KUALA LUMPUR: Pointing out that Malaysia is still lagging behind compared to top export nations, the Federation of Malaysian Manufacturers (FMM) has called on manufacturers to go for higher value products in order to further grow the sector.

FMM chairman Tan Sri Saw Choo Boon said manufacturers must move away from lower-end manufacturing, which requires extensive use of low-skilled workers.

“We need to move away from the simple assembly type of manufacturing, where we need a lot of low-skilled workers, and a reduction in our dependency on foreign workers is something we must aim for.

“However, this has to be implemented over a period of time. A total ban on foreign workers would be damaging to Malaysia’s economy, as we are quite dependent on foreign workers,” he said at a press conference yesterday.

Saw explained that the government should emphasise more research and development (R&D) activities, as well as automation of manufacturing processes in order to evolve the nation’s manufacturing sector.

“The government can help through providing an environment for R&D, by giving grants for R&D to assist in innovation. If we move to higher-end manufacturing, we will need skilled workers, and the government should help by ensuring that skilled workers are available,” he said.

Meanwhile, he said FMM has been pushing for an extension for the reinvestment allowance beyond the three-year assessment announced in Budget 2016, from 2016 to 2018, to encourage further automation by companies.

Saw said currently the state of automation in the manufacturing sector is still insufficient, especially as foreign labour is comparatively cheaper.

“At the moment, the government has given reinvestment allowance for companies that invest in automation, but it’s only up to a certain company size. We have asked for it to be extended to all companies, and beyond the three-year assessment period.

“But it’s not just money driving this automation journey, it’s also about support given to the industry, in terms of skilled workers and education,” he said.

Besides that, he also advocated for the setting-up of a centralised oversight body for the export segment.

“All the processes involved in exporting are controlled by many different agencies and departments, so there’s no centralised control or body overseeing the entire chain of processes.

“Some countries have a centralised body which oversees everything, whereas in Malaysia we have the port authority, the transport ministry, as well as the Royal Malaysian Customs. There are too many government departments involved, so it can be very complicated. We are not doing so well comparatively with the top exporting,” he said, adding that this increases the time and costs needed to export goods.

Saw spoke to the media during a briefing by FMM and the Malaysian Institute of Economic Research (MIER), announcing the findings of the FMM–MIER Business Conditions Survey for the first half of 2016 (1H16).

According to the survey, the general business conditions index showed an uptick of seven points to 90 for 1H16, from 86 and 83 in 1H15 and 2H15 respectively, while the index for the expected business conditions stood at 107.

While the index has improved since last year, Saw noted that it is still below the 100-point mark, indicating some cautiousness on behalf of manufacturers amid the uncertain global environment.

“In summary, the first half of the year has performed better than the second half of last year. Going forward, generally there is a positive outlook for 2H16,” he said.

He said the positive outlook for the latter half of the year will be mainly supported by the weakened ringgit and also the continuous efforts by government agencies such as Malaysia External Trade Development Corp (Matrade) to boost global trade.

“Having said that, we need to be cautious because the global economy is still facing challenges. The US, the largest economy in the world, expanded by just about 1.2% in 2Q16, while the eurozone’s growth dropped from 2.2% in 1Q16 to 1.2% in 2Q16. China also showed slower growth, while Japan is stagnant,” said Saw.

In terms of sales, the local sales index rose to 80 for 1H16, from 77 and 72 in 1H15 and 2H15 respectively, while the export sales index rose to 99 points from 95 points in 2H15. However, the index declined year-on-year, from 102 in 1H15.

Going forward, manufacturers anticipate better local and export sales, as the indices stood at 99 points and 112 points respectively, higher than the figures recorded for 1H16.