Kilang Sony Pulau Pinang Tutup Selepas 36 Tahun, 3400 Pekerja Terlibat, Fitch 'Downgrade' Malaysia Jadi 'BBB'

 Well not so good news again. That landmark Sony factory in Perai is going to close after 36 years in operation. Here is the news : 

• GEORGE TOWN: Sony plant in Penang to close next Sept, after 36 years 
• Sony’s impending closure, close to 3,400 workers will be laid off.
• 1,800 workers locals, 1,600 foreigners
• Some employees transferred to Bangi
• plant closing in stages, fully cease next Sept
• fierce competition in multinational manufacturing industry
• FMT is reaching out to Sony Malaysia for comment

My comments :

Fierce competition in multinational manufacturing industry. Indeed the competition is fierce. Sony like most other multinationals has to consolidate and manage their costs. Only the most productive and most cost effective plants can be sustainable. lt is sad that after 36 years here they have to close one of their plants here. We are becoming less cost effective for them. 

However other plants and other countries seem to still perform better.  Are we losing out? According to Fitch the rating agency that seems to be the case. 

Fitch has downgraded Malaysia's rating from 'A' to 'BBB'. Here is the news :

KL Dec 4 — Fitch Ratings downgraded Malaysia to ‘BBB+’ from ‘A-‘ 
coronavirus, weak investment, low tourism reduced economic activity
Fitch expects GDP to contract 6.1% in 2020,  before rebounding 6.7% in 2021 
We forecast growth of 4.6% in 2022
fiscal deficit to remain higher than pre-pandemic levels
expect govt revenue to remain low 19.1% of GDP in 2020 (‘BBB’ median: 31.4%) 
oil  to generate 22% of total revenue this year
low and concentrated revenue base
led govt to draw on dividends of GLCs 
general govt debt to jump to 76% of GDP in 2020 (65.2% of GDP in 2019)
significantly higher than 59.2% and 52.7% for ‘A’ and ‘BBB’ rating 
Malaysia’s debt close to 400% of revenue, 3 times peer median
current account surpluses to narrow to 3.4% of GDP in 2021 (4.2% in 2020)
govt’s foreign currency debt low, 2% of total debt
BNM's cuts in rate by 1.25% to 1.75%
banking sector maintains sufficient loss-absorption capital buffers
expect major banks to remain profitable in near term
Bernama

My Comments :

Malaysia is now running on 'pure luck'.  

Through no effort of our own oil prices have gone to US$45 per barrel (from the US$45 that was holding).  

Crude Palm Oil is around RM3,500 per tonne. In July 2019 it was around RM1,800 per tonne. Again with no extra effort on our part the CPO prices have jumped almost 100%  in 18 months.

We are a very lucky country. 

But the problem is our productivity. The growth in our exports have slowed down. With Sony factories closing our exports will deteriorate further.

Some folks thought that our domestic consumption will be enough to generate growth. We are a very small economy. Our domestic consumption does not have the capacity to generate sufficient growth. We must export. And we must export value added, manufactured goods. Not just things we dig from the ground or plant in the soil.  

Our economy is in trouble because of our self imposed restrictions and poor economic management. This situation will get worse.

In this country we have Civil Servants, politicians and Ministers who do not understand a damn thing about business and finance making policy or making announcements that almost always (100%) negatively affects our economic growth.  

For example we have Civil Servants who dont know a damn thing about business arbitrarily restricting economic activity in the courier business. (Yes I will be blogging about that strange announcement by the MCMC to restrict licenses for courier companies).

We have Ministers arbitrarily restricting economic activity among restaurants, pubs and Chinese medicine shops by banning, reducing, restricting their business activities (sale of liquour etc).  

We have MPs making arbitrary suggestions that certain sectors of the economy should be hit with windfall taxes. Why? Because they make too much profits !!  

Bagus lah. Keep doing that and they will leave our country.  And then Fitch can downgrade us even more.  Then you can jump up and down and shout Allahu Akbar !!

So whenever the Civil Servants, the politicians and the Ministers open their mouths about business and the economy, some business stops - somewhere in the country.

Couriers must stop business, Chinese medicine shops must stop some business, glove manufacturers must suffer higher loss (from higher tax) etc.

Just keep going along this track and in a few more years Malaysia will hit 'CCC' rating - like Mogabe-land or Banggi-stan. 

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.