This article first appeared in The Edge Financial Daily on March 23, 2018
KUALA LUMPUR: Chinese businesses are more optimistic about the Malaysian economy this year owing to a slight improvement in the second half of last year but remain concerned about rising costs.
Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) indicated that 55% of respondents surveyed were “optimistic” or “somewhat optimistic” about prospects this year.
However, rising labour costs also prompted 40% of the respondents to state they could consider the need to downsize their workforce in the coming 12 months.
In a survey on the economic situation of Malaysia in the second half of 2017 (2H17), a significant number of the businesses said they anticipate the possibility of staff cuts in view of higher operating costs, in part because of a newly implemented Employee Insurance System (EIS) and heftier foreign worker levies. Minimum wages are also set to be reviewed in July.
Of the 390 respondents to the survey, 38.8% indicated employee numbers could be cut by 5% to 20%, while on the other end of the spectrum, only 1.9% estimated a drastic 30% cull.
A quarter said they were “unsure” how many employees need to be let go.
Even so, ACCCIM said should the need arise, the “percentage effect” of retrenchments was not expected to be significant.
“It should also be noted that varying the reliance on staff in certain areas of activities is a norm as businesses strive to remain competitive.”
Sharing the survey results with the media yesterday, the association said 41% of the respondents said their business performance was adversely affected mainly because of government policies.
These included compliance with the Competition Act 2010, minimum wages, foreign workers’ levy, anti-profiteering mechanism, goods and services act 2014 and the Employment Insurance System (EIS).
The second most important factor impacting their businesses was rising operating and raw material costs, according to 39% of the respondents (35% in 1H17).
With the coming into force of the EIS from Jan 1, employers and employees have to each contribute 0.2% of the monthly salary (up to a ceiling of RM4,000) to a scheme, which seeks to provide temporary relief to workers who lose their jobs.
ACCCIM president Tan Sri Ter Leong Yap said businesses faced with high costs should work on improving efficiency and productivity to stay competitive.
This is imperative considering an overwhelming 92% of the respondents believe inflation will continue to rise in the future.
On a sweeter note, more businesses (16%) noted an improvement in production volumes in tandem with the movement in sales during the period under review, compared with 4% in 1H17.
Additionally, 14% saw increased new overseas orders versus 10% before, indicating an improvement in the export of goods and services.
Commenting on how the upcoming general election might change the Malaysian business landscape, Ter said the ACCCIM hopes to maintain good trade relations with China regardless of the outcome.
“The One Belt, One Road initiative is a very important milestone achieved. Malaysia should fully capitalise on this as it will help with the nation’s economic growth and development.”