Malaysian businesses: We're harder hit by weak
ringgit than by GST
Kuala Lumpur: IT may be too early to gauge the effect of
the new 6 per cent Goods & Services Tax (GST) on the
Malaysian economy, but businesses say the feeble ringgit
is already exacting a heavy price, with many saying they
feared the depreciation of the currency more than they
did the GST.
Indeed, nearly nine out of 10
respondents polled by the Associated Chinese Chamber of
Commerce & Industries Malaysia (Acccim) on the economic
situation in the second half of last year said they
expect the ringgit to continue its downward slide
against other major currencies in the "coming future".
The ringgit has shrunk some 14 per cent against the
greenback since mid-2014, and given analysts'
projections of a continuing dip towards the RM4.00 level
by year-end, the concerns appear warranted.
The ringgit is now hovering at around 3.6597, having
rebounded slightly from its mid-March peak of about
3.71; its pegged level following the Asian financial
crisis of 1997/98 was 3.8. |
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Asked whether the fall of the ringgit had affected their
selling prices and costs, nearly all respondents in the
Acccim survey said business has been affected one way or
another, whether in the form of selling prices and/or
costs. In the currency crunch, exporters that have
mostly ringgit-denominated inputs but sell in US dollars
- glove manufacturers, for example - have benefited from
the surging dollar.
But businesses caught in the maelstrom of spiralling
expenses are finding it tougher to pass on the
additional costs to increasingly wary consumers.
It is worth noting only 8.2 per cent of those polled
were export oriented; an overwhelming 80.5 per cent were
domestic market-oriented, and the remaining 11.3 per
cent were a mixture of both.
Ahead of the rollout of the GST on April 1, the
Malaysian Automotive Association had sought to temper
expectations of lower car prices, given the RM's
depreciation against major currencies.
Its president Aishah Ahmad said: "The biggest issue to
us right now is the exchange rate." She noted that many
vehicle parts were sourced in US dollars and that that
would be more significant in determining car prices than
the consumption tax, which replaced a 5 to 15 per cent
sales & service tax.
Post-GST, car makers such as Volkswagen and BMW
maintained their prices, but Mercedes instituted a
slight reduction of 0.5 to 1 per cent on its vehicles.
Domestic car maker Proton, which uses more local
components, announced lower prices of up to 3.25 per
cent on all its models.
Retailers with significant operations in China, such as
Parkson Corporation, are also keeping a close eye on the
ringgit.
Its chief operating officer Law Boon Eng
said last week that GST would have a nominal effect on
prices relative to the ringgit's depreciation of about
16 per cent against the renminbi since June 2014. He
estimated that the GST and the exchange rate factor
could result in goods costing a fourth more.
Although consumer spending is expected to recover after
a period of adjustment to the GST, the effects of a
sickly ringgit will be harder to overcome. Business
confidence has sunk to the lowest in a decade. Acccim
respondents showed themselves to be pessimistic about
the economic outlook for this year and also the next.
Source:
THE BUSINESS TIMES
, dated
07/04/2015 |