KUALA LUMPUR (March 5): Nearly half of manufacturers in the Federation of Malaysian Manufacturer's latest survey on business conditions expect a 5%-10% cost increase in 2025 due to higher minimum wage and mandatory wage costs.

Another 26% expect a more than 10% jump.

The survey found that 91% of manufacturers expect wage costs to impact operational expenses, while the remainder see no impact.

A new minimum wage of RM1,700 for workers took effect on Feb 1, 2025, while the Employees Provident Fund (Amendment) Bill 2025, which will mandate a 2% contribution for foreign workers, has been tabled for the first reading in Dewan Rakyat.

The FMM survey, which drew 524 respondents nationwide, was conducted from Dec 18, 2024 to February 17, 2025 and tracked business confidence via the FMM Business Conditions Index (FMM BCI), covering the actual performance in the second half of 2024 and outlook for the first half of 2025.

FMM president Tan Sri Soh Thian Lai said that while manufacturers generally maintained a relatively stable outlook for business conditions and growth in 2025, their optimism is tempered by the persistent challenge of rising input costs, which have been identified as a primary concern for the year ahead. 

Many manufacturers are likely to adjust by recalibrating pricing, optimising costs or improving productivity to offset the expected wage-related cost pressures.

Other key challenges faced by manufacturers highlighted by the survey include intensifying competition and weak demand.

Business activity expectations among Malaysian manufacturers remained positive, with a focus on stability despite ongoing challenges, according to Soh.

He added that while internal conditions are expected to improve, broader economic and industry trends remain stable, with concerns over potential slowdowns. 

Despite these pressures, manufacturers remained “cautiously optimistic,” with capital investment expectations holding steady, Soh added. 

The survey also highlighted that the employment outlook remained stable, with the percentage of respondents expecting increased hiring rising to 22%, up from 18% previously.

The majority (62%) anticipated no changes to their workforce, while 16% foresaw a reduction in employment, suggesting trends such as sectoral restructuring or automation. 

The employment index stayed above 100, reflecting moderate optimism without any aggressive expansion plans. 

The results in the current survey suggest a mix of optimism and caution, with cost pressures, market uncertainties and operational efficiencies shaping profit expectations. 

With no significant anticipation of substantial losses, the overall sentiment remained steady yet prudent, with businesses likely to prioritise cost management and operational efficiency.