This article first appeared in The Edge Financial Daily on February 7, 2020

KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) is calling on the government to expedite the launch of its planned economic stimulus package, to minimise the impact of the Wuhan virus outbreak on Malaysia’s growth.

“The FMM urges the government to bring forward its stimulus packages planned to address the US-China trade war risks if the novel coronavirus (2019-nCoV) [Wuhan virus] outbreak further worsens the economic situation as we believe it would help to minimise the impact on sectors, including manufacturing, tourism and construction, that have been affected by the Wuhan virus and support overall economic growth,” FMM president Tan Sri Soh Thian Lai said in a statement yesterday.

This, he added, is in view of China being Malaysia’s largest trading partner, and expectations that manufacturers that are export-oriented and rely heavily on Chinese demand, as well as those that import their raw materials from China, are expected to be significantly affected.

The FMM’s statement came after Finance Minister Lim Guan Eng said yesterday that his ministry has been tasked to prepare the stimulus package and that a multi-ministry discussion will be held to get feedback from stakeholders to formulate the plan. The package will be announced at a suitable date that will be fixed, Guan Eng said.

In its statement yesterday, the FMM also suggested several measures it hopes the government would include as part of the stimulus package, including expediting local infrastructure and development projects such as the East Coast Rail Link and Pan Borneo Highway.

This, said Soh, can be the first wave of economic stimulus to release more cash flow to businesses and to shore up short-term domestic demand. “Full implementation of all these construction-related projects will have a profound multiplier effect on more than 100 industries in all other sectors, especially the manufacturing sector,” he said.

The FMM also called on Bank Negara Malaysia (BNM), which had just shaved off 25 basis points (bps) from the overnight policy rate (OPR) to 2.75%, to cut another 50bps “to cushion any anticipated moderation in economic activities”. It further suggested a reduction in employees’ contribution to the Employees Provident Fund by three percentage points, which was last done in 2016. “This will put more cash in the rakyat’s pocket, thereby increasing consumer spending which can further stimulate the economy,” said Soh.

Other measures suggested by the FMM include:

• intensify the promotion of Buy Made-in-Malaysia products to boost domestic demand for locally made products;

• reinstate the now-suspended brand promotion grant that was launched in 2003 to develop and promote Malaysian-owned brand names overseas;

• conclude the Regional Comprehensive Economic Partnership agreement and implement free trade agreements that have been signed to provide market access to Malaysian exporters;

• remove the RM300,000 ceiling on market development grant to encourage more Malaysian small and medium enterprises to participate in international export promotion activities and explore more markets;

• reduce the sales and service tax by 2% for a 12-month period to boost business conditions;

• give exemptions or relief of sales tax on all inputs for the manufacture of non-taxable goods;

• halve levy payments to the Human Resources Development Fund from 1% to 0.5% for all employers for 12 months;

• reduce electricity and gas tariffs for one year to help lower business costs and sustain operations; and

• give Cuti-Cuti Malaysia travel vouchers to encourage Malaysians to holiday locally.

Besides that, Soh said the government should set up a Budget Implementation Committee to ensure that all the proposed and approved initiatives and projects outlined in Budget 2020 — and earlier national budgets — are implemented as planned, and, where possible, expedited to give a more sustained and further boost to keep the economy going.