FMM president Jacob Lee said the conflict has affected the sector in three key areas – logistical disruptions, higher energy and fuel costs, and material shortages.
He said manufacturers are not only facing price increases but are also preparing for shortages of key materials required in their manufacturing processes.
“On logistical disruptions, companies need to reroute shipments at significantly higher freight costs, while also paying premium insurance and higher port storage charges.
“The other issue affecting every Malaysian is the increase in energy and fuel costs. As such, FMM is appealing to the government to consider extending diesel subsidies to the sector.
“Thirdly, there are material disruptions, especially in petrochemical derivative products such as polyvinyl chloride, polypropylene, polyethylene, and other plastic resins,” he said in a Bernama TV programme.
Lee said as most Malaysian manufacturers are involved in conventional manufacturing, they are highly sensitive to cost increases due to thin margins, posing a significant threat to business sustainability.
“We hope the government can introduce measures or interventions to help cushion cost increases so that companies do not have to pass too much of the burden onto consumers, as this could in turn drive inflation,” he said.
He said the Malaysian manufacturing sector contributes a significant 23% to the nation’s gross domestic product and employs 2.3 million people.
“We (the manufacturing sector) are probably the second-largest taxpayer in the country.
“Meanwhile, 86% of Malaysia’s exports are manufactured goods.
“I would also like to highlight that 44% of exports come from the electrical and electronics sector, or emerging technology manufacturing,” he said.
In addition, he said, the Purchasing Managers’ Index, which indicates whether the manufacturing sector is expanding or contracting, shows the sector is recovering but remains unstable, rising to 50.2 in January before falling to 49.3 in February.
The index is measured on a threshold of 50, where readings above 50 indicate expansion and those below 50 indicate contraction.
Currently, oil prices remain above US$100 per barrel. At 5.18pm, Brent crude fell 1.54% to US$107.30 per barrel.