Saw Choo Boon, President, Federation of Malaysian Manufacturers; and Co-Chair, Special Task Force to Facilitate Business: Interview

Interview: Saw Choo Boon 

How is Malaysia responding to global and domestic economic pressures?

SAW CHOO BOON: As an exporting nation, we are subject to the vagaries of the global environment. The weak ringgit has caused imports to become expensive. Some of our exporters are affected as they are dependent on imports of intermediate and capital goods. The greatest impact is on manufacturers who produce for the local market. At the same time, some of our resource-based exporters in the rubber-based and wood-based subsectors have benefited significantly from a weaker ringgit. However, I don’t think that the current valuation truly reflects the strength of the economy. In addition to external global factors, the valuation could have been impacted by a number of unresolved domestic issues.

Overall, the country is on the right track in terms of fiscal and economic reforms. We have reduced subsidies, broadened tax collection with the goods and services tax and reduced our dependence on labour-intensive manufacturing by moving up the value chain and developing the services sector. As announced in the recently recalibrated 2016 budget, the government is confident that the economy will remain on a strong growth trajectory. Our 2016 forecast of GDP growth has been revised from 4% to 4.5% and we endeavour to achieve a fiscal deficit target of 3.1% of GDP through fiscal consolidation methods. Malaysia is ranked 18 out of 189 countries in the World Bank’s “Doing Business” report, and we are working hard to make our way into the top 10.

What changes should be made to labour laws?

BOON: Our labour laws were crafted many years ago, and need to be updated to match today’s economic climate. Certainly, businesses must go through a process before terminating somebody for non-performance, but that process should be quicker and more efficient than it is now. Coverage of the Industrial Relations Act, for instance, is too broad, as it currently covers everyone along the salary spectrum, when it should be there to protect lower-income workers earning below RM10,000 ($2475) per month. Workers’ rights must be protected, but the law needs to fall in line with the needs of the modern employer.

How do you expect Malaysia to benefit from integration under the ASEAN Economic Community (AEC) and the Trans-Pacific Partnership (TPP)?

BOON: Malaysian manufacturers look forward to measures that will enhance trade and investment through tariff concessions and transparency in investment rules, and that will boost exports, economic growth and employment. With the AEC, local firms will benefit from greater operational efficiency and lower operating costs given enhanced access to capital, technology and raw materials in the region. Manufacturers also look forward to free movement of skilled and unskilled labour among ASEAN states, and to opportunities for equity participation in infrastructure in ASEAN. Companies also expect to benefit from transparent guidelines on setting up and operating businesses, and from reduced tax requirements for cross-border activities. However, while duties in ASEAN are already almost zero, non-tariff barriers pose the biggest obstacles to intra-regional trade, as compliance is both difficult and costly. Unless there is political will to address these, the full potential of the AEC could take many years to realise.

The TPP’s benefits are expected to be more immediate. Parliament agreed to be a signatory on January 27, 2016. Manufacturers, especially in sectors such as machinery, electronics, textiles and rubber, will benefit from duty-free access to TPP countries, which will save local industries about $1.2bn. Businesses stand ready to support the government in completing ratification in the next two years, especially by providing feedback on the required legislative amendments.