Malaysian businesses enter 2018 in more upbeat mood: RAM survey

KUALA LUMPUR: The business confidence of large corporations and small and medium enterprises (SMEs) is positive going into 2018, even though the larger businesses look to exude more optimism than their smaller counterparts, according to the quarterly RAM Business Confidence Index.
The survey took into account factors such as turnover, profitability, hiring intentions, business expansion, capacity utilisation, investment intentions and access to bank financing. Jointly produced by RAM Holdings and RAM Credit Information Sdn Bhd, a total of 3,500 respondents comprising 974 corporates and 2,500 SMEs were surveyed.
It showed that both large corporations(55.6) and SMEs(52.4) had scored above the benchmark 50 points, whereby corporates appeared to be more bullish on turnover, profitability and business expansion.
In terms of hiring, albeit marginally lower than a year ago, large corporations and SMEs both still indicated interest in increasing headcount. This was especially notable among agriculture, mining and manufacturing firms in line with the output recovery in palm oil sector and external demand for manufactured goods.
SMEs projected weaker sentiments in terms of expectations for profit and turnover, due to uncertainties and limitation to economies of scale, operational flexibility and bargaining power. This is exacerbated by revenue collection punctuality and visibility on future contract awards.
RAM Holdings Bhd Group CEO Datuk Seri Dr. K. Govindan said the struggle faced by local SMEs in financing, economies of scale and others is not unique to Malaysia.
On the domestic front, large and medium-capacity firms are more likely to be the ones steering Industry 4.0 rather than SMEs, which are in the smaller size bracket, given the advantage larger firms have in capacity, productivity and labour.
Industry 4.0 refers to the trend of automation and data exchange in manufacturing technologies. It is described as the fourth industrial revolution, smart manufacturing or digital factories.
On top of that, Govindan said, a number of the SMEs are not in a position to take advantage of the growth opportunities available to them, because of financing issues, for example, lack of collateral, lack of initiative and access to export opportunities and, to some extent, literacy.
“Smaller ones need attention and the possibility of helping them grow in e-commerce,” he said.
RAM Ratings economist Kristina Fong said the bullishness projected by both large corporations and SMEs going into the first quarter of 2018 is a sign that Malaysia’s economic growth momentum will remain resilient.
RAM is forecasting full-year gross domestic product (GDP) growth to come in at 5.8% in 2017 and 5.2% this year on the back of strong domestic and external demand.
Private investment is expected to grow with companies showing indications of capacity building in terms of business expansion and capital investment as well as a continued interest in hiring, while export growth is expected to moderate.
The ringgit is expected to hover between RM4.10 and RM4.20 to the US dollar throughout the year, while a 25-basis-point increase in Bank Negara Malaysia’s Overnight Policy Rate is expected sometime in May this year.