Rising costs, labour shortage temper border reopening joy for SME

PETALING JAYA: The reopening of Malaysia’s international borders and further easing of Covid-19-related restrictions on Friday are welcome, small and medium enterprises (SME) say, but they revealed that they are still inundated by challenging conditions, particularly from runaway commodity prices and labour shortages.

SME Association Malaysia president Ding Hong Sing (pix) pointed out that the business community is seeing rapid material cost inflation, especially due to the conflict between Russia and Ukraine. To illustrate, he cited flour prices. which have shot up 11% recently.

“Furthermore, labour shortages due to the restriction on foreign workers because of the Covid-19 pandemic have yet to be resolved. Recently, there has been a recovery in sales orders but SME struggle to fulfil them as there are not enough workers,” Ding told SunBiz.

He said his members have recruited locals to fill the vacancies but there is simply not enough supply to meet demand, particularly in the “3D” (dirty, dangerous, difficult) jobs.

On this issue, Ding stated that he is lucky to be able to obtain the automation grant that was offered by the government last year, of which he invested an estimated RM5 million to automate his operations. However, given the bottleneck in supply chains, the machines needed will only arrive at the end of this month, after a 10-month wait.

He shared that the adoption of automation is projected to double his capacity and reduce his dependency on labour but without all the equipment and processes in place he has yet to find out.

With regard to the shift towards an endemic Covid-19 situation, Ding expressed caution in relation to his company’s operations.

“Although the vaccination rollout and measures to combat Covid-19 have seen some measure of success, SME are cautious as the risk still remains and businesses dread a shutdown over a positive case which could lead to losses.”

On this subject, the SME Association president said members will err on the side of caution and continue to adhere to the government’s standard operating procedures.

For Terang Bulan Landscape Sdn Bhd founder Tan Peng Koon, the coming border reopening and the easing of restrictions are not expected to bring a direct positive impact to his landscaping, construction and plastics manufacturing business, which is largely focused on the domestic market.

He shared that the main concern at the moment is the runaway commodity prices such as steel, cement and oil prices which have greatly affected his bottom line.

“For most jobs and orders, we are able to pass the increase in cost to our customers. However, there are also contracts we’ve entered into before the price hike so we have no choice but to absorb,” he said.

Given the challenges in the last two years, Tan realises that to get through these challenging times he cannot rely only on a single source of profit.

“Throughout the lockdown period, the maintenance business has helped us to break even and keep salaries paid but there is also a need to diversify the business. Since then, Terang Bulan has ventured into e-commerce and food production, which has led to growth despite the challenging climate,” he said.