THE jury is still out on the government’s announcement of an exemption for Malaysian manufacturers of essential products from the Movement Control Order (MCO).
The move to allow such manufacturers to resume their operations with 50 per cent of their production workforce can be viewed as one which can reduce, but not stop, the current “bleeding.”
For Penang, whose economic backbone is sustained by the manufacturing sector, the announcement has not sunk in completely.
There is currently confusion on the ground between enforcement, management and workers. Time is needed before everything and everyone settles down.
“For Penang, most of our industries are in the essential categories such as food, medical devices and electrical and electronics,” Invest-in-Penang Berhad director and special investment advisor to the Penang Chief Minister, Datuk Seri Lee Kah Choon said.
“As a result (of this announcement), they can now work at a minimal level and this is the best outcome in this difficult situation,” he added.
At press time, only a handful of Penang factories have resumed operations, albeit on a reduced manpower scale.
While some have managed to get almost half of their production staff back on the floor, others are opting to stay closed until the situation becomes stable.
The ability of a manufacturer to resume operations with half its production workforce hinges on, among other things, how automated a company’s processes are.
If higher automation is employed, then the demand for workers can be managed. However, there is also the issue of a company’s market order book position.
If demand is slow, then it should be alright for a manufacturer to operate with half their usual headcount at this time. In the event that a company has a strong order book and is required to deliver on their orders, production output may be affected.
At this time when the government is intent on doing all it can to contain the Covid-19 spread, goodwill and understanding are likely to prevail among customers, considering the fact that the global supply chain has been disrupted.
The exemption being granted to our manufacturers now is likely to leave them in a less difficult position to engage fulfilment status when recovery demands return.
Of a more critical element is the need to keep the supply chain humming. This is because any collapse by even a single supplier is likely to shut down everything.
The move by the government now is a positive one to help keep the supply ecosystem well-oiled, although at lower levels and allows companies to “lubricate” their fiscal health.
Also to consider is that since manufacturers of essential products can now go back to business, albeit on a reduced scale, they are now on a firmer footing to secure or maintain commercial trade loans.
Malaysia’s financial market was introduced with a type of negotiable instrument known as a bankers’ acceptance (BA) in 1979.
The BA is a usance or usage bill of exchange drawn by a trader on his bank under an agreed line of credit.
This now means that manufacturers in Penang and elsewhere who resume their operations and trading, can have access to loans for their cash management.
This welcome relief, if anything, will help many to stay afloat for now as Malaysians join ranks in staying at home and praying for the world to be Covid-19 free soon.