OUR country has seen a lot of changes over the past two weeks.
And while the business community is positive on the outlook for the country in the long run, most are uncertain about market conditions going into the second half of the year. Coupled with a slowing growth on the global front, businesses could be in for a rocky ride.
Nonetheless, there are pockets of opportunity that companies can exploit to grow their business during this time, notes RHB Investment Banking head of economic research Peck Boon Soon.
“Don’t just look at the threats, but look for the opportunities,” he said at the launch of The Star Outstanding Business Awards (SOBA) 2018 last Friday.
During his talk titled ‘Post-GE Market Outlook – Opportunities & Risks’, Peck advised SMEs to look beyond the domestic market.
“The export market is where you should target after you’ve established a strong base in Malaysia. The Malaysian market is too small compared to the global population,” he said.
According to Peck, China makes a good destination for local exporters given that the country has transformed from an export-based economy to a consumer-driven one. With rising incomes in China, it is only a matter of looking for a product that is suited to the market.
China is becoming an important market for Malaysia’s export. Its share picked up from 3% of total exports in 2000 to about 13% in the first half of 2017. Peck expects China’s share to increase to over 20% of exports.
He added that food and beverage products present a great potential for local exporters as the segment currently only makes up close to 2% of total exports to China. The largest export segment at the moment is machinery and transport equipment (40.5%), followed by mineral fuels (17.7%).
“Chinese consumers have strong confidence in our food products. That’s our strength. We follow food standards accordingly. So the opportunities in this sector will be tremendous,” he said.
He also encouraged companies to leverage on the use of e-commerce platforms to market their products to consumers in other countries.
For businesses still largely reliant on the domestic market, Peck advised these companies to study the changing demographics of the Malaysian population to ensure that they can cater their products to the growing segments of the population accordingly.
However, he cautioned that economic uncertainties remain as developments taking place in other markets could potentially have an impact on Malaysia.
For one, there are concerns that the US may experience a slowdown or a recession in 2019, in line with the economic cycle.
He noted that the global economy has slowed slightly due to tightening measures in Europe. He also expected China to slowdown in the second half of the year due to tightening measures in the property sector.
“But they (China) are managing the slowdown pretty well. And that’s good news for many Asean countries,” he said.
Global growth is expected to remain on hold at 3.9%.
Domestically, the recent announcement that the GST would be zero-rated from June 1 would also affect businesses.
“It is good news for many of us. It means more money in the consumers’ pockets.
“However, it would have been better if this was done later when things are better planned out, at least for businesses so that they will not be stuck with 6% GST for their inventories. We are not sure how this will pan out. If they are able to claim it back, then it’s ok.
“If they can’t claim it immediately, then their cashflow will be impacted and we know that cashflow for small businesses are not very liquid. So some are quite worried,” he said.
He added that the removal of the GST would mean a lost of revenue for the government and that the government may reduce their expenditure to contain the deficit, which could affect liquidity in the economy.
“So we will have some turbulence in the second half. But this is short-term pain for long-term gain,” he said.
He added that the ringgit will likely not weaken too significantly, expecting growth for Malaysia to moderate to 5.2% this year from 5.9% in 2017.
“How do you position your company under these circumstances? Your borrowings should not be too high, especially when we are coming towards the end of the (economic) cycle. But, bear in mind, that in recessions, opportunities come,” he said.
Small businesses have proven to be resilient through tough times. Star Media Group Bhd group managing director and chief executive officer Datuk Seri Wong Chun Wai noted that the last eight years of SOBA have uncovered such success stories of small ventures that have withstood the test of time and emerged stronger and bigger.
“When you hear these stories, it makes you feel proud to be a Malaysian. They grew by pure hard work. As SOBA goes on, we will continue to see more of these stories unearthed.
“SOBA is a collective effort by Star Media Group in recognising home-grown enterprises and their contributions to the country’s economy. These awards are not just given to companies that do well in their bottomlines but to companies that are at the forefront of the industries they are in,” he said at the launch.
SOBA pays tribute to enterprises striving to carve a niche for themselves in the world of business. These awards aim to inspire, drive and also steer them forward towards greater success, as well as promote business excellence and stimulate positive competition.
The awards are open to all local enterprises that are not part of a multinational group or listed group incorporated in Malaysia with foreign equity not exceeding 50%. Those who wish to participate may obtain the awards submission pack from The Star or download the forms at www.soba.com.my.
Deadline for entries is October 19, 2018.
SOBA 2018 is organised by Star Media Group with DiGi, PKT Logistics Group Sdn Bhd and RHB Bank Berhad as main sponsors, Credit Guarantee Corporation as co-sponsor, Matrade as official trade promotion partner and New World Petaling Jaya Hotel as official venue. It is endorsed by Ministry of International Trade and Industry, supported by Bursa Malaysia and audited by BDO with 988, SuriaFM and dimsum as official media partners.
For more information on SOBA 2018, call The Star Events Business Unit at 03-7967 1388 ext 1432 (Jasmine) / 1857 (Pei Wen) or visit www.soba.com.my