Business

Friday July 3, 2009

Manufacturing takes a beating


Declining trend in industrial output since fourth quarter of 2008 is expected to continue this year

PETALING JAYA: The manufacturing sector is expected to continue to be adversely affected by the global economic downturn, according to the International Trade and Industry Ministry Report 2008.

The report said the declining trend in industrial output since the fourth quarter of 2008, due to decreasing demand in export-oriented industries, was expected to continue this year.

Malaysia’s export performance, which was sustained up to July 2008 due to revenues from high commodity prices and high export values of manufactured goods, was expected to register a decreasing trend in 2009, it said.

While the crisis would have a general impact on the sector, the ability to cope with the crisis would differ among industries, it added.

The report said industries which were expected to face less impact from the crisis included wood-based, pharmaceutical, healthcare and medical devices.

The wood-based industry has moved up the value chain into secondary processing and invested in capital-intensive activities, such as medium-density fibreboard and particle-board manufacturing.

The export markets remain challenging, as Malaysia’s two major export destinations of wood and wood-based products – the United States and Japan – are expected to be in recession this year.

Meanwhile, the prospects for the pharmaceutical industry remain positive, despite the weak economic climate outlook, due to growing healthcare needs, an ageing population and the prevalence of various diseases. Key drivers which are expected to sustain Malaysia’s pharmaceutical industry are medical tourism, specialist therapy, as well as generic and over-the-counter drugs and food supplements.

The industry is expected to remain resilient this year due to inelastic demand for medicines, regardless of the economic climate.

The report said the healthcare industry was anticipated to continue growing in 2009, with domestic demand for medical devices expected to remain strong due to expansion of hospitals, particularly in the private sector, and healthcare infrastructure projects.

In contrast, several other industries are expected to face a more difficult business environment. These industries include electrical and electronics (E&E), petroleum products and petrochemical and plastics products, iron and steel, textiles and apparel, and cement.

The demand for E&E products is expected to be lower this year.

The report said petroleum products, petrochemical and the plastics industry was expected to face weaker export prospects, as the major markets for Malaysian petroleum products, such as the United States, Europe and Japan, are in recession.

The price of crude oil will exert a strong influence on the outlook of the industry.

Demand for basic industrial chemicals – which are supplied as intermediate products and inputs to industries such as electronics, automative, construction-related, personal care and agriculture – is expected to move in tandem with the progress of these industries in dealing with the crisis.

The report said the automotive industry was expected to face a difficult period this year, as slower economic growth would translate into lower sales volume. The volume is expected to be lower due to slower consumer spending and the difficulty of obtaining financing.

Demand for iron and steel is expected to remain weak due to the depressed construction activities, slowing down of capital investments and reduction in car production in many countries.


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