Converting 75% of export proceeds harmful for industry, says Margma

PETALING JAYA: The Malaysian Rubber Glove Manufacturers Association (Margma) has asked for an exemption from foreign currency conversion rules, saying that anything above a 50% conversion of foreign currency to the ringgit would be harmful to the rubber glove industry.
On Friday, Bank Negara Malaysia announced that effective Monday, exporters holding earnings in foreign currency, would need to convert as much as 75% of it to ringgit. It was one of several other measures announced to support the falling ringgit.
In a statement yesterday, Margma president Denis Low Jau Foo said the rubber glove industry has always used the US currency as a natural hedge to cushion their costings and pricing, as 50%-55% of the foreign currency will be used to offset the difference in purchasing raw materials such as synthetic and natural rubber latex as well as chemicals required for rubber glove production.
Most of local manufacturers and exporters have foreign currency accounts to better manage the spikes and volatility of foreign exchange rates.
Low added that without this natural hedging, the industry will be forced to do a double conversion on the currency – from US dollar to ringgit and from ringgit back to US dollar for all payments.
“We are hoping for and believe for the greater benefit of the rubber glove export industry, that a 50% direct conversion from US dollar to ringgit will be more manageable. We seek an exemption on this new policy in order for the industry to stay competitive in global business,” he added.
The association hopes that BNM will be open to a dialogue to discuss this matter in a more comprehensive manner, as it is engaging both Malaysian Rubber Export Promotion Council (MREPC) and Malaysia External Trade Development Corp (Matrade) on this matter concerning all exporters, especially those in the rubber glove industry.
Low said the association would like to better understand the idea and workings behind BNM’s move so that it can be supportive of a reasonable policy that is workable and conducive for both the central bank and exporters.
“Malaysia is a small trading nation, largely dependent on export revenue. Bigger trading nations like Japan and China trigger a devaluation of their currency in order to stay competitive,” he added.