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THURSDAY | MAR 6, 2025

FMM: No more taxes please, manufacturing at chokepoint

prioritise efficiency over aggressive growth, focusing on stability amid global economic uncertainties. While employment remains stable and investment sentiment is steady, rising costs and external risks may temper business expansion. The sector is moving towards gradual recovery, but caution remains a defining factor in strategic planning. The survey also showed manu facturers’ expectations for higher production volume fell from 32% previously to 30%. Meanwhile, stable production expectations grew to 48% (favourable responses), reflecting greater predict ability. Manufacturers also anticipate rising production costs, with 72% expecting higher costs in the first half of 2025, up from 66% previously. Further, domestic manufacturers remain cautiously optimistic about revenue prospects in 2025, with 56% expecting growth, 24% anticipating stability, and almost 19% foreseeing declines. Most respondents predict mo derate revenue increases (1%-10%), while only 8% expect strong growth (>25%), reflecting measured confi dence rather than aggressive ex pansion. A majority of respondents (91%) expect the increase in minimum wage and mandatory Employee Provident Fund contribution to impact their operational expenses, while 9%

15% will be taxed. “However, if we break down the numbers, the 15% includes the 1.5% of mid-tier and large companies – meaning the remaining 13.5% consists of SMEs. These SMEs, which are being taxed, are not wealthy conglomerates. They are hardworking businesses that significantly contribute to the country’s tax revenue. “Moreover, SMEs are the backbone of the Malaysian economy. They account for over 38% of GDP (gross domestic product) and employ nearly 7.8 million people. Mid-tier com panies also play a crucial role within this segment. “The impact of taxation on these businesses will directly affect eco nomic stability and employment,” Soh said. The 26th edition of the FMM Business Conditions Survey revealed that Malaysian manufacturing sector in the second half of 2024 demon strated steady momentum, with business conditions, sales and pro duction strengthening amid high costs. Sustained capital investment and steady employment levels underscore a strategic, long-term confidence as manufacturers navigate an evolving economic landscape with a balanced approach to growth and risk manage ment. Looking ahead to first-half 2025, the FMM survey showed domestic manufacturers are expected to

o Federation urges govt to find better way to generate revenue and to plug leakages

ment revenue of RM322 billion. “So it means the private sector had contributed 68.6% of government tax revenue. We are the taxpayers. We hope the government understands us. We are the ones who pay the most tax. “If the government keeps on adding more tax, the domestic manu facturing sector will face tremendous pressure. How to generate better revenue and better profits?” he said. Soh also noted that the govern ment is working to expand tax base. “We fully understand that. However, our industry is already the largest tax contributor,” he said. Soh said Malaysia has about 1.3 million business entities, of which 98.5% are micro, small, and medium enterprises. Only 1.5% consist of mid tier, large and multinational com panies. Within the 1.5%, mid-tier com panies make up around 1%, or about 8,000 to 10,000 businesses, while large companies account for just 0.5%. Despite being a small segment, these mid-tier and large companies con tribute the most in taxes. The FMM president said the government claims that 85% of businesses are unaffected by new tax measures and that only the remaining

Ű BY JOHN GILBERT sunbiz@thesundaily.com

KUALA LUMPUR: The government will award Arm Compute Subsystem (CSS) tokens – access to Arm Holdings’ high-end chip design framework – to Malaysian semi conductor companies that meet selection criteria at the next KL20 Summit in the coming months, said Economy Minister Datuk Seri Rafizi Ramli. He said that through the ecosystem partnership with Arm Holdings, Malaysia would work to develop complex design companies with Arm’s intellectural property expertise and to design based on Arm’s “crown jewel” offering – the CSS. “For each of the CSS, we are looking to build a complete supply chain in advanced industries such as AI data servers, autonomous vehicles, IoT, robotics and others. An eco system perspective also means that we will prioritise local players as the first resort for every part of the supply chain,” he said in his speech at the launch of Silicon Vision 2025 with Arm Limited yesterday. KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) has urged the government not to intro duce or raise any taxes this year, stressing that the domestic manu facturing industry is already at a choking point. “Don’t increase any tax on micro, small and medium industries again. There are nine taxes introduced this year. We have enough taxes already. The government needs to find a better way for revenue generation. “And the government must also find ways to stop the leakages,” FMM president Tan Sri Soh Thian Lai told reporters when presenting the FMM Business Conditions Survey for the Second Half of 2024 yesterday. Soh pointed out that the private sector contributed RM94.4 billion in corporate tax and RM30.8 billion in income tax to the government. A further RM51.24 billion came from private sector indirect tax. “And if you add in sales and service tax, which mostly involved industries, it is about RM44.7 billion. All in all, the private sector had contributed RM221 billion in tax out of our total govern Ű BY HAYATUN RAZAK sunbiz@thesundaily.com

OSAT (backend) that captures 5-10% of the value, to integragted circuit design that captures over 60% of the supply chain value. “Our economic strategy requires Malaysia to build local, indigenous technology for higher margin exports and supply chain resilience. We need to venture into new technology areas like AI, robotics, autonomous vehi cles, and IoT,” he added. According to media reports, Rafizi told reporters on Monday that Malaysia will pay Arm Holdings US$250 million (RM1.1 billion) over 10 years to acquire the firm’s chip design plans. Malaysia aims to produce its own graphics processing unit chips within the next five to 10 years to meet the growing demand for artificial intelli gence and data centres. The agreement includes access to seven of Arm’s high-end chip design blueprints and a commitment to train 10,000 engineers in Malaysia. The government hopes this deal will help local semiconductor com panies scale up, with a target of creating 10 firms generating annual revenues of US$1.5 billion to US$2 billion each. In 2025, manufacturers are bracing intensified cost pressures and slightly heightened competition, with 55% citing rising input costs (up from 49% in 2024) and 48% noting increased competition versus 47% previously. Additionally, 2025 introduces new issues such as regulatory bur dens, labour shortages and sus tainability compliance, suggesting that although some traditional challenges have moderated, the overall operating environment re mains complex and demands a strategic focus on cost efficiency and market differentiation. believe there will be no significant effect. Among those anticipating higher costs, 48% expect a moderate increase (5% to 10%), while 26% foresee a smaller rise (less than 5%), and another 26% anticipate a more substantial cost surge (more than 10%). Soh speaking at a press conference in conjunction with the release of the FMM Business Conditions Survey for the second half of 2024.

Govt to award Arm CSS tokens to eligible companies at KL20 Summit

Prime Minister Datuk Seri Anwar Ibrahim (fifth, left) at the launch of Silicon Vision 2025. With him are Rafiizi (fourth, left), Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz (third, left), Arm CEO Rene Haas (fourth, right) and Chief Secretary to the Government Tan Sri Shamsul Azri Abu Bakar (second, left). – BERNAMAPIC

highlighting the collaboration with local players, and showcasing these technology prototypes at the next KL20 Summit,” he shared. Rafizi said Malaysia’s semi conductor industry must move from

holistic way. “In the next few months, we will show progress on this Arm colla boration: By launching the 10-year vision blueprint, announcing the recipients of the CSS tokens,

Rafizi said it has put in place a collaboration structure with ad vanced foreign firms, proposed technology transfer and localisation requirements, so that it could uplift local players in a realistic and