KUALA LUMPUR, Sept 3 — The West Asia war continues to cast a shadow over Malaysia’s manufacturing sector, with a vast majority of firms reporting that global instability remains a persistent drag on their operational efficiency and bottom line.
According to the latest survey findings presented today by the Federation of Malaysian Manufacturers (FMM), nearly all manufacturers — 96 per cent of respondents — indicated they have been affected by the West Asia war in one way or another.
The data highlighted that supply-chain fragility and surging input costs remain the primary channels through which these geopolitical risks filter down to local businesses.
Raw material shortages hit key sectors
Presenting the data, FMM president Jacob Lee said raw material supply shortages and rising costs are the most pressing concerns, affecting 74 per cent of those surveyed.
“These disruptions have disproportionately impacted several high-value sectors, with the automotive, plastics and pharmaceutical industries identified as the most severely affected,” he added.
For these sectors, the inability to secure consistent raw material inputs has created significant bottlenecks in production and inventory management.
To mitigate these pressures, Lee said manufacturers are increasingly pivoting their sourcing strategies.
“Due to the disruptions in the Strait of Hormuz, a significant number of firms are turning to suppliers in Singapore and China as they seek reliable alternatives to stabilise their supply chains.
“However, the rising logistics costs have significantly increased the production cost,” Lee added.
Logistics and operational challenges
Beyond raw materials, the survey points to a broader landscape of rising overheads.
Freight, logistics, and shipping costs are weighing on 72 per cent of manufacturers, while 44 per cent are grappling with higher energy and fuel expenditures.
Other notable impacts include pressures on working capital and cash flow (20 per cent), as well as a decline in export orders or renegotiations of existing contracts (19 per cent).
While some manufacturers indicated that the intensity of these disruptions has partially eased for 40 per cent of firms, conditions have yet to normalise.
A substantial 32 per cent of respondents reported that the impact remains at the same elevated level as six months ago, while 11 per cent noted that the situation has deteriorated.
According to Lee, many manufacturers who rely on energy and raw materials from countries located around the Strait of Hormuz have found alternative ways to transport their supplies through other routes, which have become more costly.
“Some traders have to take their products through land transit before [bringing] them here to Malaysia via sea, but this is a costly process,” he added.
Strategic shift and policy calls
In response to the volatile environment, manufacturers are actively restructuring their business models.
Approximately 29 per cent of those surveyed have increased their stockholding of critical raw materials, while 25 per cent are actively switching to alternative suppliers or diversifying their sourcing countries.
Another 21 per cent have comprehensively restructured their logistics arrangements.
However, uncertainty about the long-term outlook remains, with 31 per cent of manufacturers saying it is still too early to determine the lasting effects of these disruptions.
To weather these challenges, the industry is calling for targeted government intervention rather than broad-based financial aid.
The survey shows that 56 per cent of manufacturers are advocating for duty and tax exemptions on raw materials sourced from alternative origins.
Additionally, 40 per cent are seeking industrial fuel rebates for those excluded from current diesel subsidy schemes, while 32 per cent support tariff reductions or the acceleration of trade agreements to offset mounting geopolitical costs.
