THE past week has been nothing short of confusing for everyone in the country with regard to the government’s Movement Control Order (MCO). The order stipulates that all mass gatherings and schools are to be suspended while businesses, except for those providing essential goods and services, are to be closed from March 18 to 31.

However, what constitutes “essential” has been a hot topic among businesses. So, after meeting with industry representatives, the National Security Council came up with a final list of essential goods and services last Wednesday.

The list also shows the names of approved industries deemed important to facilitate the provision of essential goods and services, and which have been allowed to continue their activities under certain terms and conditions.

One of the conditions is that the number of workers has to be reduced to a minimum during the MCO period, or at least 50% of the current or registered number.

This comes as a huge relief to many manufacturers who were concerned about having to completely shut down their operations for two weeks.

“We are operating at 50% or less of our workforce as per the government requirement. So, there will be some impact on revenue and earnings. But this is better than a total shutdown for two weeks,” says a director of a Penang-based electrical and electronics (E&E) company.

Even so, there are disagreements over the list of industries — which include E&E, export-oriented timber and palm oil — that are deemed essential by the government and permitted to operate during the MCO period. Many segments of the manufacturing industry have appealed to the government for leniency.

Meanwhile, certain segments, like the glove manufacturers, believe they should be allowed to operate at full capacity instead of 50%, given that medical gloves are seen as a necessity during the Covid-19 pandemic.

“The World Health Organization has urged industries and governments to increase medical glove manufacturing by 40% to meet the rising global demand. Malaysia is the world’s largest medical glove producer and we are duty-bound and responsible for the welfare of all humanity,” Malaysian Rubber Glove Manufacturers Association president Denis Low stressed in a statement last Thursday.

There is huge concern about how supply chains will be disrupted, especially in industries where work has come to a standstill. Many say these industries will just have to play catch-up after the MCO is lifted.

One saving grace, some point out, is that the factories in China have started to operate again after a lockdown to curb the spread of Covid-19. But there are also worries about softer demand in the light of the pandemic that has sent economies everywhere into a tailspin.

Electronic manufacturing services players who are not listed as part of essential services are understood to have halted operations, according to CGS-CIMB Research in a report.

The report highlights that the supply chain is less of an issue than the global end-demand for consumer electronics. “We gather from channel checks that the order visibility of some export-based manufacturers has already reduced from 6 to 12 months to as short as a few weeks due to Covid-19. The slowdown is compounded by potential logistical bottlenecks and reduced footfall in consumer electronic retail outlets,” it says.

University of Malaya economics professor Datuk Rajah Rasiah believes that export-reliant sectors, especially those with strong integration with China, like palm oil, durian and electronic products, will be worst hit by the MCO. “At the moment, the contagion has spread through the whole economy, including undermining the higher education sector. Closing the factories for a long period of time will quicken the slide into a recession,” he says.

A March 20 report by S&P Global Market Intelligence says the impact of Covid-19 on the supply chain has been widespread globally, with the automotive, electronics, capital goods, commodity and apparel sectors experiencing a slowdown in sales and availability of parts.

This is reflected in the plunge of the global manufacturing Purchasing Managers’ Index (PMI) to the low levels of the 2008/09 global financial crisis. The global PMI hit 47.2 points last month, falling from 50.4 points in January, weighed down by China as the country battled the disruption wrought by Covid-19 in manufacturing activity and the supply chain.

As of now, economists have yet to change their forecast of export and import growth for this year. However, many say it is expected to be affected in the near future. “Trade activity is likely to have deteriorated further in February as the full impact of Covid-19 is reflected. On top of that, concerns over political uncertainty and policy continuity may weigh on consumption and investment appetite, further dampening the growth outlook for this year,” says CGS-CIMB Research in a March 4 report.