Roughly 42% of respondents from the manufacturing sector in a survey are preparing to cut costs by decreasing their headcount by as much as 30% come the end of 2020, as an attempt to keep their businesses afloat during the pandemic-induced slowdown.
The FMM-MIER Business Conditions Survey also showed that retrenchments by manufacturers would be likely in 2021, with 42% of the those surveyed stating they will proceed to decrease staff count, albeit by a smaller quantum of 10% to 20%.
"Due to new normalcy and standard operating procedures (SOP) to comply with, the manufacturing output has been reduced. Hence, they do not need so much workforce [to keep the business running]. One of the ways to reduce cost is cut down the workforce," FMM president Tan Sri Soh Thian Lai said.
Soo said most non-essential goods manufacturers were only permitted to continue production activity after movement restrictions were relaxed. Moreover, not many of them have restored operating capacity to pre-pandemic levels, except for rubber glove manufacturers, which he believes are performing at their maximum capacity.
He said many manufacturers are still running at about half capacity as their production is capped by the subdued demands from export and local markets. Those most affected are largely building material manufacturers who supply the construction sector and food manufacturers catering to the hospitality industry.
In terms of business sustainability, 38.9% of those surveyed thought that their businesses would be able to survive for less than 12 months, as 2.2% already winding down. Meanwhile, 34% of respondents assumed that their companies would be able to sustain their businesses for more than 12 months.
The importance of government initiatives.
Given this, Soo said government initiatives such as the wage subsidies and loan moratorium play a vital role in business sustainability.
Because of the uncertainty and discouraging economic backdrop, Soo advised the government to continue to give cash assistance to companies, especially micro-enterprises and small and medium enterprises as they are in the most vulnerable group.
As businesses are facing cash flow issues due to the pandemic, Soo pressed the government to extend the loan moratorium by another three months until the end of the year.
"Based on our view, banks have enough liquidity to support the extension of loan moratorium. Now businesses must be able to survive to keep the unemployment rate low. Bear in mind there are half a million undergraduates in the country likely to face unemployment on top of the current unemployment figure. We are asking banks to extend the loan further [moratorium], to give businesses space to recover their revenue so later they can cover their bank loan facility," he added.
It was reported by the Statistics Department that there are 773,200 people unemployed as of June this year, bringing the unemployment rate to 4.9%. Compared to May, the unemployment rate stood at 5.3% or 826,100 people unemployed.
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Source: The Edge Markets
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