There is light at the end of the tunnel for Malaysian manufacturers that have been scaling back their production for nearly one-and-a-half years.

The country’s factory activity, which has contracted for 16 straight months up until last December, is expected to stage a rebound this year despite persistent risks in the global economy.

The major catalysts for the expected reversal are China’s recovery, improved trade, a potential upswing in the technology sector and a resilient domestic economy.

In December 2023, Malaysia’s S&P Global Purchasing Managers’ Index (PMI) was unchanged at 47.9, indicating that business conditions remained challenging for manufacturing firms.

A PMI reading below 50 points indicates contraction in factory activity.

It is noteworthy that Malaysia’s PMI reading has remained below the 50-point threshold since August 2022.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid, however, said there is a “chance” for Malaysia’s PMI to turn around in 2024.

The rebound in activities will be seen more in semiconductor-related sectors, he told StarBiz.“The latest World Semiconductor Trade Statistics has projected that the Global Semiconductor Sales (GSS) would grow 13.1% in 2024 from the previous forecast of 11.8%.

“For 2023, it is estimated that GSS contracted by 9.4%.

“Perhaps, the anticipation for lower interest rates could also help improve business sentiment because lower interest rates would reduce their cost of borrowings and also show the government’s commitment to support growth,” he said.

Bank Muamalat, in its 2024 outlook report, had projected the manufacturing sector to grow by 4% in 2024 from an estimated 1.5% in 2023.

The stronger growth is expected as recovery in the semiconductor-related sectors will help to lift the export-oriented industries’ performance.

As highlighted in the latest PMI report, Malaysian manufacturers are also confident about an upcoming rise in production over the next 12 months.

MIDF Research, in its economic brief, foresees demand outlook to gradually pick up and provide support to regional trade recovery.

“We believe this explains the continued optimism indicated by the local manufacturers,” it said.

Meanwhile, TA Research opined that new orders will rebound in the local manufacturing sector.

“The existing subdued demand environment has kept optimism levels relatively steady since September, though concerns persist regarding the speed and timing of the anticipated recovery,” it said.

Referring to the S&P Global PMI report, TA Research said manufacturers scaled back production but the moderation was the slowest recorded since August.

Meanwhile, stocks of finished goods were wound down at the fastest pace since September, as firms used existing stocks to fulfill orders.

On a positive note, TA Research said Malaysian manufacturers exhibited resilience in the face of challenging market conditions by increasing employment levels for the first time in eight months.

“Simultaneously, companies managed to reduce their outstanding business at a marginal rate, marking the slowest pace since August 2022.

“Although the most recent PMI data indicates subdued demand conditions in the Malaysian manufacturing sector as of the close of 2023, S&P Global affirms that the findings align with modest growth in official statistics,” it added.

Malaysia was not the only country in the region to face a contraction in factory activity in December.

Among the seven Asean nations under observation, manufacturing conditions were weak as well in four other countries, namely Myanmar (42.9), Thailand (47.9), Malaysia (47.9) and Vietnam (48.9).

Nevertheless, some countries showed an improvement in their operating conditions, led by the Philippines (51.5), Singapore (52.0), and Indonesia (52.2).

In summary, the Asean manufacturing sector concluded the year on a subdued note, scoring 49.7, a decline from the previously recorded 50 points.

In Malaysia, new export orders fell for eight consecutive months, but the pace of decline at the softest rate since May.

Kenanga Research noted that although manufacturers remained concerned about the pace and timing of a recovery, the degree of optimism remained broadly stable since September.

“The manufacturing PMI is expected to gradually improve in the near term, attributed to the potential upswing in the technology sector and China’s gradual recovery, both of which are expected to contribute to an improvement in Malaysia’s export performance moving forward.

“Nevertheless, our outlook remains cautiously optimistic, as rising geopolitical tensions could disrupt the global supply chain and potentially impact global trade activity,” it said.

Against this backdrop, Kenanga Research retained its gross domestic product (GDP) growth forecast for the fourth quarter of 2023 (4Q23) at 3.7%, as compared to 3.3% in 3Q23.

The stronger sequential growth is likely to be supported by a resilient domestic demand, bolstered by year-end festive spending and a continued increase in tourist arrivals.

“Hence, we expect 2023 GDP growth to align with our projection of 3.5% to 4.0% (2022: 8.7%) and anticipate it to expand to 4.9% in 2024,” it said.

Source: The Star

Optimism for manufacturers

PGF Capital Bhd plans to develop a self-sustaining integrated township with an estimated gross development value (GDV) of RM3 billion adjacent to the Automotive High-Tech Valley (AHTV) in Proton City, Tanjong Malim, Perak.

In a statement on Wednesday, the company said the strategic development with over 6,000 residential and commercial units would take place over 10 to 15 years on 161.87 hectares (ha) of land.

PGF Capital said the comprehensive project also includes 99.27 ha for agriculture plantations, 21.61 ha for aquaculture activities, 119.58 ha for eco-tourism, 23.55 ha for an eco-retreat, and 29.02 ha for lifestyle communities, including a retirement and wellness village.

“This comprehensive initiative reflects PGF Capital’s commitment to creating not just a township, but a harmonious and sustainable living environment,” it said.

PGF Capital said it was leveraging AHTV’s potential as China’s automotive powerhouse Zhejiang Geely Holding Group Co Ltd is investing RM46.8 billion to develop the AHTV as Malaysia’s next-generation vehicle hub.

Group chief executive officer Fong Wern Sheng commented that the master plan for the land envisions a self-sufficient and vibrant community, integrating residential and commercial spaces with thoughtfully designed amenities and infrastructure.

“Geely has proposed the construction of a university, and we are delighted that the Perak state government is exploring suitable locations for such a facility.

“Our property development plan is currently undergoing review and awaiting approval from the Perak state government. We aim to launch our first phase by 2024,” he said.

Fong said that PGF Capital had signed a joint venture agreement with Malvest Properties Sdn Bhd, a property developer based in Penang, to jointly develop Phase 1 with an estimated GDV of RM600 million, which will offer 1,808 units of residential and commercial properties tailored to different market needs.

“The development plan includes the integration of technology for sustainable living, which encompasses initiatives such as electric vehicle shuttles for a greener transportation option, artificial intelligence-enhanced security systems for a safe living environment and the adoption of solar energy to mitigate carbon emissions and reliance on traditional power sources,” PGF Capital added.

Source: Bernama

PGF Capital plans RM3 bil GDV development near Automotive High-Tech Valley

Oliver Healthcare Packaging (Oliver), a leading supplier of sterile barrier flexible packaging solutions to the global healthcare market, has commenced construction of its new manufacturing facility in Johor – the first plant in Malaysia, and the largest in Asia.

In February last year, the company broke ground on their 122,000-square-foot manufacturing facility, which is located within the i-Tech Valley, an integrated industrial park in the established economic zone of Iskandar Puteri, Johor. The plant, expected to begin operations by end-2024, will help develop Malaysia’s medical devices ecosystem through the supply of innovative flexible packaging solutions for Asia-Pacific’s rapidly growing healthcare industry.

Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz said, “Oliver Healthcare Packaging’s choice of Malaysia for its inaugural presence in Asia stands as an unequivocal testament to our attractiveness not only as an investment destination, but also as a thriving and dynamic hub for companies wishing to establish strategic access to the region. The commencement of their facility’s construction sends a strong signal on Malaysia’s efficient facilitation of investments to other investors. To us, timely implementation of committed investments is equally key, because it means that jobs and opportunities for SMEs can be quickly realised to benefit the Malaysian economy.”

Meanwhile, Malaysian Investment Development Authority CEO Datuk Wira Arham Abdul Rahman said Oliver Healthcare Packaging’s decision reflects confidence in Malaysia’s business-friendly environment and the resilience of their medical devices supply chain.

He added that Mida is fully committed to collaborating with the company to bring this project to fruition, extending a warm welcome to similar initiatives.

“Malaysia plays an important role as a strategic hub for the many pharmaceutical and medical devices companies in Southeast Asia. We look forward to working closely with Mida to further the growth and development of Malaysia’s medical devices ecosystem. It’s a critical investment that will support the ever-evolving healthcare needs of this region and beyond,” said Kenneth De Muynck, general manager, Asia-Pacific, Oliver Healthcare Packaging.

The new manufacturing facility will create employment opportunities with positions in engineering, manufacturing, plant management, and more. It will also boast the latest state-of-the-art manufacturing equipment housed in ISO-7 and ISO-8 clean rooms, meeting the stringent regulatory standards for medical packaging.

Source: The Sun

Oliver Healthcare Packaging starts construction of Johor factory

Manufacturers should be more objective when asking the government to be transparent and clear about the implementation of the Imbalance Cost Pass-Through (ICPT) mechanism as they should practise what they preach with their consumers.

This is not only limited to the energy sector but all sorts of investment, training, and business activities under the Madani government.

The Federation of Malaysian Manufacturers (FMM) recently said it was disappointed with the government’s decision to maintain the ICPT mechanism surcharge for the first half of 2024 at 17 sen per kilowatt hour (kWh).

The manufacturers also called for more clarity on the mechanism while hoping for more details to be made available on why it made such a decision as industry players were aiming for a reduction in the ICPT surcharge following the overall declining trend in global fuel prices in 2023 and the six-month lag.

On a complaint made by FMM, Malaysia University of Science and Technology economics professor Geoffrey Williams said that since the surcharge has not changed, it would not disadvantage businesses.

“The bills for high users are determined in the same way as before and will adjust in the same way so there should be nothing to complain about. Provided cheaper global fuel prices eventually feed into lower prices, there is no particular issue here,” he told Bernama.

Implemented in 2015, the ICPT mechanism helps protect the industry against fluctuating fuel costs by reviewing fuel prices and generation costs every six months.

The mechanism also allows the utility company, Tenaga Nasional Bhd, to reflect changes in fuel and other generation-related costs in the electricity tariff as these costs are set based on benchmarked prices in the base tariff.

Williams said the ICPT surcharge was cut to 17 sen/kWh from 20 sen/kWh in July last year, therefore industry players have already benefited.

They are also enjoying a subsidised rate based on US$79 per tonne of coal to generate electricity when the actual price is US$110 per tonne.

“Global gas prices are similarly higher than those used to calculate the costs to industry, therefore they are benefiting quite a lot but we do not see them passing on lower costs to consumers when that happens,” he said, urging the manufacturers to be more objective on the matter.

Changes are part of subsidy rationalisation

He stressed that these changes are part of the subsidy rationalisation programme that industry players have been calling for.

They will save money, reduce the subsidy to richer people, and reduce market distortions and this is what is expected and what stakeholders want, he said, adding that the government is delivering on its promises.

“As the subsidy bill is reduced, the government has more fiscal space to help industry players more directly with tax cuts for example, or indirectly by putting more money into the hands of their customers.

“This is a win-win and industry players should support the subsidy rationalisation that they have been calling for. They can also work proactively to reduce energy consumption and switch to renewable energy or more efficient business models,” Williams said.

He also called on manufacturers to work with the government on many green economy schemes and the Green Investment Tax Allowance on green assets for example.

From July to December 2022, the government allocated RM5.4 billion for electricity subsidy. This amount rose to RM10.8 billion from January to June 2023 and RM5.2 billion from July to December 2023.

The government, on implementing its subsidy reforms, planned to give subsidy to targeted consumers only as it moves away from the inflating allocation for all subsidies which reached RM80 billion in 2022 – the highest in history.

Pro-business government

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the government has always been pro-business when it comes to economic policies.

This is proven via the various incentives to promote investment namely the pioneer status, investment and reinvestment tax allowance which would essentially help companies to upgrade their production capacities.

Besides, there is also a financing programme administered by various agencies namely the SME Bank, Bank Pembangunan, BSN, et cetera, that can assist the financing needs among the micro, small and medium enterprises.

Not to mention matching grants provided by government agencies to promote certain activities such as automation.

“While the government has been forthcoming to help businesses in managing their cost and investment, prices are still high.

“This would mean businesses have not really passed the benefits that they have procured from the government incentives and instead continue to charge prices as per normal to gain better profit margins,” Mohd Afzanizam said.

Sharing an economics term, he said this is called prices sticky downward whereby prices tend to remain high even though the businesses may have been experiencing a decline in their input cost.

Citing an example on a menu cost, he said business operators are likely to keep their prices unchanged on the menu even though their input prices have gone down (subsidies and price control).

“This is given the fact that it is a costly affair for businesses to reprint a new set of menus despite market prices having gone down. More importantly, it is profitable for business to maintain their prices,” he concluded.

Source: Bernama

Be more objective on ICPT, industry representatives told