kuala lumpur: Malaysia’s manufacturing industry achieved growth in the first half of 2024 (H1’24) despite facing headwinds, inflationary pressures, unstable demand and global uncertainties.
Federation of Malaysian Manufacturers (FMM) president Tan Sri Saw Thian Lai said local manufacturers were optimistic and confident about growth in the second half of the year.
Speaking at a press conference on the FMM Business Conditions Survey H1 2024 today, he said local manufacturers are confident that Malaysia’s economy is moving in the right direction, and are expressing confidence in the country’s FDI and Domestic Direct Investment environment.
The survey revealed that Malaysian manufacturers have maintained production volumes, increased capacity utilisation, strategically managed costs and stabilised employment levels.
These results suggest that local manufacturers are not simply responding to external pressures but are actively seeking to position themselves to shape their future in a competitive global landscape.
The survey also found that manufacturers are mixing optimism with caution due to economic challenges when it comes to revenue growth in 2024, with half of respondents expecting revenue to increase, supported by a recovering global economy and solid domestic demand.
However, 21% believe their revenue will remain stable, and 29% expect their revenue to decrease, likely due to rising operational costs, continued inflation, and global economic uncertainty. Notably, 9% of those surveyed expect a significant decline in revenue, particularly in export-dependent and already struggling sectors.
Looking ahead to the second half of 2024, FMM said the manufacturing sector is expected to see continued growth, supported by a recovering global economy and supported domestic policies. Key indicators such as business activity and production volumes are showing strong momentum, and manufacturers are well prepared to meet rising domestic and international demand, it said.
However, the industry is still conscious of rising production costs and is taking a cautious approach to expanding its workforce.
On the minimum wage, the FMM survey found that the majority of respondents (57%) supported an increase to RM1,600, reflecting the consensus that a moderate increase is affordable and in line with the current economic situation.
However, concerns over rising operational costs and competitiveness have limited support for further increases, with only 14% and 13% in favour of increasing prices to RM1,700 and RM1,800 respectively.
The survey revealed that the top five challenges to business operations and growth in the second half of 2024 are weak demand, rising input costs, depreciation of the ringgit, increasing competition, expanding customer base and geopolitical risks.
Referring to the ringgit, Soh said the continued appreciation of the local currency would help manufacturers reduce operating costs and expand profit margins.
Regarding how a strong ringgit will affect their businesses, a significant proportion of respondents (47%) viewed the strong ringgit positively, which may suggest that these businesses will benefit from stronger domestic purchasing power and reduced import costs.
Some 36 percent expect a negative impact due to factors such as a decline in export competitiveness and a rise in the ringgit value for companies that rely on export sales. The 17 percent who expect no impact are in sectors that are less sensitive to currency fluctuations.
When it comes to government procurement, the majority of respondents (88%) said they do not supply to government, suggesting barriers to entry and challenges in the procurement process. Only 12% are involved, suggesting government contracts are competitive or difficult to obtain.
The main obstacles identified were the need for greater transparency (34%), high paperwork (23%), complexity of the government procurement process (20%) and competition from traders and overseas suppliers (20%).
To improve the system, 48% of respondents suggested developing a uniform procurement policy with strict enforcement, 45% recommended creating a database of local manufacturers, 44% thought the use of e-procurement platforms would be helpful, and 31% supported whistle-blower protection.
“These challenges and the lack of clear guidelines and processes mean that almost all local manufacturers are not supplying to the government. FMM urges the government to expedite the implementation of the Government Procurement Law and support local manufacturers to supply to the government,” Mr Soe said.
Looking at the 2025 Budget, 32% of respondents prioritised lowering corporate tax rates, highlighting the importance of maintaining Malaysia’s competitiveness in attracting foreign investment.
Expanded tax incentives (16%) are also important to stimulate growth in key sectors, particularly technology, manufacturing and green energy, which is in line with the global trend to foster innovation and economic diversification.
Another 13% said ESG is becoming increasingly important, encouraging sustainable practices and attracting ESG-focused investments.
