Lack of favorable factor and dropped in orders, foreign machinery firms to withdraw from Malaysia

Writer: Su Zheng Yi (translated name)
Nanyang Siang Pau, June 22, 2015

Kuala Lumpur, June 21 – The devaluation of ringgit, bank tightening its loans and the implementation of Goods and Services Tax (GST) have all contributed to the slowdown of the investment sentiment, many manufacturers tend to be conservative and adopted a wait-and-see attitude. The machinery sector which is an important part of the industry has also been adversely affected and some foreign firms are considering withdrawing from Malaysia.

Machinery is an integral part of the national development, majority of the industries such as agriculture, aviation and automobile industry cannot do away with machinery. However, the machinery industry has all along being neglected by the government, coupled with the present adverse factors the industry is now in deep trouble.

Nanyang Siang Pau learnt that earlier there were foreign investors who had been considering withdraw from Malaysia as the overall situation here is not as favorable as in Thailand, Indonesia and China.

Market goes slow business is bleak

Malaysia Hardware, Machinery & Building Materials Dealers’ Association (MHMBA) president Datuk Loh Foo told Nanyang Siang Pau that the machinery industry had slowed down and the orders received had dropped because of market sentiment.

On the advantages of neighbor countries, Loh Foo said the investment atmosphere in the neighboring countries is much better than Malaysia, many investors had moved over to these countries.

The demand of machinery would only be there when there is new plant setting up or replacement of old machineries. But with the wait-and-see attitude adopted by the local businesses, the orders had also relatively gone down.

In the past, Malaysia’s machinery industry was deemed to be among the best in ASEAN countries, one of the contributing factors being exemption of tax on the machinery transaction. Many foreign countries had invested in Malaysia because of the 5+5 tax exemption.

However, with the implementation of GST, and also the weakening of ringgit where some machinery firms had refused to purchase new stock, even some big scale foreign companies are also considering withdrawing from Malaysia and moving to neighboring countries.

Shifting plant after the tax exemption period is over

Facing with the unfavorable factors, many businesses have chosen to transform. The largest steel mill in the region had shifted to Indonesia to cope with the demand of the Japanese automobile plants.

Foreign investors in favor of Indonesia and Thailand

Big corporations such as Motorola and Seagate have withdrawn from Malaysia and moved to Indonesia and Thailand. Not only the government will have to bear the consequence, many other related companies were also hit hard.

In view of the lack in research and development resulting in the inability to produce high technology machinery, foreign investors have decided to withdraw from Malaysia, and the peripheral related industries will be adversely affected.

Observers felt that if the government does not look into the problem seriously and take immediate remedy action, the situation might be worsened. Consequently, more and more of the small and medium industries will be forced to wind up as they are unable to compete with the big firms which are more powerful.

Even though there are some businesses chosen to set up plants in other markets, Loh Foo opined that these were only isolated cases; no such trend has emerged yet.

Original Source: 缺乏利因‧订单锐减 机械外企拟从马撤资