharges and 43% delayed collection of shipments;
  • 24% faced multiple inspections, 41% delays in getting International Trade and Industries Ministry’s (MITI) approval and 13% with the police;
  • 77% said business recovery status will worsen; 49% said that business recovery will be further delayed by 6 to 12 months;
  • 56% will freeze jobs; 39% cut benefits; 34% reduce work hours/days; 22% will cut pay further and 17% more in the medium-term; 8% would be retrenching further or in mid-term while 24% were not taking any measures yet; and
  • 35% of the companies surveyed expect increased difficulties; 28% were facing tighter financing terms, 24% have rescheduled loans again.

Businesses continue to be immensely constrained in their cash flow given that orders, both pending and future orders are interrupted with no certainty on when operations will be allowed to resume.

However, suppliers are expecting to be paid on time, wages to employees have to be paid in full even if no actual work was performed, and utilities and rental payments are still due.

“There is also fear that if they are not allowed to open up operations immediately, many will not be around to help rebuild the economy once businesses are allowed to open,” said Soh.

With the positive registration and vaccination rates, the Government should be confident in allowing all industries to resume operations.

This is given that all efforts are already underway by industries to have their workers vaccinated including state/private arrangements for vaccination where companies will bear the full cost of vaccination, said Soh. – July 21, 2021.

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