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Survey Report on Economic Situation of Malaysia

VIEWS: 7 PAGES: 30

									      ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008



1.       INTRODUCTION

1.1      THE PURPOSE OF THIS SURVEY

         In Malaysia, due to the wide participation of the Chinese businessmen in the
         economic activities, Chinese businessmen play an important role in the
         economy. This survey can be viewed as a means to gauge the economic
         situation facing the Chinese businessmen in the 2nd half of 2008. This survey
         covers four major areas in relation to the Chinese business community,
         namely:

         i.     The Malaysian economic situation in the 2nd half of 2008 ;
         ii.    Major factors affecting business performance;
         iii.   Malaysian economic outlook ; and
         iv.    Current issues facing the Chinese businessmen in relation to
                trade, investment and industrial development in Malaysia.



1.2      SIGNIFICANCE OF THE SURVEY

         Most of the data and statistics in relation to the economic situation available
         today are collected by the Government through Statistical Department of
         Bank Negara Malaysia and its agencies. The Malaysian Institute of Economic
         Research (MIER) did conduct survey on the economic recovery but focused on
         the consumers and the manufacturing sector.

         Given that the Chinese business community plays an important role in the
         Malaysian economy, ACCCIM, as a national organisation representing the
         Chinese business community, take the task to assist the Government in
         gauging the economic situation facing the Chinese business
         community. It also attempts to collect feedback and opinion on
         various measures undertaken by the Government to enable them to
         evaluate the effectiveness of those measures. This would be helpful
         to the Government either in making adjustments to the existing
         policies or in the formulation of new policies.


         The result of the survey would also provide a basis for ACCCIM to
         submit relevant memoranda to the Government and serves as a
         reference for the business community and foreign investors in
         formulating investment plan and strategy.




                                            1
     ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008




2.      SURVEY METHODOLOGY

        The purpose of this survey is to collate information in relation to the
        economic situation facing the Chinese business community in the 2nd
        half of 2008. The questionnaire was constructed based on the current
        economic issues faced by the country and the various measures
        undertaken by the Government.

        ACCCIM represents some 28,000 Chinese businessmen and trade
        associations in Malaysia. As most of the prominent Chinese businessmen
        are the committee members of ACCCIM either at the national or state
        levels, these committee members could be taken to represent the Chinese
        business community. The total questionnaires sent are 702.

        A total of 253 questionnaires were returned, i.e. 36.1% of the total
        questionnaires sent. These 253 respondents made up the sample of this
        survey. The 36.1% response rate is reasonable, as other surveys
        conducted by other organisations are common to have low response
        rates.

       Even though the questionnaires have been sent to Chinese businessmen
       across all sectors and industries, the respondents are mainly from
       wholesale and retail, manufacturing, professional & business
       services as well as construction, which are the major sectors of our
       economy. This can be depicted as follows:



                                                 Number of
                         Sector                questionnaires         Percentage
                                                  returned                (%)

              Wholesale and retail                    66                   26

              Manufacturing                           45                   18
              Professional & business                 28                   11
              services
              Construction                            28                   11

              Others                                  86                   34

              Total                                   253                 100




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ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008




   84% of the respondents             are   from   small    and    medium-scale
   enterprises (SME).




   On 2 December, 2004 the National SME Development Council has issued
   a new definition for small and medium enterprises with regard to
   manufacturing (including agro-based) & manufacturing related services,
   primary agriculture and services sector (including information and
   communications technology, ICT).


   Primary Agriculture

   A small and medium enterprise in primary agriculture is an enterprise
   with full-time employees not exceeding 50 or annual sales turnover not
   exceeding RM5 million.

   The agriculture, forestry & fishery sectors have been classified under this
   category in this report.

   Manufacturing (including Agro-Based) and Manufacturing-Related
   Services (MRS)

   A small and medium enterprise in manufacturing (including agro-based)
   and MRS is an enterprise with full-time employees not exceeding 150 or
   with annual sales turnover not exceeding RM25 million.

   The manufacturing, mining and construction sectors have been classified
   under this category in this report.




                                      3
ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


   Services Sector (including information and communications
   technology, ICT)

   A small and medium enterprise in services is an enterprise with full-time
   employees not exceeding 50 or annual sales turnover not exceeding RM5
   million.


   The real estate, transportation, forwarding and warehousing,
   telecommunications, information technology, wholesale and retail trade,
   international trade, tourism, hotels, restaurants, recreation and
   entertainment, finance and insurance, professional and business
   services have been classified under this category in this report.



   74% of the respondents are domestic market oriented whereas 26%
   focuses on export or both domestic and export markets.




                                      4
       ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008



3.            SURVEY FINDINGS

3.1           THE MALAYSIAN ECONOMIC SITUATION IN THE 2ND HALF OF
              2008

3.1.1 Sales performance

                                                  We evaluate our sales as :
                                                        1st half of 2008

              80



              60


 % Response
              40



              20



               0
                     Overall     Manufacturing        Wholesale & retail

                                                        2nd half of 2008
              80



              60


% Response
              40



              20



              0
                     Overall      Manufacturing         Wholesale & retail



                                                                             Good   Satisfactory   Poor


              Sales boosted by wholesale & retail
              Overall sales were slightly better for the period under review. The number of
              respondents who were satisfied with their sales rose to 62% from 58% in the 1 st half
              of 2008 but fell short of the 72% in 2nd half 2007. On the other hand, the number of
              respondents who registered poor sales dropped to 26% from 30% in the 1H 2008 and
              compared with 16% in 2H 2007.

              This was mainly boosted by an improvement in wholesalers & retailers’ sales with
              65% of them satisfied with their sales, an increase from 60% in 1H 2008 but lower
              than 81% in 2H 2007. The number wholesalers & retailers who registered poor sales,
              on the other hand, dropped to 18% from 24% in 1H 2008 but higher than 10% in 2H
              2007.

              In the manufacturing sector, however, the number of respondents felt satisfactory
              with their sales performance falling to 58%, from 61% in 1 st half 2008. Further, 33%
              of the manufacturers registered poor sales, increased from that of 26% in 1H 2008.



                                                                5
   ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008



      As a whole, although wholesalers & retailers have yet to feel the pinch,
      manufacturing sector has began to feel the heat on the back of a deepening slump in
      developed countries demand due to the deepening credit crisis.

3.1.2 Production volume


                                  Our production volume has :

                                        1st half of 2008

                 80



                 60


    % Response
                 40



                 20



                 0
                      Overall          Manufacturing




                                        2nd half of 2008
                 80



                 60


    % Response
                 40



                 20



                  0
                      Overall          Manufacturing

                                                           Increased   Unchanged   Decreased




      Production volume was not too bad, but manufacturing sector suffered

      Consistent with the slight improvement in sales, 59% of the respondents in
      the period under review (compared to that of 58% and 71% in 1H 2008 and
      2H 2007 respectively) indicated that they were able to maintain their output.
      Further, only 20% of the respondents reduced their production volume,
      compared to that of 26% and 14% in 1H 2008 and 2H 2007 respectively.

      However, it was not the same for the manufacturing sector with only 51% of
      the manufacturers managed to maintain their production in the period under



                                            6
   ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


        review, a drop from 57% in 1H 2008 and 72% in 2H 2007. Further, 22% (20%
        & 17% in 1H 2008 & 2H 2007) of the manufacturers reduced their production
        volume.


3.1.3 Stock of unsold products


                               Our stock of unsold products has :

                                               1st half of 2008

                80



                60


   % Response
                40



                20



                0
                     Overall   Manufacturing            Wholesale & retail




                                         2nd half of 2008

                80



                60


   % Response
                40



                20



                0
                     Overall   Manufacturing            Wholesale & retail



                                                        Increased            Unchanged   Decreased




        Mixed picture in inventory

        The stockpiles of 69% of the respondents remained unchanged for the period
        under review, marginally lower than that of 70% in 1H 2008, while 15% of
        the respondents indicated a drop in inventory, a reduction from 19% in 1H
        2008.

        In this connection, 62% of the manufacturers surveyed indicated that they
        maintained their stock level (69% in 1H 2008), but 25% said that they had
        cut their inventory in 2H 2008 compared with 19% in 1H 2008. On the other
        hand, 80% of the wholesalers & retailers surveyed indicated that they
        maintained their stock level (82% in 1H 2008), but 6% said that their
        inventory had increased in 2H 2008 compared with 1% in 1H 2008 .


                                                    7
    ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008




         The mixed picture in inventory suggests that majority of manufacturers
         preferred to draw down their stocks to meet sales given the uncertain
         economic conditions. However, wholesale & retailers topped up their
         inventory during the period probably in preparation for the forthcoming
         festive season shopping.


3.1.4 Collections

                                 Our collections for payment of debts are :

                                                 1st half of 2008
               80



               60


  % Response
               40



               20



                0
                    Overall   Manufacturing     Wholesale & retail




                                              2nd half of 2008


               80



               60


  % Response
               40



               20



               0
                    Overall   Manufacturing     Wholesale & retail

                                                                     Good   Satisfactory   Poor




         Stable collections but not for manufacturers

         Almost one third (32%) of the respondents faced difficulty in collections, the
         same as in 1H 2008. Only 56% of the respondents were satisfied with their
         collections, a marginal drop from 57% in 1H 2008.

         Consistent with the above, the number of wholesalers & retailers who
         experienced poor collections remained stable at 27%, the same level as in 1H



                                                      8
       ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


              2008 (20% in 2H 2007). However, the number of manufacturers who
              experienced poor collections has increased to 40% from that of 31% in 1H
              2008 (17% in 2H 2007). Further, manufacturers who were satisfied with their
              collections have reduced further to 51% from that of 57% in 1H 2008 (77% in
              2H 2007). On the other hand, wholesalers & retailers who were satisfied
              with their collections rose to 64% from that of 55% in 1H 2008 (67% in 2H
              2007).

              As a whole, this suggests that wholesalers & retailers’ collections were still
              satisfactory, but for manufacturers their collections have deteriorated, in line
              with the deterioration in economic conditions.


3.1.5 New orders for our products / services from abroad


                              Abroad new orders for our products / services have :

                                                       1st half of 2008
             100


              80


              60
% Response

              40


              20


               0
                    Overall            Manufacturing




                                                        2nd half of 2008


             100


             80


             60
% Response

             40


             20


              0
                    Overall            Manufacturing

                                                                          Increased   Unchanged   Decreased




              New orders from abroad shrank

              44% of the respondents received lesser overseas order, an increase from that
              of 38% and 26% in 1H 2008 and 2H 2007 respectively. The number of


                                                                  9
      ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


             respondents who managed to maintain their overseas orders, on the other
             hand, decreased to 32% from 44% and 55% in 1H 2008 and 2H 2007.

             In the manufacturing sector, 45% (40% in 1H 2008) of the respondents
             surveyed indicated that their overseas orders have declined in the current
             period. 38% of the manufacturers (46% & 48% in 1H 2008 & 2H 2007
             respectively) managed to maintain their new orders from abroad.

             If new orders are any indication, this suggests that Malaysian Chinese
             manufacturers’ export sales are likely to weaken going forward.

3.1.6 New orders for our products / services from local


                                          Local new orders for our products / services have :

                                                                    1st half of 2008
             80



             60


% Response
             40



             20



              0
                             Overall          Manufacturing          Wholesale & retail




                                                                2nd half of 2008
                        80



                        60


      % R e sp o n se
                        40



                        20



                         0
                                   Over all     M anuf act ur ing      W ho lesale &
                                                                          r et ail



                                                                                   Inc re a s e d   Unc ha nge d   D e c re a s e d




             Local orders were stable

             61% of the respondents (versus 57% & 70% in 1H 2008 & 2H 2007
             respectively) received same amount of local orders. About one third (30%
             versus 34% & 18% in 1H 2008 & 2H 2007 respectively) of the respondents
             received lesser local orders in the current period under review.


                                                                              10
      ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008




             Thanks to wholesalers & retailers as 65% of them said that they received the
             same amount of local orders in 2H 2008 versus 66% in 1H 2008, while 24% of
             them said that their orders have dropped, compared with 25% in 1H 2008.

             On the other hand, the manufacturers who saw lower local orders were 37%,
             about the same with that of 36% in 1H 2008, while 55% (56% in 1H 2008) of
             the manufacturers said that they received the same amount of local orders.

             As a whole, this suggests that local orders were still stable, thanks to
             resilient domestic demand.


3.1.7 Sales prices


                                    Our local sales price (products / services) :
                                                    1st half of 2008


             80



             60


% Response
             40



             20



              0
                      Overall    Manufacturing     Wholesale & retail




                                                  2nd half of 2008

              80



              60


 % Response
              40



              20



                  0
                       Overall    Manufacturing    Wholesale & retail



                                                                   Increased   Unchanged   Decreased




             Local sales prices remained relatively unchanged


             61% of the respondents managed to maintain their sales prices, compared to
             that of 55% and 66% in 1H 2008 and 2H 2007 respectively. In particular, 53%




                                                           11
     ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


          and 68% (48% and 51% in 1H 2008 respectively) of the manufacturers and
          wholesalers & retailers respectively maintained their sales prices.

          29% (34% & 18% in 1H 2008 & 2H 2007 respectively) of the respondents were
          forced to cut their sales prices. In particular, 45% (42% in 1H 2008) of the
          manufacturers reported a drop in their sales price in local market, but only
          23% of wholesalers & retailers (36% in 1H 2008) reported a drop in their
          sales price in local market.

          It appears that manufacturers, in particular, were forced to cut prices to
          compete for new local orders, which were shrinking given softer market
          conditions, in order to sustain their sales.


3.1.8 Number of employees

                                      Our number of employees has :

                                             1st half of 2008

              80



              60


% Response
              40



              20



              0
                   Overall   Manufacturing    Wholesale & retail




                                             2nd half of 2008

              80



              60


 % Response
              40



              20



               0
                   Overall   Manufacturing    Wholesale & retail



                                                                   Increased   Unchanged   Decreased




          Employment was generally stable



                                                  12
   ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008




        The employment market remained generally stable even though employers
        were generally still cautious in recruiting. A total of 81% (79% in 1H 2008) of
        the respondents maintained their existing workforce and 12% (same with 1H
        2008) reduced their staff in the current period under review. It should be
        noted that only 3% (5% in 1H 2008) of the respondents increased their
        number of employees for the period under review.

        However, in the manufacturing industry, 71% (77% in 1H 2008) maintained
        their existing workforce whilst 24% (16% in 1H 2008) of them reduced their
        staff. This was in line with the trouble experienced by the manufacturing
        sector due to a decline in exports.


3.1.9 Wage cost per unit of output


                                          Our wage cost per unit of goods/services :

                                                            1st half of 2008

                  80



                  60


   % Response
                  40



                  20



                  0
                           Overall     Manufacturing          Wholesale & retail




                                                          2nd half of 2008
                   80



                   60


  % R esp o nse
                   40



                   20



                       0
                           Over all   M anuf act ur ing    W ho lesale & r et ail


                                                                             Inc re a s e d   Unc ha nge d   D e c re a s e d




        Wages were on a downward trend
        The soft domestic employment market, on the back of deterioration market



                                                             13
     ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


         conditions, has pushed wages into a downward trend as employees have less
         bargain power. 29% (27% in 1H 2008) of the respondents has reduced their
         wages. In particular, 31% (18% in 1H 2008) of the manufacturers have done
         the same. However, for wholesalers and retailers who had cut their
         employees’ pays, the number dropped to 35%, from 37% in 1H 2008.

         Overall, 55% (54% in 1H 2008) of the respondents managed to maintain the
         wage cost per every unit of output or services for the period under review.
         62% and 48% (57% and 49% respectively in 1H 2008 respectively) of the
         manufacturers and wholesalers & retailers polled said that the wage cost
         remained unchanged for the period under review.

         As a whole, the wages were on a downward trend particularly in the
         manufacturing sector.


3.1.10 Capacity Utilisation


                                 Our capacity utilisation level at present is :

                                                 1st half of 2008
             60




             40

% Response



             20




              0
                  Overall   Manufacturing   Wholesale & retail




                                                2nd half of 2008
             60




             40

% Response



             20




             0
                  Overall   Manufacturing   Wholesale & retail

                                                                              0 - 40%    41 - 60%
                                                                              61 - 80%   81 - 100%




                                                    14
     ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008




         Undesired capacity utilisation

         Overall, 87% (89% in the previous period) of the respondents utilized less
         than 80% of their capacity. Only 7% (6% in the previous period) of the
         respondents polled achieved 81% to 100% capacity utilization whereas 33% of
         them said that their capacity utilisation was 61-80%. It is noted that only
         20% of the manufacturers utilised 81%-100% of the capacity.

         As a whole, the overall capacity utilisation was still well below the desired
         level of 80% and above. This points to an excess capacity in the market,
         particularly for exporters, given that the deterioration in market conditions
         has eroded demand for products and services. This has resulted in keen
         competition and businesses, particularly exporters, were forced to cut prices
         of products and services for survival.


3.1.11 Investment in new resources or plant


                                       Our Investment (in new resources / plant) has :

                                                            1st half of 2008

                  80



                  60


  % Response
                  40



                  20



                  0
                          Overall      Manufacturing        Wholesale & retail




                                                       2nd half of 2008

             80



             60


% Response
             40



             20



             0
                       Overall      Manufacturing       Wholesale & retail



                                                                     Increased   Unchanged   Decreased




                                                                15
   ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008




      Investment in new resources or plant shrank, especially for manufacturers

      As capacity utilisation rate remained not high, 39% of the respondents cut
      their investment, while only 3% said that they have increased their
      investment in the period under review, compared with 46% and 3%
      respectively in the last period. The investment in new resources and plant of
      27% of the respondents remained unchanged as compared to 28% of the last
      period.

      Similarly, 45% of the manufacturers reduced their capital budget, while only
      4% increased their capital investment (40% and 3% respectively in the
      previous period). The excess capacity and deterioration in market conditions
      might have resulted in companies holding back their investments.


3.1.12 Economic situation in Malaysia




                                         16
      ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008




         The Malaysian economy continued to deteriorate in the 2ndt half of 2008

         70% (same with last period) of the respondents indicated that the Malaysian
         economic condition had deteriorated in 2nd half of 2008.

         At the same time, 28% (26% in the last period) of the respondents was of the
         view that the Malaysian economy had remained unchanged in the period
         under review. Only 1% of respondents said that the economic condition was
         growing in the current period.


3.2      MAJOR FACTORS ADVERSELY AFFECTING BUSINESS PERFORMANCE

         The result of the survey is tabulated as follows:



             Factors affecting business performance             2nd half    1st half
                                                                of 2008     of 2008
                                                                   %           %
          Drop in foreign & domestic demand                        31          19
          Government policies                                      49          54
          Increase in operating cost & price of raw materials      39          61
          Domestic competition                                     36          38


         Drop in foreign & domestic demand


         The financial tsunami originated from the United States has spread like
         wild fire into Europe, South America and certain parts of Asia in the 2 nd
         half of 2008. This has caused the world demand for goods and services to
         shrink very quickly. Being one of the largest trading nations, Malaysia
         was not spared from this crisis. This is evidenced by the drop in
         Malaysia’s export for the 2nd half of 2008.

         In the domestic market, the concerns about the possible imminent
         recession which may hit the country has caused the consumers to be
         cautious in their spending.

         Against this backdrop, 31% of the respondents said that drop in foreign
         and domestic demand is one of the major factors adversely affecting their
         business performance, a sharp rise from just 19% in 1H 2008. In
         conclusion, drop in demand increasingly become a concern to many
         businesses.




                                             17
ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


   Government policies

   49% of the respondents cited government policies remained as one of the
   major factors affecting their business performance. This is not surprising
   as numerous government policies and projects had become topics of
   discussion in the 2nd half of 2008. Amongst others, the RM7 billion
   stimulus package, the tabling of Malaysia Anti-Corruption Commission
   bill, changes to subsidy policies in relation fuel price, the government
   procurement system, the effectiveness of the Special Task Force to
   Facilitate Business (PEMUDAH) were the major topics discussed in the
   current period. This also highlighted a need for the Government to
   improve its delivery system and makes its policy more transparent and
   liberal.




   Increase in operating cost and price of raw materials

   39% of the respondents cited increase in operating cost and price of raw
   materials as one of the major factors affecting their business
   performance but it was less acute compared to 61% said so in the
   previous period. Increase in price of raw materials such as fuel and iron
   and steel have pushed up businesses’ operating cost. In addition, the
   low level of capacity utilisation might have contributed higher cost per
   unit of output given that the fixed operating cost remained unchanged.


   Domestic competition


   The shrinking demand and excess capacity have forced local traders and
   manufacturers to organize regular sales and promotions to attract
   consumers. Inevitably, this has led to increase competition and a cut in
   sale prices, particularly when sales were sluggish. The setting up of
   more hypermarkets and their retail outlets might have also eaten into
   small traders and sundry shops’ market share.           Hence, it is not
   surprising that 36% of the respondents confirmed that domestic
   competition is one of the major factors adversely affecting their business
   performance.

   Overall, drop in foreign and domestic demand, government policies,
   the increase in operating cost and price of raw materials and
   domestic competition were the four major factors adversely
   affecting the business performance in the 2nd half of 2008. In
   particular, a drop in demand is increasingly become a key concern
   among Malaysian Chinese businesses.




                                      18
ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008




                                      19
      ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


3.3      MALAYSIAN ECONOMIC OUTLOOK


         The Chinese business community is pessimistic about the economic
         outlook for the 1st half of 2009

         More than half (52% vs 47% in the last period) of the respondents
         surveyed in 2H 2008 indicated that their local sales are likely to drop for
         the next six months. Consumers would remain cautious in their
         spending in view of the possible pay-cut and retrenchment in the light of
         imminent recession. Further, 38% of the respondents (42% surveyed
         previously) expect their local sales to be maintained. Only 3% of the
         respondents expect local sales to increase.

         Consistently, on export sales, 58% of the respondents anticipated that
         their export sales would drop, an increase from 42% surveyed previously,
         whilst only 3% expect export sales to increase, given the weakening
         external environment. 23% of the respondents expect that their export
         sales to remain unchanged, a drop from 42% surveyed previously.
         Overall, the businessmen were pessimistic about the domestic and
         export sales in the months ahead.

         In line with the expectation of weaker sales performance, 39% (same with
         previous period) of the respondents expect their production volume to
         shrink, while 40% (46% survey previously) of the respondents thought
         that they might be able to maintain their output level.           In this
         connection, 47% (same with previous period) of the businessmen polled
         said that they would cut their local sales prices in the next six months.
         42% (40% surveyed previously) of them, however, hoped that they could
         keep their current local price levels.

         Consequently, the businesses didn’t expect to increase their staff
         strength with 24% expecting to cut their workforce, higher than 17% in
         previous period and only 4% expecting to increase it. The workforce of
         65% of the respondents was anticipated to remain unchanged. In
         connection with this, 44% of the respondents would likely maintain the
         wage cost per unit of goods and services for the next six months.
         However, 40% (a sharp increase from 29% surveyed previously) of
         respondents might reduce the salary of their employees.

         Weak business prospects also translate into lower capital investment
         with 46% (47% surveyed previously) of the respondents indicated that
         they would cut capital investment. This is compounded by the under-
         utilisation of the existing resources and capacity. Meanwhile, 19% (a
         drop from 25% survey previously) of the respondents planned to
         maintain their current capital investment in new resources and plant in
         the next six months.



                                            20
ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


   This gives an indication that the Chinese business community is
   pessimistic about the economic outlook of Malaysia for the 1st half
   of 2009.

   In this connection, 3 quarters (77% vs 74% in previous period) of the
   respondents are pessimistic or somewhat pessimistic with regard to
   the Malaysian economic outlook in the medium term, i.e. in the
   next two to three years, whereas 22% (25% in previous period) are
   optimistic or somewhat optimistic.


                   The Malaysian economy in the next 2 - 3 years is :




                                       21
      ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


3.4      IMPACT OF THE RECESSION IN UNITED STATES, JAPAN AND
         EUROPE


                  Has the recession in United States, Japan and Europe affected your business?


                                            2nd half of 2008




         The financial tsunami originated from the United States has spread like
         wild fire into Europe, South America and certain parts of Asia in the 2nd
         half of 2008. This has caused the world demand for goods and services to
         shrink very quickly. Being one of the largest trading nations, Malaysia
         was not spared from this crisis. This is evidenced by the drop in
         Malaysia’s export for the 2nd half of 2008.

         Against this backdrop, 73% of the respondents opined that the
         recessions in United States, Japan and Europe has affected their
         businesses. 26% of the respondents said no impact.




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       ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


3.5       IMPACT OF SLUGGISH PRICES OF COMMODITIES


                   What is the impact of sluggish prices of commodities on your business?


                                              2nd half of 2008




          Commodities price were at its peak in the middle of 2008 but it fell
          sharply to a low at the end of 2008. For example, crude palm oil traded
          at around RM3,750 per tonne in May 2008 but the price plunged to
          around RM1,573 per tonne in December, 20081.

          Against this backdrop, 45% of the respondents said that sluggish
          prices of commodities had a negative impact on their businesses
          whereas 36% said no impact. In this connection, 18% of the
          respondents said that the impact is positive.




1
    http://econ.mpob.gov.my/upk/weekly


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       ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


3.6       IMPACT OF THE SHARP DEPRECIATION OF RINGGIT AGAINST US
          DOLLARS


                          What is the impact of a sharp depreciation of Ringgit
                                 against US Dollars on your business?

                                             2nd half of 2008




          The US dollar strengthened following increasing economic uncertainties
          and investors flight to safety by buying US Treasuries. Against this
          backdrop, the ringgit depreciated by 5.5% against the US dollar and
          7.3% against the Japanese yen during the third quarter of 2008. The
          ringgit, however, appreciated against the pound sterling (4.6%) and the
          euro (3.9%) amid indications of rapidly deteriorating economic conditions
          in the European economies. During the period 1 October to 27 November
          2008, the ringgit continued to depreciate against the US dollar (-4.5%)
          and the Japanese yen (-12.8%), and appreciated against the pound
          sterling (11.8%) and euro (6.1%)2.

          Against this backdrop, 45% confirmed that the sharp depreciation of
          Ringgit against US dollar had a negative impact on their business
          whereas 42% said no impact. In this connection, 13% of the
          respondents polled confirmed that the impact is positive.




2
    http://www.bnm.gov.my/view.php?dbIndex=0&website_id=1&id=679


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      ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008




3.7      FURTHER REDUCTION OF THE PRICE OF PETROL AND DIESEL

                      Should the government further reduce the price and diesel
                               to reflect the current price of crude oil?

                                           2nd half of 2008




         On 5 June, 2008, the government announced that prices of petrol and
         diesel would be increased by around 41% and 63% to RM2.70 and
         RM2.58, respectively, with immediate effect.      Generally, the sharp
         increase was received negatively by the business community and rakyat
         at large. Subsequently, in tandem with the falling crude oil price in the
         world market, the Government has reduced the prices of petrol and
         diesel seven times to RM1.80 and RM1.70 respectively in the 2 nd half of
         2008.

         Having said that, 93% of the respondents surveyed opined that the
         Government should further reduce the prices of petrol and diesel to
         reflect the current price of crude oil.




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       ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


3.8       FURTHER REDUCTION OF OVERNIGHT POLICY RATE (OPR)


                      Should Bank Negara further reduce overnight policy rate (OPR)
                                 under the current economic scenario?




                                         2nd half of 2008




          The adverse global developments have already affected the Malaysian
          economy, as evidenced by the slowdown in export performance and lower
          equity prices. While domestic demand remains resilient, there are
          indications of slower private sector activity amid some softening in the
          labour market conditions and a more challenging business environment.
          Under these conditions, sustaining domestic demand is key to ensuring
          that growth in 2009 remains positive 3 . Against this backdrop, on 24
          November, 2008, Bank Negara Malaysia announced that the overnight
          policy rate be reduced by 25 basis points to 3.25%. Consequently, most
          of the commercial banks have reduced their base lending rates (BLR)
          accordingly.

          Having said that, 92% of the respondents opined that Bank Negara
          Malaysia should further reduce the overnight policy rate (OPR)
          under the current economic scenario.




3
    http://www.bnm.gov.my/index.php?ch=8&pg=14&ac=1724


                                                   26
      ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


3.9       STIMULUS PACKAGE BEYOND RM7 BILLION

               Should the government increase the stimulus package beyond RM7 billion?

                                      2nd half of 2008




          On 4 November, 2008, the Government announced a RM7 billion
          stimulus package to reinforce the economy, strengthen national
          resilience and to maintain economic growth momentum to face the
          increasingly challenging global economic climate. Among others,

         RM1.2 billion has been allocated to build 25,000 units of low-and
          medium-cost houses

         RM500 million to upgrade, repair and maintain police stations, living
          quarters, camps and military quarters

         RM600 million for minor projects under the public and basic
          infrastructure maintenance programme such as maintaining village
          roads, building community halls and small bridges

         RM200 million to revive abandoned housing projects

         RM100 million to increase business premises besides beautifying and
          landscaping small towns nationwide

         RM200 million for early education for children aged between one and six

         Allow workers to reduce their Employees Provident Fund (EPF)
          contribution voluntarily by three percent from Jan 1, 2009 to increase
          the disposable income.

          Against this backdrop, 84% of the respondents opined that the
          Government should increase the stimulus package beyond RM7
          billion.




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    ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


3.10     REDUCTION OF WORKFORCE

                                    Do you intend to reduce your workforce
                                   in view of the current economic scenario?

                                             2nd half of 2008




         In December, 2008, Human Resources Minister Datuk Dr S. Subramaniam
         confirmed that 137 employers, mostly in the electronics sector, will retrench
         close to 5,000 workers. The manufacturing sector employs 1.1 million people or
         10% of the total Malaysian labour force of 11.1 million. There are 2.2 million
         foreign workers employed legally, including 700,000 in the electronics sector.
         The Malaysian Institute of Economic Research (MIER) expects the
         unemployment rate to rise to 4.5% this year but trade officials fear that it could
         be higher.4
         The following is the figures released by the Department of Statistics as at 31
         December, 20085 :


                                                                 2008       2008
                                                                                         2008
                      Employment                        2007      1st          2nd
                                                                                      3rd Quarter
                                                                Quarter    Quarter

       Total Labour Force('000)                      10,889.5   10,923.3   11,123.7    11,123.4

       Employed ('000)                               10,538.1   10,525.3   10,735.6    10,779.7

       Unemployed ('000)                                351.4    398.0      388.1        343.7

       Unemployed Rate (% of Labour Force)               3.2      3.6          3.5        3.1


         Against this background, 47% of the respondents polled intend to reduce
         their workforce in view of the current economic scenario whereas 52% of
         the respondents would maintain their current workforce. It is noted that in


4
  http://thestar.com.my/news/story.asp?file=/2009/1/4/focus/2933581&sec=focus
5
 http://www.statistics.gov.my/eng/index.php?option=com_content&view=article&id=59:employment&cati
d=38:kaystats&Itemid=11


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    ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008


        the manufacturing sector, 65% of the respondents surveyed intend to reduce
        their workforce.
3.11    SELLING PRICE OF CONSUMER GOODS


                          Do you intent to reduce the selling price of consumer goods
                                    produced or traded by your company?

                                           2nd half of 2008




        The Consumer Price Index (CPI) for January to November 2008 increased
        by 5.5 per cent y-o-y compared with that of 2.0% in the same period
        last year. Compared with that of the same month in 2007, the CPI for
        November 2008 registered an increase of 5.7 per cent y-o-y, sharply
        lower than +8.5% recorded in August and when compared with the
        previous month, the CPI decreased by 1.1 per cent6.

        Against this backdrop, 48% of the respondents surveyed intend to
        reduce the selling price of consumer goods produced or traded by
        their companies whereas 47% would maintain their prices. It is noted
        that 56% and 52% of the manufacturers and wholesalers & retailers
        polled intend to reduce the selling price of consumer goods produced or
        traded by them. This suggests that prices of consumer goods are likely
        to fall in the months ahead.




6
  http://www.statistics.gov.my/eng/index.php?option=com_content&view=article&id=310:consumer-price-
index-november-2008-&catid=44:consumer-price-index-malaysia-&Itemid=12


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       ACCCIM SURVEY REPORT ON ECONOMIC SITUATION OF MALAYSIA FOR THE 2ND HALF OF 2008




3.12      PUBLIC SAFETY


                               Are you concern over the public safety in this country?




          As reported in the Ninth Malaysia Plan, the public safety in Malaysia had
          deteriorated 21.5% from the year 1990 to 20047. The crime index rose
          15.74% in 2006 from 171,604 cases in 2005 to 198,622 cases in 2006.
          Property crime made up 70% of the total crime cases in 2006, 10% were
          commercial crime and balance were violent crimes8.

          Against this backdrop, 89% of the respondents polled expressed their
          concern over the public safety in this country.




7
    Ninth Malaysia Plan, Chart 5 : Malaysian Quality of Life Index, 1990 - 2004
8
    http://www.thestar.com.my/news/story.asp?file=/2007/1/31/nation/16734055&sec=nation


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