Insight - Can export momentum be sustained?

“For the next six months, the pace of exports should be sustained; beyond that, we have to see how the global economy performs, ’’ said MMC group managing director Datuk Seri Che Khalib Mohamad Noh.(pic)

AMID reports of high numbers of Covid-19 clusters at workplaces, can the pace of exports be sustained?

Additional challenges worldwide include container shortages, port congestion, cargo liners having maxed out their capacity and sky high Trans Pacific shipping rates.

Shortage of containers is a global issue, but at MMC Corp Bhd, which operates five ports in Malaysia, the problem is still manageable; it has not seen a big drop in volume at its ports.

“For the next six months, the pace of exports should be sustained; beyond that, we have to see how the global economy performs, ’’ said MMC group managing director Datuk Seri Che Khalib Mohamad Noh.

The real test will come when governments around the world start opening up their economies and withdrawing the social safety nets for their people.

With strict implementation of the standard operating procedures, Malaysia should be able to control the situation better.

MMC operates the Port of Tanjung Pelepas, Johor Port, Northport, Penang Port and Tanjung Bruas Port.

MMC's Port of Tanjung PelepasMMC's Port of Tanjung Pelepas

The main risk is still the “stubbornly high” number of Covid-19 cases, which will disrupt the labour force, if their numbers remain elevated, said Areca Capital CEO Danny Wong.

With the cases so high in Malaysia, many manufacturers including Karex Bhd are facing challenges to keep operations running smoothly.

“A lot of testing and sanitising will inevitably occur and that will definitely cause disruptions to output; so this has to be taken into account when considering overall export levels, ’’ said a representative from Karex, the world’s largest condom maker based in Port Klang.

Positive factors that will sustain Malaysia’s trade and further strengthen its trade surplus, include global trade in goods and industrial production returning to pre-pandemic levels, and the US manufacturing index hitting multi-year highs.

US purchasing managers index, which indicates the health of the manufacturing sector, climbed to 57.1 in December, marking its highest level since September 2014, and the eighth straight months of gains.Malaysia’s exports rebounded in the second half of last year, higher by 4.8% from a drop of 7.9% in the first half of last year.

Exports to China notched a new high in 2020, and posted the largest value to the United States in the last decade.

For now, the momentum for exports is still on, following pent-up demand especially from the United States.

“I understand most factories are running at maximum capacity across all sectors, ’’ said Rakuten Trade head of research Kenny Yee. (pic below)

But they are cautious, as the authorities are targeting them with regard to Covid-19 preventive measures.

Exports have been the bright spot for Malaysia since the second half of last year, and are expected to support domestic recovery in 2021.

Estimated to grow by 3.3% in 2021 from minus 1.4% last year, exports will be underpinned by sustained demand for electronics and electrical products as well as firmer commodity prices, said Socio Economic Research Centre executive director Lee Heng Guie.

Despite selective lockdowns in some of Malaysia’s major export markets, a recovery in exports is taking place with the pick-up in demand.

But in the first half of the year, this recovery is likely to be uneven, due to the cautious stance of consumers worldwide, said former RHB Research Institute chief Asean economist Peck Boon Soon.

Malaysia’s exports in December last year grew by 10.8% to RM95.6mil, the highest export value recorded in 2020.

Last year, Malaysia also recorded the highest trade surplus ever, which widened by 26.9% to RM184.8bil.

Anecdotally, this could have been due to a rush for global exports in December ahead of Britain leaving the European Union on Dec 31.

Coupled with a potential resurgence of Covid-19, that may have helped Malaysia’s exports, said Etiqa Insurance & Takaful chief strategy officer Chris Eng.

But the high trade surplus also points to weak imports which is a concern, pointing to weaker demand in Malaysia.

Imports in 2020 totalled RM796.19bil, a decline of 6.3% from a year earlier.

As we enter this crucial period of trying to check the pandemic at workplaces, it is hoped that all companies will speedily set up anti Covid-19 measures and not wait for be slapped with stricter fines and other penalties.

If we manage to contain the spread of Covid-19 via thorough measures, the disruptions to the pace of exports will not be so severe.

Workers’ housing and social activities, besides other areas, will need closer attention by managements and the government.

Yap Leng Kuen is a former business editor of StarBiz. The views expressed here are the writer’s own.

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Insight , MMC , Export , Khalib Mohamed Noh , Tanjung Pelepas ,


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