Friday 29 Mar 2024
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KUALA LUMPUR (June 2): The sharp drop in Malaysia's manufacturing output was anticipated and temporary, and is expected to bounce back, International trade and industry minister Datuk Seri Mustapa Mohamed said today.

"Last year was a good year for electronics and semiconductors," he said at a press conference on a study between the Malaysian Investment Development Authority (MIDA) and Universiti Malaya, as well as Universiti Teknikal Malaysia Melaka, on the future of Malaysia's manufacturing industry.

He was speaking at the sidelines of the World Economic Forum (WEF) Asean Summit.

"This year, we knew it was going to slow down and we hope that it will recover," he added.

Malaysian goods producers' output contracted for the 14th successive month in May, recording the sharpest rate of decline in three-and-a-half years, due to poor market conditions and a fall in demand.

The headline Nikkei Manufacturing Purchasing Managers’ Index (PMI) stood at 47.2 in May, little changed from April’s five-month low, indicating a solid deterioration in operating conditions at Malaysian manufacturers.

New orders decreased for the 15th month running in May, the fastest decline since December last year.

Mustapa said the biggest impact in the manufacturing sector is due to the slowdown in the electronics segment, as it comprises 35% of Malaysia's exports.

"We are still dependent on electronics manufacturing," he said.

"A lot of that is export-oriented, so when the export market is softer, that will have some impact (on electronics segment)," he added.

Despite this, he said the government has no plans to review its policies on incentive for the manufacturing sector.

"We think the incentives are quite generous," he added.

He said the International Monetary Fund (IMF) had projected a slower global growth, but growth none the less.

IMF had revised its baseline projection for global growth in 2016 at 3.2%, a 0.2 percentage point downward revision to its projection in January 2016, with recovery projected to strengthen in 2017 and beyond, to be driven primarily by emerging market and developing economies.

IHS senior director and Asia Pacific chief economist Rajiv Biswas told theedgemarkets that Malaysian exports of electrical and electronic products 8.5% year on year in 2015, boosted by strong orders for integrated circuits and semiconductors, with the ringgit depreciation also driving demand for Malaysian electronics output.

He said the global market for industrial semiconductors will grow 8% per annum until 2019, reaching US$60 billion annual market size from a wide range of applications, including medical devices, aviation LED lighting and factory automation.

"The strength of Malaysia's electrical and electronics industry will make it a leading beneficiary of global electronics demand growth over the next decade, related to the fourth industrial revolution and the internet of things," he said when met at the sidelines of the WEF Asean summit.

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