Unemployment Rate To Rise In Malaysia

US tech firms in Malaysia face falling sales, job cuts
Source: Bloomberg

SALES by US electronics makers in Malaysia will fall this year and next as a global recession saps demand for Dell Inc computers and other devices, the head of an industry group said.

Electronics manufacturers in the Southeast Asian nation will probably have to cut jobs next year after reducing overtime and letting workers take longer Christmas holidays this year to lower costs, said Wong Siew Hai, chairman of the Kuala Lumpur-based American Malaysian Chamber of Commerce’s electronics industry group.

“They are very uncertain and very concerned,” Wong said in a telephone interview yesterday from Penang, a manufacturing base for Dell, Intel Corp and other US companies. “Next year you will see the real impact. If there’s a world recession and the economic impact is going to be great, they have to do something, nobody will be spared.”

Malaysia cut interest rates for the first time since 2003 this week, seeking to bolster domestic demand as recessions in the US, Japan and Europe hurt exports and threaten factory jobs across Asia. Retrenchments in Malaysia’s manufacturing industry jumped almost five-fold to 10,182 in the third quarter, central bank data show.

“It’s inevitable when the operating environment slows down, you should expect a rise in retrenchments,” said Lee Heng Guie, chief economist at CIMB Investment Bank Bhd in Kuala Lumpur.

Malaysia’s unemployment rate may rise to as high as 4.2 per cent from 3.6 per cent now as job cuts in 2008 will likely exceed the average of the past five years, he said.

Production Falls

Export sales by the American Chamber’s 17 electronics companies may decline this year, instead of growing 0.4 per cent as predicted in July, Wong said. Sales, which gained 7.1 per cent to RM73.8 billion (US$20.4 billion) in 2007, may fall further next year, he said.

The government, which has announced a RM7 billion spending plan to spur growth, needs to help manufacturers by cutting utility costs, Wong said.

Electronics companies are only able to forecast orders weeks ahead now, down from monthly and quarterly projections previously, he said.

“The visibility is very short, things are changing very fast,” Wong said. “This seems like the worst crisis so far.” Most if not all of the industry group’s members have reduced overtime work at their factories, and more than half plan to have longer-than-normal Christmas production shutdowns, he said.

Some are considering shorter work weeks and have delayed their capital investment to “conserve costs,” he added.

Malaysia’s industrial production fell for the first time in 18 months in September. The government this month slashed its growth forecast for 2009 to an eight-year low of 3.5 per cent and predicted a decline in exports next year as the worst financial crisis since the Great Depression pushed economies from Singapore to New Zealand into recession.

Intel, Motorola Inc and other US electronics makers account for about 12 per cent of Malaysia’s total exports, and more than a quarter of the country’s electronics shipments.