Local companies listed on the local bourse do not in general expect their performance to recover fully this year despite broad expectations of an improved economy, a senior minister said today.

"According to the findings of a survey conducted in the second half of 2001 by the Department of Statistics, industries will not be able to recover fully," Rafidah Aziz, minister of International Trade and Industry said.

"But there is a general expectation that the manufacturing sector will be able to perform better this year," she said at a government/private sector dialogue.

Rafidah said the survey, which covered 270 listed companies and drew a 100 percent response, indicated the weak economic conditions in 2001 are expected to spill over into 2002.

The minister said the pace of recovery in 2002 could be speeded up by the industries themselves taking proactive initiatives, such as rationalisation of activities and a stronger drive in exports.

The minister said the pace of recovery in 2002 could be speeded up by the industries themselves taking proactive initiatives, such as rationalisation of activities and a stronger drive in exports.

Review peg

At the meeting, the Federation of Malaysian Manufacturers (FMM) urged the government to review the ringgit peg and extend the liberalisation of equity rules in the manufacturing sector beyond 2003.

The FMM said the ringgit peg needed to be reviewed to make it "more flexible and reflective of competitiveness", to ensure Malaysia maintains export competitiveness.

It said its survey indicated the current ringgit peg impeded the increase in export sales.

But last month central Bank Negara Malaysia said the four-year-old currency peg of RM3.80 to the US dollar has provided economic stability and will not be changed.

The FMM said: "Extend the liberalisation of equity conditions for the manufacturing sector (which is currently in effect up to 2003), indefinitely to encourage foreign direct investments."

Under current rules, foreigners are allowed to have 100 percent ownership of companies if they set up industries in Malaysia before end-2003.

The federation warned that due to keen competition for foreign direct investments in the region, there may be a "hollowing out" effect and slower economic growth in future if investments in Malaysia do not pick up.

Industrial output in February rose 2.9 percent year-on-year and was up 3.6 percent from January, the Statistics Department said Monday.

Economic upturn

The year-on-year increase follows 11 consecutive months of contraction since March last year, it said in a statement.

The 2.9 percent year-on-year industrial output growth was due to a 3.8 percent growth each in the manufacturing and electricity sectors indices, which offset the 1.3 percent decline in the mining sector.

Compared to a month earlier, the 3.6 percent industrial output expansion was due solely to the 7.8 percent growth in the manufacturing sector, which countered a 9.3 percent decline in the electricity sector and a 8.2 percent fall in the mining sector.

Malaysia last month slightly lowered its 2002 economic growth forecast to 3.5 percent but predicted an upward bias if the US economic recovery was sustained.

The government has earlier predicted 2002 gross domestic product to grow between four and five percent, although Prime Minister Dr Mahathir Mohamad in January said GDP would grow by only three percent.

The central bank, in its 2001 annual report, noted the current economic upturn was taking place amid global excess capacity, particularly in the technology sector.