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Free Malaysia Today
a day ago
- Business
- Free Malaysia Today
Economist backs govt's LPG rule enforcement to optimise subsidies
All restaurants, cafés and hawker stalls are required by law to use commercial-grade 14kg LPG cylinders, which cost RM70 each. (AP pic) PETALING JAYA : An economist has expressed support for the government's decision to enforce existing cooking gas cylinder regulations, saying it is necessary to prevent the misuse of subsidised liquefied petroleum gas (LPG) and ensure they reach their intended beneficiaries. Sunway University's Yeah Kim Leng said the move would allow Putrajaya to reduce the RM3.4 billion it spends on LPG subsidies annually, allowing the savings to be reallocated to development programmes. 'The subsidy amount is sizeable and better used for health, education and other welfare development programmes. This should be communicated well, in line with the country's subsidy rationalisation reforms,' he told FMT. Yeah, however, said traders, especially small vendors and hawkers, should be allowed a grace period to help them adjust to the changes. Yeah Kim Leng. 'Rather than forceful enforcement, a more friendly and compassionate approach—such as warnings for first-time offenders and closer monitoring—would be desirable and less disruptive to small traders and hawkers,' he said. Last month, the domestic trade and cost of living ministry launched Ops Gasak in an effort to curb the misuse of subsidised LPG, particularly by industrial users and large-scale businesses. Businesses—including restaurants and cafés—are required to use commercial-grade 14kg LPG cylinders, costing RM70 each, and not subsidised household cylinders priced at RM26. Those that use or store more than 42kg, or three cylinders, must also obtain a scheduled controlled goods permit. Although introduced in 2021, the rule is only now being strictly enforced with the ultimate goal of reducing subsidy leakages. Domestic trade and cost of living minister Armizan Mohd Ali said the initiative aims to curb the misuse of subsidised LPG by ineligible sectors and prevent the illegal transfer of gas from subsidised cylinders to non-subsidised ones for resale at a profit. He also said enforcement officers were presently prioritising advocacy over punitive measures, and that no compounds will be issued or seizures conducted at this stage. Yeah said many traders may not even be aware of the regulations in question, and suggested that the government set a grace period before fully enforcing the law. He said small businesses, especially hawkers, may not be familiar with the law. 'Given that many small traders and hawkers are updated through word of mouth, a grace period coupled with well-crafted public communication and education programmes would be helpful in reducing misuse of subsidised gas.'
The Star
24-05-2025
- Business
- The Star
INTERACTIVE: Malaysians have highest grocery bill in South-East Asia
PETALING JAYA: Malaysians are experiencing a heavy burden when it comes to rising food prices, with data showing that they spend more on groceries than any South-East Asian country. Data from the US Department of Agriculture (USDA) Economic Research Service shows that Malaysia's consumer expenditure on food at home was highest in the region in 2023 at US$1,940 per person per year. The USDA figures are not adjusted for inflation or differences in living costs between countries. According to Bank Negara Malaysia's exchange rate in 2023, the US$1,940 figure for Malaysia is equivalent to RM8,848. However, at current exchange rates, it is equivalent to RM8,286. Singapore was second at US$1,831, followed by Thailand (US$1,108), Philippines (US$1,070) and Cambodia (US$898). Experts said several factors explain why Malaysians spend a relatively high amount on food at home compared to other countries in the region. They include a reliance on food imports, a weaker Ringgit and farm labour shortages. Other reasons include the rising cost of input in food production such as fertilise and animal feed, monopolies and oligopolies in food production, as well as low farm productivity. 'Malaysia's elevated food cost per person relative to its Asean counterparts points to the need for concerted efforts by the government and private sector to expand food production and raise farm productivity,' said Sunway University economics professor Dr Yeah Kim Leng. He said other complementary actions include dismantling monopolies and liberalising food markets, reducing transport and storage costs and improving supply chain efficiencies to bring down food prices. He said Malaysia's higher food expenditure per person at home compared to Asean countries with lower per capita income can also be explained by its higher income level. 'However, despite income per capita that is in multiples that of Malaysia, Singapore's food expenditure per capita is about the same as Malaysia's during the 2017 to 2023 period, with the 2023 figure dipping below Malaysia's in 2023,' he said. While the data specifically does not take inflation into account, Yeah noted that the food component in Malaysia's consumer price index (CPI) basket has been experiencing higher inflation averaging 3.1% annually between 2020 and 2024 compared to the overall CPI inflation of 1.8%. Khazanah Research Institute's research associate Dr Teoh Ai Ni said the total amount spent on food consumed at home would vary depending on how frequently individuals spend eating at home. She said Malaysians also spend a larger portion of their monthly spending for food on food at home compared to Singaporeans. 'Data from the Household Expenditure Survey 2022 shows that Malaysian households spent about 48% of their total monthly food expenditure on food away from home, with 52% spent on food at home. 'In comparison, Singaporean households spent 68% of their food expenditure on food away from home.' 'This is why the consumer expenditures spent on food at home for Singapore is lower than that of Malaysia, and it does not imply that food in Malaysia is more expensive,' she said. She noted that the use of US dollar in USDA's data as the unit for comparison does not take into account the variations in the current strength or cost of living, nor does it equal purchasing power. Fellow research associate at KRI, Nik Syafiah Anis said Malaysia is also one of the more food import-dependent nations in Asean, which means its food system is vulnerable to global supply chain disruptions and external price shocks. She said other Asean countries such as Thailand and Vietnam have transitioned into major agricultural powerhouses, with Vietnam's food exports surging more than 15-fold between 1995 and 2018, driven by rice, seafood, and coffee. She in comparison, Malaysia's food import bill reached RM75.6 billion in 2022 and it remains a net importer of essential food items, particularly animal or vegetable fats and oils, cereals, and dairy products. 'One key dimension of this dependency is the country's reliance on imported animal feed - particularly corn and soymeal, which are key inputs in poultry, livestock, and aquaculture production. 'For example, Malaysia imports around 95% of its corn needs, largely from Argentina, Brazil, and India. This includes corn for feed and food, seed, and industrial (FSI) use,' she said. She said over-reliance on imported feed has a trickle-down effect on domestic food prices. She added that with global disruptions such as geopolitical tensions or poor harvest due to climate change, feed prices can spike, leading to higher prices for chicken, eggs, fish and meat at the consumer level. Meanwhile, Teoh said the share of income spent on food depends on wages and food expenditure. Malaysians' portion of food spending is comparatively lower than most other countries in the region. 'The differences are attributable to a combination of factors, including income level, food prices and food consumption patterns. She said that as income rises, the share spent on basic necessities like food would likely decrease while the share of spending on discretionary items like entertainment and recreation would likely to rise.
The Star
19-05-2025
- Business
- The Star
Growth likely to moderate this year
PETALING JAYA: While downside risks to Malaysia's growth linger, factors such as resilient private consumption, a diversified trade base and continued demand for electrical and electronics (E&E) goods, are expected to continue to lend support to the economy. All eyes, however, are still on how trade negotiations will unfold between economies, including Malaysia, with the United States, following the major easing of tariff levels between the latter and China. Sunway University economics professor Yeah Kim Leng said the outcome of the country's ongoing trade negotiations remains relevant to this year's growth outlook despite the anticipated slowdown, as a successful resolution could help cushion the impact from tariffs. 'If the 24% reciprocal tariff on Malaysia's exports to the United States is not reduced substantially, the impact on the Malaysian economy will be moderately severe, especially for the affected small and medium-sized industries. 'With exports to the United States amounting to 15% of total exports, a successful outcome of the ongoing trade negotiations will not only ensure a positive contribution of exports to Malaysia's growth prospects this year, but also add clarity to its investment outlook given the sizable US investment stock and pipeline in the country,' he told StarBiz. HSBC Asean economist Yun Liu said while the trade negotiations are still up in the air, at least the direction of a trade de-escalation is moving in a positive direction. 'For Asean, in particular, the focus is likely to be on the sizeable trade surplus with the United States, and its connection to regional and global supply chains. Overall, we expect Malaysia's growth to be around 4.2% for 2025,' she said. With escalating trade tensions and associated uncertainties, Bank Negara expects growth in 2025 to be slightly lower than the 4.5% to 5.5% range forecast it announced in March. Real gross domestic product (GDP) growth moderated to 4.4% in the first quarter of 2025 (1Q25), in line with the advance estimate. In 2024, GDP registered an expansion of 5.1%. 'This was supported by sustained household spending amid positive labour market conditions and policy measures; steady expansion in investment activities; continued export growth supported by E&E exports as well as vibrancy of tourism activities,' chief statistician Datuk Seri Mohd Uzir Mahidin said at a recent press briefing on the release of the 1Q25 GDP data. While Bank Negara governor Datuk Seri Abdul Rasheed Ghaffour acknowledged the need to revise the GDP growth forecast for 2025, he noted a revision should not be made based on assumptions. 'This is important because we do not want to come up with a revision knowing that we need to revise it again the next day. This may also not be positive for businesses because it will add further uncertainty to the already heightened uncertain environment. 'While we do have an internal view, the global environment is still very fluid – trade negotiations are still ongoing and the outcomes remain uncertain, although we have seen positive outcomes, this can affect our outlook. As we get more clarity on the outcomes of the ongoing trade negotiations, we will finalise the new forecast and announce it in one to two months time,' he said. In 1Q25, exports expanded by 4.4%. The central bank expects exports to see some moderation this year amidst the uncertainties. Nevertheless, Yeah said the country's exports to the United States grew by 36.5% in 1Q compared with the same quarter last year, significantly higher than the 4.4% rise in the country's total exports. 'The export pick-up is likely to continue in the following quarter before the end of the 90-day pause on the United States' 24% reciprocal tariff hike imposed on Malaysia,' he said. The central bank warned Malaysia, as a trading nation, will not be spared from the impact of US tariffs. There are, however, factors like the front-loading of exports and tariff exemption on key products like semiconductors that will help to cushion the impact from tariffs. 'About 32% of our exports to the United States are exempted from tariffs, including key products such as semiconductors. Further, 83% of our exports to the United States are price inelastic, which means the quantity demanded for our exports will not drastically change in the short term when prices increase due to tariffs. Examples of these products include electrical machinery, computer hardware and optical and scientific equipment,' Abdul Rasheed said. Front-loading activities, particularly in E&E exports, have supported growth in 1Q25, as firms try to soften the impact of tariffs. Abdul Rasheed expects demand for E&E to continue, supported by the country's entrenched position in the global value chain and AI-related demand. Nonetheless, he foresees that 'there could be some normalisation happening'. Following the special parliamentary session on May 5, the government pledged to provide up to RM1.5bil in additional loan guarantees and financing for small and medium enterprises (SMEs) affected by US tariff measures. Yeah said the early response in providing financing access for SMEs is 'laudable'. However, the further rollout of specific and targeted support from the government will need to be assessed after the conclusion of the negotiations, notably on the economic impact of the tariff levels and the nature of trade concessions and restrictions. 'Rather than mounting a major fiscal stimulus needed to offset a global slowdown, Malaysia's policy makers can focus on targeted support for affected industries while rolling out the initiatives planned for this year to sustain growth, strengthen fiscal resilience, improve wages and productivity and enhance administrative efficiency and social support systems,' he said. Yeah also concurred with the central bank that it is important to double down on reform measures to further strengthen the resilience of the economy. This will not only signal the resilience of the economy but also establish the competitive foundations for the country to sustain its high-income, inclusive growth trajectory. 'With implementation the overriding policy focus in the mid-term of the current administration, a greater urgency is observed in the various ministries to implement the initiatives spelt out in the various development plans and sectoral blueprints,' he said. In the face of President Donald Trump's negotiated trade regime, Yeah said the structural reforms to strengthen fiscal resilience, accelerate structural upgrading, raise productivity and competitiveness, improve human capital development and fortify social safety nets are expected to continue regardless of any changes in response to the said regime. 'The refinement needed is to reduce dependency on the United States where feasible while taking steps to reduce friction and avoid conflicts in order to forge a 'win-win' economic relationship with a superpower, be it the United States, China or other economies,' he said.
The Star
19-05-2025
- Business
- The Star
Experts: 2025 GDP growth set for 4-5% range
PETALING JAYA: With the national economy expanding at 4.4% in the first quarter of the year and amid uncertainties surrounding the US-China trade tension, experts expect the country's GDP growth for 2025 to be within the 4.0%-5.0% range. Sunway University economics professor Dr Yeah Kim Leng said the first quarter GDP was lower than last year's 5.1% due to stronger global challenges resulting from the shocks to global supply and demand. This was caused by the continuing uncertainties over US President Donald Trump's tariff policies despite a truce with China. He said the GDP growth for the second quarter was expected to be at about 4.6%, driven by rising exports, sustained domestic consumption and investment spending. 'Exports to the United States picked up by 36.5% in the first quarter compared with the same quarter last year. 'Front-loading ahead of the end of the 90-day pause of 24% reciprocal tariff imposed on imports from Malaysia into the United States is expected to underpin Malaysia's exports which grew by 4.4% in the first quarter. 'The gradual resumption of US-China trade following the 90-day truce achieved on May 12 is also expected to lift Malaysia's exports through trade linkages.' On Friday, the Finance Ministry said the GDP forecast of 4.5%-5.5% would be revised after US reciprocal tariffs stabilise and the situation becomes clearer. It also acknowledged the presence of downside risks in the form of global demand, heightened geopolitical tensions and the rising prevalence of protectionist trade policies. Yeah said the lessened fear of a US recession and a milder Chinese economic decline further boosted the growth outlook for the world's top two economies. 'This in turn has improved Malaysia's growth prospects given its high exposure to both economies amounting to a quarter of its total exports. 'Moody's downgrade of US sovereign rating is expected to trigger a shift away from US debt securities and assets. 'It signals higher credit risk and the accompanying lower demand for US dollar assets will likewise result in a weaker dollar,' he said. On May 16, credit rating agency Moody's downgraded the United States' sovereign credit rating from its top-tier 'Aaa' to 'Aa1', on the back of rising debt burdens and higher interest costs, which would affect the country's standing as a pre-eminent destination for global capital. Economist Geoffrey Williams said although the 4.4% in Q12025 was lower than 4Q 2024 due to domestic production disruptions rather than global headwinds, it was a strong performance given the uncertainties. 'There was a stronger-than-expected 6.8% annual rise in exports in March, when shipments to the United States rose by 50.8% to a record RM22.66bil (US$5.14bil). 'The front-loading from the effect of US tariffs has helped to push Malaysia's growth, showing a benefit from the reciprocal tariff process announced on Liberation Day on April 2. 'The tariff issue is under negotiation and we expect them to be resolved following the example of the UK and China,' said Williams. 'This will mean that the outlook for the second half of the year will be better if there is a good negotiation outcome.' On the domestic front, Williams said there was no better time to pursue the RON95 subsidy rationalisation, adding that this would benefit in terms of long term growth. 'A commitment to this will support confidence in the government's commitment to reform. 'There may be some front-loading effect into 2Q but we would expect net exports to be lower later in the year because production and exports have been pushed forward into the last two quarters. 'We are likely to see growth within the underlying potential of the economy between 4.0% and 5.0%,' he added.
Free Malaysia Today
15-05-2025
- Automotive
- Free Malaysia Today
Factory closures prompt call for stronger social safety nets
Economist Yeah Kim Leng says displaced workers from the manufacturing sector must be allowed to attend training and upskilling programmes to improve their employment prospects. (Bernama pic) PETALING JAYA : An economist warns that inadequate social safety nets for workers displaced by factory closures in Malaysia could lead to grievances over job losses, similar to those seen in the US. German auto supplier Continental last month announced it will cease production at its tyre manufacturing plant in Alor Setar by the end of the year, the latest in a string of major factory closures which have collectively impacted thousands of workers. Last year, American tyre company Goodyear announced it was shutting down its factory in Shah Alam after 52 years. Other notable manufacturers which have closed plants in Malaysia in recent years include Sony and Western Digital. Several Chinese-backed solar panel manufacturers are also reported to have halted or cut back on their operations here as a result of new US tariffs and duties on solar cell imports from Malaysia. Yeah Kim Leng of Sunway University said Continental's decision reflects shifting regional business dynamics, with Malaysia losing its manufacturing edge to neighbours like Thailand, Vietnam and Indonesia due to higher costs. He said training and upskilling programmes were needed to help displaced workers secure new employment. 'This is important to prevent social problems. There are winners and losers when manufacturing becomes more globalised, and it's crucial that each country is able to cope with this,' he told FMT. 'The displaced workers must have a strong social safety net which will enable them to find new jobs or sources of income. 'That has to be in place. If not, it will lead to what we are seeing in America, which has accused other countries of stealing their manufacturing jobs. That is the extreme cost of globalisation.' US president Donald Trump, who first came to power in 2016 on the back of anger over lost manufacturing jobs, marked his second term in office by announcing sweeping global tariffs— partly in a bid to revive his country's domestic manufacturing sector. Many US towns have suffered factory closures, layoffs and industrial decline over the past few decades, with workers blaming globalisation, free trade agreements and outsourcing for the movement of their jobs to Mexico, China, and other countries. Trump tapped into these frustrations by campaigning heavily on a 'Make America Great Again' message, promising to bring back manufacturing jobs, renegotiate trade deals, and impose tariffs to protect US industries. Despite the loss of manufacturing jobs, Yeah said Putrajaya should be encouraged by the rise of investment into electronics and other advanced sectors. Last November, the government announced that Hyundai Motor would invest RM2.16 billion to assemble and produce six car models, including hybrid electric vehicles, in Malaysia. One month later, Chinese battery manufacturer EVE Energy inaugurated its first overseas plant in Kulim, Kedah. When fully operational, the facility will be able to produce up to 680 million battery cells annually and will employ 2,000 Malaysians in technical fields. Economist Geoffrey Williams told FMT Malaysia would need to remove various regulatory barriers, lower taxation and encourage free innovation to sustain manufacturer interest. 'Malaysia remains competitive, but it will always have to compete against regional countries which are larger and have lower costs of doing business,' he noted.
