ANN/THE STAR – After persevering for two years against the pandemic, Malaysia’s economy appears to be making progress, particularly the tourism and export sectors which could capitalize on the weakening ringgit to rebound.
Federation of Malaysian Manufacturers (Penang) chairman Datuk Lee Teong Li said exporters of electronics, machinery and equipment benefited from a weaker ringgit. “Compared to about three months ago, when the ringgit was MYR 4.39 to the USD 1, export-oriented manufacturers, especially those with low import content, gained about 5%, given the exchange rate of 4.50 MYR for 1 USD today.
“US currency earnings helped offset the higher cost of imported raw materials and logistics,” he said.
Importers, however, would lose out because their ringgit earnings would not compensate for the higher logistics costs for air and sea freight and import costs, Lee said.
“Higher interest rates are making the situation worse. Currently, the bank interest rate is around 4.5% compared to 3% a year ago. They are therefore penalized by a weaker ringgit and high interest rates,” he added.
FMM has over 4,000 members, including about 500 in Penang. Some 40 percent of its members are exporters.
The head of research at the Malaysian Institute of Economic Research, Shankaran Nambiar, said that while a weaker ringgit made Malaysian exports attractive and benefited exporters, it was also valid that countries whose currencies had depreciated by against the American currency would ultimately matter less.
“The Japanese and Chinese currencies have depreciated recently, affecting their purchasing power when buying from Malaysia, a situation that would not spare local exporters, as Japan and China are Malaysia’s main trading partners,” he said. he declared.
Malaysia’s Honorary Secretary of Small and Medium Enterprises (Samenta), SH Yeoh, said the downside of a weaker ringgit was, of course, soaring prices of imported commodities.
“The margins of those who sell only in the domestic market will be reduced. The higher import cost will have to be passed on to consumers, which will eventually affect demand,” he said. Yeoh added that a weaker ringgit also meant holidays abroad would be expensive.
On the positive side, a weakened ringgit would attract more tourists to the country.
“Since the opening of the country’s borders, leisure and medical tourists have been arriving.
“There is no doubt that a weaker ringgit has played a pivotal role in enhancing Malaysia’s competitive advantage as an attractive leisure and medical tourism destination.”
Industries Unite MCO 2.0 coordinator Datuk Irwin Cheong said that with the stronger US dollar, companies were having to pay higher fees for their social media ads.
“Most of us source our items from China and other countries. However, for social media ads, we still have to pay in US dollars,” he said.
Industries Unite is a coalition of 120 trade associations and chambers of commerce, as well as associations from the retail and hospitality sectors.
In Petaling Jaya, trade associations also warned that while the stronger US dollar could make Malaysian exports competitive, the weaker ringgit could lead to higher production costs and would not bode well for importers.