KUALA LUMPUR, Aug 19: Nearly 40% of Malaysian manufacturers said their businesses would only be sustainable for less than a year, according to a survey by the Federation of Malaysian Manufacturers-Malaysian Institute of Economic Research (FMM-MIER).
According to the survey’s first half of 2020 results released today, 38.9% of businesses said they could not sustain themselves for the next 12 months after revenues plummeted due to Covid-19 and the movement control order (MCO) which saw all non-essential businesses brought to a halt.
FMM said 549 respondents nationwide participated in the July 2-31 survey, held for the 17th year.
A total of 9.1% said they could sustain themselves for 10-12 months, 6.7% for 7-9 months, 18.4% for 4-6 months and 4.7% for 1-3 months.
“Most of the companies, unless they are cash-rich, on average will have six months of cash (reserves) to sustain them – and that is already considered good,“ FMM president Soh Thian Lai said in a press conference at FMM’s headquarters today.
“Some of them who say they can last for 12 months… it is because of the government stimulus packages, wage subsidies and bank moratoriums,” he added.
Around 24.6% of the businesses said Covid-19 and the MCO had not affected their business while 34.2% said their businesses would be sustainable for over 12 months.
While 2.2% of the respondents reported they were already closing their businesses, Soh said the 38.9% of businesses who said they would not be able sustain themselves might not be closing shop as “after these 12 months, they will look to bank loans, government assistance or mergers and acquisitions”.
Noting that the manufacturing sector made up close to 85% of total exports last year, Soh said this year’s outlook would be less hopeful due to weak global demand.
The International Monetary Fund last month slashed its forecast economic growth, estimating a 4.9% contraction after previously predicting a 3% contraction.
Stating that it was important for local businesses to survive to keep unemployment numbers from rising, Soh said the government and banks had key roles to play in providing more stimulus packages and loosening loan restrictions.
“Manufacturing makes up 23%-25% of GDP (gross domestic product), so the government should focus on the sector,” he said.
“The banks have the liquidity to support businesses, and it’s critical that businesses survive as we are worried that unemployment will shoot up to more than one million.”