The Federation of Malaysian Manufacturers (FMM) has projected 7.2 percent growth for the manufacturing sector this year, from five percent in 2003, as strong electronic orders lead firms to reopen assembly lines, newspaper reports said Saturday.

FMM president Mustafa Mansur was quoted by The Star as saying the rosier outlook was based on an overall improvement in manufacturing, especially in electrical and electronics sectors, in line with the country's economic growth.

"Most of our members' order books are still expanding. In fact, most of the companies have secured orders until the third quarter of this year," he said.

The New Straits Times quoted Mustafa as saying capacity utilisation, which dropped below 60 percent for some industries last year due to the Iraq war and the SARS outbreak in the region, has climbed back up to above 80 percent.

He said the FMM, which represents some 2,000 companies, had not received complaints about the ringgit peg of 3.80 to the dollar, fixed since 1998.

Production costs up

Malaysia's exporters have become more competitive with the weaker dollar but at the same time production costs have risen as imported goods became more expensive.

Mustafa said manufacturers were, however, confident that any squeeze in margins would be offset by higher sales.

"We hope that the peg will remain as it is. (Imported inflation) is not an issue for the time being," he said, adding that manufacturers importing raw materials from Europe should seek other alternatives to get cheaper supplies.

The manufacturing sector, which accounts for 30 percent of Malaysia's economy, rebounded late last year fuelled by stronger global demand and a recovery in the semiconductor sector.

Manufacturing sales in November rose 11.40 percent year-on-year to RM29.30 billion ringgit (US$7.71 billion) for a third consecutive month of double-digit growth. Malaysia's exports were worth RM342.5 billion in the first 11 months of 2003 and were expected to hit RM380 billion for the whole year.

Prime Minister and Finance Minister Abdullah Ahmad Badawi has said the economic outlook remains positive and predicted growth of 5.5 to 6.0 percent for this year, up from the 4.5 percent expected for 2003. - AFP