Malaysiakini Letter

Why Wuhan matters to us

Lee Kah Choon
Published:  |  Modified:

LETTER |  Wuhan, also known as "Chicago of the East", is an 11 million population capital city of the Hubei Province in Central China.

It has a GDP of US$224 billion and 230 Fortune Global 500 firms have a presence there.

It is a transportation, manufacturing, financial and commercial hub all rolled into one. On industrial activities, it is big in automotive, oil and gas.

If the 2011 flood in Bangkok and the nuclear power station mishap in Fukushima, Japan affected the global manufacturing supply chain negatively, the current coronavirus epidemic will likewise dislocate the global supply chain due to prolong shut down of manufacturing facilities there.

The effect of this epidemic coupled with the tariff placed on Chinese export to America may affect Malaysia in several ways.

Firstly, many Chinese companies may go out of business and as a result, Malaysian export to China would be greatly reduced. 

This is significant to Malaysia as our export to China is 14 percent of our total gross export and our import from China make up nearly 21 percent of our total gross import.

The curtailing of travel manufacturing activities have reduced the demand for oil. Consequently, the crude oil price has plunged 20 percent to below US$50 per barrel since the onset of the epidemic. Low oil price will impact Malaysia negatively in term of revenue receipt.

Consequently, the tourism industry is expected to be negatively affected as Chinese tourist arrival is curtailed and travel from the rest of the world is discouraged. 

Our Visit Malaysia 2020 campaign target of 30 million tourists with RM100 billion in tourist receipts is unlikely to be achieved if this epidemic is prolonged

This is if the epidemic is contained within Hubei province. If the situation breakout from this province (which seems to be the situation currently), the effect will multiply manifold.

However, there is a silver lining to all these negativity. The demand for healthcare consumables such as gloves, masks, sanitizers have spiked. This is positive to our manufacturers in the healthcare industries.

Further, the disruption to the global supply chain, especially in the electrical and electronics industry will present our manufacturers with the opportunities to fill the shortfalls.

To take up the expected slack in the domestic economy, it is heartening to note that the Finance Minister Lim Guan Eng has assured the country that stimulus packages will be introduced to pump up the economy.

Especially important is for the government to push forward major infrastructure projects to improve our competitive edge. In the meantime, major construction projects will have a wide-ranging multiplier effect on the local economy.

2020 will be an extraordinary year that calls for extraordinary initiatives.

Lee Kah Choon is the Special Investment Advisor to the Chief Minister of Penang.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

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