As Malaysia’s total trade in April jumped 43.2% to RM 190.8 billion from a year ago, how will it be from May to June and possibly in beyond, under the current order of movement control (MCO 3.0)?
With MCO 3.0, which began on June 1, extended for another two weeks until June 28, there are concerns about the extent of the moderation in exports during this period.
Since the main sectors are allowed to operate under 60% capacity, the impact on them can, at this stage, still be considered minimal.
But the effect on individual businesses, especially small and medium-sized enterprises (SMEs), can be substantial.
Many non-core sectors such as plastics, paper products, wood-based products as well as clothing and clothing, which are not allowed to operate, are unable to ship their exports.
“These are the types of sectors where SMEs are dominant; prolonged confinement will worsen the situation.
“Even for those who do not have essential services operating at 60% of their workforce, total output and productivity will indeed also be affected,” said the national secretary of the Association of Small and Medium Enterprises. , Yeoh Seng Hooi.
The turnaround time of production lines will be affected by the 60% capacity limit, and the momentum of export recovery will be affected by the expansion of FMCO, said Chief Economist of Bank Islam Malaysia Bhd Mohamad Afzanizam Abdul Rashid. (photo above)
Faced with this local development, global demand is rather healthy; the global manufacturer purchasing index (PMI) continues to hold above 50, signaling that the manufacturing sector is in an expansionary mode.
(The PMI indicates the health of the manufacturing sector; a reading above 50 represents an expansion of the sector).
In the current MCO 3.0, the all-important electrical and electronics (O&E) sector is classified as “critical”, unlike the first MCO 1.0 of 2020.
Since E&E accounts for 40% of total exports, this segment can continue to operate largely as usual, remaining a key contributor to export growth.
The E&E sector is supported by favorable winds from the global chip shortage and increased demand.
“Therefore, we still view exports as the key driver of Malaysia’s growth for the remainder of 2021,” said Weillian Wiranto, economist at OCBC Bank Malaysia. (photo below)
Manufacturing is a priority sector for getting vaccinated against Covid-19, and production losses during this HSFO period will be met in the coming months, against a backdrop of solid prospects for global trade.
In addition to E&E, commodity exports are also expected to remain dynamic.
RHB Bank Maintains 5.4% YoY Gross Domestic Product (GDP) Growth As Export Data So Far Proves To Be Stronger Than Expected, Said Dr Sailesh Jha, Group Chief Economist RHB.
With the gradual reopening of sectors in later phases of OCAF, we could see an increase in export shipments in the third quarter, said former head of RHB Research Institute, Asean economist Peck Boon Soon.
Some exporters with finished products, who were not authorized to operate, could head to the ports.
As exporters, they have contracts to fulfill, and it is hoped that their customers will accept delayed shipments as well as discrepancies in letters of credit, Yeoh said.
Subject to the impact of MCO 3.0 and the effectiveness of the vaccination rollout, Alliance Bank Malaysia Bhd believes that the reimposition of MCO 3.0 will have minimal impact on Malaysia’s foreign trade. This is partly attributed to the strong economic recovery among major trading partners in the United States and China.
“Malaysia’s total exports have reached new milestones for two consecutive months, indicating the continued resilience of foreign trade performance.
“This is despite ongoing restrictions on movement and the uneven recovery of the global supply chain,” said Manokaran Mottain, chief economist of Alliance Bank Malaysia. (Photo above)
Exports in April had jumped 63% year-on-year to RM 105.6 billion, from a year ago, helping to boost the PMI for April, which peaked at 53.9 and remained on an expansionary trend in May (51.3).
In March, exports grew 31% year-on-year, surpassing the RM100 billion mark to RM 104 billion.
The main export products – E&E, rubber gloves, petrochemicals, chemicals, palm oil and palm oil products – which are allowed to operate during this MCO at 60% of their capacity, account for around 63 % of total exports.
Mah Sing said in April that he had secured purchase orders through September, with the first batch of shipments to be sent to buyers in China, the United States, the Middle East, Japan and Korea. , around May and June.
The export industry needs to operate smoothly in order to fill orders on time and efficiently.
There are a few snags during this prolonged OLS; major sectors are operating at 60% capacity while companies on the non-essential list but with items ready for export are unable to operate.
Time is of the essence in our fight to get out of this hold of Covid-19 because we urgently want to seize the wave of exports. Opportunities cannot strike twice.
Yap Leng Kuen is a former StarBiz editor. The opinions expressed here are those of the author.