Budget should have addressed woes in electronics sector

Hoo Ke PinPETALING JAYA: An economist has warned of tough times in Malaysia’s electronic sector and said Budget 2017 should have taken this into account.

Speaking to FMT, Professor Hoo Ke Ping said the electronics sector would take a hit next year with the United States moving towards stagflation. The US is the main market for finished Malaysian electronic products as well as components.

“Penang and Selangor will be severely affected,” he said. “Already electronics companies are closing shop in Penang and moving elsewhere.”

He said a lot of people would lose their jobs and would need training for work in which they had no experience.

What Putrajaya should have done, he said, was to allocate at least RM100 million specifically for the retraining of these workers.

He noted that Pakatan Harapan’s alternative budget did not address the issue either.

In September, it was reported that the Rubicon Sapphire Technology factory in Prai would be shutting down. Two months earlier, disk drive makers Seagate and Western Digital were reported to be moving production operations to Thailand.

Commenting on another aspect of the budget, Ho acknowledged that the government made a wise decision in basing it on an estimated oil price of US$45 per barrel.

He noted that Deutsche Bank economist Diana Rose del Rosario had estimated the price to be at least US$50 a barrel and others had predicted that it would hit US$60.

He said these estimates were fuelled by three factors, namely reduced global supply, reduction in shale oil prices and the continued high demand for oil in China.

“These will surely push up oil prices, and if prices average US$55 per barrel for 2017, the government will reap the rewards for being conservative,” he said. “The government could easily net an additional revenue of at least RM3 billion if this is the case.”

At a recent a dialogue on Budget 2017, Rosario said it was possible for Putrajaya to reduce Malaysia’s fiscal deficit to as low as 2.6 per cent of its gross domestic product if oil prices averaged US$50 a barrel.