The Malaysian manufacturing sector is forecast to expand 4.7% year-on-year (y-o-y) in 2019, supported by export-oriented industries, following continuous expansion in electrical and electronics (E&E) as well as chemicals and chemical product subsectors, according to the Ministry of Finance’s (MoF) Economic Report 2018/19, titled Fiscal Outlook 2019 dated November 2nd 2018.
However, on the 2nd of January 2019, The Edge published the following – “Manufacturing activity in Malaysia in December suffered the sharpest deterioration in manufacturing business conditions since the survey began six-and-a-half years ago. The Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) fell to 46.8, from 48.2 in November. A reading of above 50 indicates an expansion and below 50 points a contraction.”
According to HIS Markit economist, the manufacturing prospects in the beginning of 2019 are likely to remain negative. Some analyst put the blame on the US/China trade war spill over effect. Contrasting this is the manufacturing sector in Vietnam which ended 2018 on a high note despite a dip in the PMI index to 53.8 in December. Vietnam is forecasting a GDP growth of between 6 – 6.8% for 2019 and expecting significant growth in their manufacturing and hi-tech segments.
It is forecasted by the Ministry of Finance (MOF) that Malaysian gross exports are estimated to grow 3.9% year on year in 2019 with high demand for E&E, chemical and chemical products, petroleum products, manufactures of metal, machinery, equipment and parts, as well as optical and scientific equipment. The 4% growth projected for 2019 is dip against the 6% achieved in 2018.
Given this scenario what is in store for the manufacturers of other industries? Is local demand sufficient for them to stay sustainable and relevant? If yes, how can they operate even more efficiently and cost effective in such trying times? Generally 80% of manufacturers will adopt a wait and see stance given the uncertainty and expected bleak market in 2019. Only 10% will deep dive into innovation and take the opportunity in the slow down to either transform or reengineer their business to suite the coming tide.
As Industry 4.0 dawn upon us, manufacturers in the region especially in Vietnam and Thailand have taken up the challenge to aggressively automate their factory operations. Many have installed robots, sensors and adopting big data analytics. Big manufacturers in Malaysia have undertaken such tasks as well and it is now left to Malaysian SMEs which form the bulk of manufacturing entities to pick up the ball and adopt such technologies as well. By automating more processes, Malaysian manufacturers can scale back on the operating cost and even in bad times will be able to turn a profit. Automation will lead to better quality produce, less defects, more effective use of raw materials and improve the overall supply chain of the industry. With this by the end of 2019, Malaysian Manufacturing would be back on track to compete in the regional and global market place.