Economic Update

Published 30 Apr 2020

As manufacturers target productivity gains in response to the coronavirus outbreak, Malaysia is at the forefront of global efforts to meet elevated demand for medical gloves.

Most business activity in Malaysia has been severely curtailed since the government introduced a movement control order (MCO) on March 18.

Since then, schools and non-essential businesses have been shuttered, while international and interstate travel is prohibited and people have been ordered to stay at home unless they are buying necessary provisions or seeking medical assistance.  

The MCO has been extended three times as the government strives to contain the coronavirus, and it is currently scheduled to remain in force until May 12. The local count stood at 5945 cases and 100 fatalities as of April 29.

Manufacturers of medical supplies and other products deemed critical to the nation’s interest were initially authorised to operate at 50% capacity under the MCO, although medical glove producers were later allowed to apply for special dispensation from the Ministry of International Trade and Industry to operate beyond this.

Since April 29 all such manufacturers have been permitted to operate at full capacity, provided they abide by physical distancing rules and health control guidelines.

Malaysia meets approximately 65% of global demand for rubber medical gloves. The official removal of operating limitations will thus be welcome news for governments across the world that are still struggling to procure personal protection equipment for their health care workers and others on the frontline of the fight against Covid-19.     

Market leader

According to the Malaysian Rubber Glove Manufacturers Association (MARGMA), approximately 187bn units were produced in 2019 by around 200 factories belonging to its members.

Depending on the trajectory of the global pandemic, MARGMA anticipates international demand could reach 345bn units this year, compared to 298bn in 2019. Of this total, Malaysia is aiming to export around 225bn units.

Malaysian firm Top Glove – currently the world’s biggest supplier of nitrile and latex medical gloves – has reported that orders have more than doubled since the beginning of the outbreak.

Previously, most overseas orders came from industrialised economies in Asia, but Top Glove is now receiving high-volume orders from Europe and the US as well. Consequently, it expects to command 30-35% of the global market in 2020.

As a result of challenges in sourcing sufficient labour during the MCO, Top Glove and other medical glove manufacturers have sought to improve productivity to keep up with demand. Some had already invested in automation and digitalisation prior to the pandemic, which enabled them to partially offset labour shortfalls.

Nevertheless, lead times have increased considerably due to the combination of increased orders, labour shortages and disruption to supply chains. 

Looking ahead, investments in automation and digitalisation should help Malaysian medical glove manufacturers cement their position at the forefront of the global industry, which looks likely to see elevated long-term growth as a result of government stockpiling and heightened awareness around personal hygiene.

The prospects for the industry in Malaysia are underpinned by the country’s 1.7m ha of rubber plantations, which produce almost 20% of the world’s natural rubber supply.

In addition to rubber medical gloves, Malaysia is also the world’s number-one exporter of condoms, another product seeing a Covid-19-related increase in demand.

Recovery strategies

As key manufacturers return to full capacity, Malaysian policymakers are mulling over further measures to stimulate the economy.

The government has so far announced three stimulus packages to mitigate the negative economic effects of the pandemic and the MCO. The first two packages were detailed by OBG earlier this month, while the third package announced on April 6 brought the total outlay to RM260bn ($59.9bn).   

Like its predecessors, the third stimulus package was largely aimed at small and medium-sized enterprises (SMEs), which constitute around 98% of the economy.

Measures included the expansion of wage subsidies for employers based on their workforce size, and a special grant of MYR3000 ($691) for SMEs that have fewer than five employees, or an annual turnover below MYR300,000 ($69,068).

When announcing the most recent extension to the MCO, Prime Minister Muhyiddin Yassin said he had ordered the Finance Ministry and Economic Planning Unit to draft short-, medium- and long-term economic recovery plans. 

The plans are expected to include initiatives to raise skill levels, stimulate domestic consumption, enhance industrial resilience and improve the investment environment.

The prime minister only assumed office on March 2 and, due to the need for coronavirus crisis management, has had little opportunity to articulate a long-term vision for Malaysia’s economic development.