PETALING JAYA: While Malaysia’s short term supply chain resilience should remain intact over the immediate future, economists are nevertheless more concerned about the erosion of business efficiency and profitability should the Middle East conflict be prolonged.
In an update note yesterday, Apex Research said recent data suggest Malaysian firms remain relatively well- positioned to manage current supply disruptions, with manufacturing purchasing managers’ index (PMI) surveys pointing to ongoing inventory accumulation.
The research house also cited Bank Negara Malaysia, in its latest quarterly bulletin for the first quarter of 2026, that businesses are holding an average of three to four months of inventories.
“Firms have also diversified suppliers and export destinations, reducing reliance on any single supply source.
“Overall, supply disruption risks remain manageable for now.
“Existing inventory buffers, supplier diversification efforts and government measures to safeguard fuel and supply chains should help support production activities in the near term,” said Apex Research.
On a more sobering note, however, economist Mohd Sedek Jantan argued that the sustainability of Malaysia’s supply chains under a prolonged conflict should be analysed through the lens of economic adaptation rather than operational continuity.
He said in the early phases of a geopolitical shock, firms are typically able to absorb disruptions through existing inventories, contractual flexibility and alternative logistics arrangements.
“However, as the duration of the disruption extends, the economic costs of adaptation begin to accumulate, reducing overall system efficiency even if production remains uninterrupted,” Mohd Sedek, who is also investment strategist at IPP Global Wealth, told StarBiz.
He said extended geopolitical instability can raise shipping costs, insurance premiums, financing requirements and delivery uncertainty, and these costs are transmitted through global value chains and ultimately affect firms’ production decisions, inventory management and capital allocation.
Although the transmission mechanism is largely indirect for Malaysia, he explained that the country is nonetheless deeply embedded within regional and global manufacturing networks, and consequently, disruptions affecting major maritime routes, energy markets or international logistics networks can generate cascading effects throughout the production ecosystem.
Mohd Sedek observed that the sectors most exposed to these dynamics are likely to be export-oriented industries characterised by complex cross-border production processes, particularly electrical and electronics, semiconductors, machinery and industrial manufacturing.
“These businesses depend on the timely movement of intermediate goods across multiple jurisdictions, making them especially vulnerable to rising logistics costs, longer lead times and supply-chain synchronisation challenges.
“Over time, such frictions can erode productivity, compress margins and weaken investment incentives,” he said, adding that, therefore, the more relevant economic question is whether firms can continue operating at the same level of efficiency and profitability.
Mohd Sedek said history suggests that supply chains rarely fail abruptly – rather, they become progressively more expensive, less efficient and increasingly complex to manage.
Bernard Aw, chief economist for Asia Pacific at trade insurer Coface, concurred that while stock buffers, supply diversification and government intervention can smooth short-term shocks, they are not a permanent substitute for normal trade flows.
