Better support needed amid tariffs

The Star

06-05-2025

PETALING JAYA: Support measures aimed at helping Malaysian exporters navigate US-imposed tariffs must be designed with clarity, accountability, and measurable outcomes, say economists.
While recent government initiatives signal the right intentions, Centre for Market Education CEO Dr Carmelo Ferlito said concerns remain over how effectively the support will be implemented and who will ultimately benefit.
'There's a right spirit in the government's initiatives, but we must ask who benefits and how efficiently the money will be spent,' he said.
Ferlito was commenting on Prime Minister Datuk Seri Anwar Ibrahim's announcement yesterday on allocating RM50mil for market exploration and additional financial aid for exporters.
Instead of upfront cash or loan guarantees, Ferlito advocated for tax-based incentives tied directly to export performance.
'It may be more effective to reduce taxes on profits derived from sales to alternative markets.
'A tax incentive is ex-post – it's given after results are achieved. Incentives not linked to clear key performance indicators risk mismanagement and inefficiency.'
He also questioned the suggestion made in the Dewan Rakyat yesterday to delay fuel subsidy rationalisation, arguing that such structural reforms should not be compromised.
'Are we truly in a state of emergency to justify postponing this?
'It sends the wrong signal on policy commitment,' he said.
Emeritus Prof Dr Barjoyai Bardai of Universiti Tun Abdul Razak pointed out that efforts to identify new markets will take time to materialise.
'Finding new buyers isn't immediate. Exporters must ensure credibility and secure demand – and most new markets will be in developing countries with lower purchasing power,' he said.
Therefore, in the short term maintaining strong trade flows with the United States and China remain critical, he said.
'If we can retain those markets while exploring new ones, that's already a big achievement.'
Prof Barjoyai also highlighted the importance of complementing export strategies with broader economic resilience measures, including food security and reducing reliance on imported essentials.
'We import nearly RM90bil in essential goods annually.
'If we can reduce that, we protect ourselves from currency volatility and global shocks,' he said.
He also stressed the need to support micro, small and medium enterprises (MSMEs), which collectively employ more than 65% of Malaysia's workforce.
'Helping MSMEs improves job quality and wages, which stabilises the broader economy,' Prof Barjoyai said.
Industry groups echoed similar concerns and recommendations.
The Federation of Malaysian Manufacturers (FMM) welcomed the government's immediate actions but called for enhanced export-focused initiatives.
FMM president Tan Sri Soh Thian Lai said more than half of its members are already pivoting away from traditional markets like the United States.
He said that while the RM50mil allocation to Matrade (the Malaysia External Trade Development Corporation) and the resumption of European Union free trade agreement (FTA) talks are timely, Malaysia needs stronger Market Development Grant (MDG) support to help exporters lead missions into emerging markets.
Soh stressed the need for enabling associations like FMM to access funding directly and organise targeted export activities to boost reach and competitiveness.
'These measures are crucial to ensure Malaysian manufacturers remain viable globally despite mounting geopolitical pressures.'
Meanwhile, the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) voiced concerns about unintended consequences of increased tariffs, including potential abuse of trade routes and increased risk of anti-circumvention actions.
Its president, Datuk Ng Yih Pyng, warned of 'renegade products' -- goods rebadged or misclassified to evade tariffs – distorting trade flows and exposing Malaysian firms to legal and reputational risks.
'We must enhance Customs enforcement and strengthen compliance on certificates of origin,' he said.
Ng also urged the government to accelerate FTA negotiations and expand MDG support to help SMEs explore new markets.
He cautioned that with global tariffs rising, Malaysia may face an influx of dumped foreign products that could undermine local industries, especially MSMEs in sectors like furniture, steel, retail and e-commerce.
'Swift, targeted safeguards and international collaboration are needed to protect our domestic economy.'
The Small and Medium Enterprises Association (Samenta) said the United States' reciprocal tariffs on Malaysian goods have exposed the fragility of the country's SME export ecosystem.
While welcoming the government's targeted support measures, Samenta said many SME exporters were already operating on razor-thin margins and remain vulnerable to global trade shocks.
'The latest tariff shock is a reminder that Malaysia's economic model must be recalibrated around the needs of SMEs, not just large corporations,' the association said in a statement.
Samenta added that broader structural imbalances must be addressed to ensure sustainable support for exporters and to build long-term resilience in Malaysia's trade environment.