The Business and Economic Impact of Covid-19 on Penang’s Manufacturing Sector

EXECUTIVE SUMMARY

• • Since the Covid-19 Movement Control Order (MCO) began on 18 March, Penang’s manufacturing firms have experienced supply and demand shocks.
  • A survey done by Penang Institute reveals that about half of Penang-based manufacturers are reliant on China as their supplier or sub-tier supplier, more than during the Severe Acute Respiratory Syndrome (SARS) crisis in 2004. They also stress the significance of local supply chains.
  • Penang’s well-developed manufacturing ecosystem, often cited as a key factor for its status as a manufacturing hub, has gone through different crises with the nature of the disruptions varying over the crisis period and the location of their suppliers.
  • Suggested measures to manage future supply chain disruptions in the future include:

a. diversifying and increasing range of suppliers;
b. enhancing supply chain management;
c. increasing buffer stock;
d. placing earlier orders for materials; and
e. improving communication relationship with suppliers.

• • Based on the survey responses, the recovery is expected to be more U-shaped than V-shaped – the period between recession and recovery will be long, and it may be years before a rebound. Textile companies are less optimistic about their recovery outlook compared to the electronics and electrical (E&E) and medical devices sub-sectors
  • A multi-actor and multi-pronged approach for developing clear, coherent and strategic measures is needed. Proposed measures include the following:

a. Clear guidelines for employers and employees;
b. Staggered financial assistance to small and medium industries (SMIs)/SMEs;
c. Improved collaboration between state and federal governments to develop a practical containment strategy at the corporate level; and
d. Systematic, effective and coordinated policies across government departments.