FMM says production cost will ease if ringgit continues to be strong

PETALING JAYA: The Federation of Malaysian Manufacturers (FMM) said the bane of high production costs could be contained if the ringgit strengthens to the RM3.50-RM3.80 a dollar range amid favourable business conditions, moving into the first half of this year.
The FMM-MIER (Malaysian Institute of Economic Research) Business Condition Survey found that indicators such as sales, production volume, capacity utilisation and employment have improved in tandem with an improving economy.
However, production cost, which has seen about 10% year-on-year increase since 2016, remained relatively high due to the weakened ringgit, with raw material cost constituting 70% of the total cost.
“In 2017, our ringgit weakened by 37.5% compared with 2014, which had a big impact during the the second half of 2017. If the ringgit ranges between RM3.50 and RM3.80, it will reduce the cost of doing business given most raw materials are imported,” said FMM president Datuk Soh Thian Lai at a media briefing today.
Lower production cost will boost sales and reduce the passing over of cost to consumers, in turn spurring purchasing power.
The survey, which was conducted by FMM in collaboration with MIER between Nov 15, 2017 and Jan 12, 2018, covered 414 respondents.
It noted that only 46% of the respondents were able to collect more than 50% of their payments within the stipulated credit period, with about 52% (2% of the 54% N/A) seeing delays for a varied time period – ranging from more than 30 days from the credit period to more than 90 days.
Soh said while 30-60 days is an acceptable time frame, anything more than that will affect cash flow, which in turn will increase the cost of doing business.
“Some companies may not have enough working capital hence using credit from the supplier to assist them to roll over their daily business,” he said on the reason for the delay in debt collection.
It is also understood that small and medium enterprises are the ones bearing the brunt of it, due to their lack of financial muscle.
Meanwhile, the survey highlighted that Goods and Services Tax (GST) input tax credit (ITC) refunds for both online (92%) and manual (62%) filings have taken longer than the stipulated period of 14 and 28 days, with the requirement of additional documents cited as the most common reason for the delay. About 51% online filers and 40% manual filers said their refunds have taken between one to three months.
In the second half of 2017, FMM received 135 complaints on ITC from its 3000 member base, for amounts totalling RM330 million.
FMM vice-president Abdul Samad Ibrahim said the matter has been brought up to the Customs director-general, and assurances have been given that refunds will be speedier in 2018.