KUALA LUMPUR – The Malaysian Rubber Glove Manufacturers Association (Margma) wants Bank Negara to allow rubber glove exporters to convert only 50% of their foreign currency proceeds into ringgit instead of the 75% requirement announced last Friday.
The association said in a statement that it hoped the central bank would review its new policy as it would have a detrimental impact on the industry.
According to Margma president Denis Low Jau Fo, the policy means it is now incumbent on the manufacturer to immediately convert three quarters of any foreign currency received to ringgit.
“Most local manufacturers and exporters have foreign currency accounts to better manage the spikes and volatility of foreign exchange rates. The rubber glove industry has always used the US currency as a natural hedge to cushion their costings and pricing since 50%-55% of the foreign currency will be used to offset the difference in purchasing raw materials such as synthetic and natural rubber latex as well as chemicals required for rubber glove production,” he said.
“Without this natural hedging, the industry will be placed in a very difficult position as they will be forced to do a double conversion on the currency – from US dollar to ringgit and then from ringgit back to US dollar for all payments,” he added.
Margma, he said, believed that for the greater benefit of the rubber glove export industry, a 50% direct conversion from the US dollar to the ringgit would be more manageable.
“We seek an exemption on this new policy in order for the industry to stay competitive in global business. We hope Bank Negara will be open to a dialogue to discuss this matter in a more comprehensive manner as we are engaging both the Malaysian Rubber Export Council (MREPC) and Malaysia External Trade Development Corp (Matrade) on this matter concerning all exporters, especially those in the rubber glove industry,” Low said.
He said the rubber glove players would like to better understand the idea and workings behind Bank Negara’s move so they could be supportive of a reasonable policy that was workable and conducive for both the central bank and exporters.
“Malaysia is a small trading nation, largely dependent on export revenue. Bigger trading nations like Japan and China trigger a devaluation of their currency in order to stay competitive.
“We hope Bank Negara will seriously consider the implications of this policy on our industry and all major exporters affected by this new ruling,” he added.
The Malaysian rubber glove industry contributes 1.13% to the nation’s gross domestic product.
Export revenue from the industry in 2016 is projected to be RM14.3bil.
As the leading supplier of medical examination and surgical gloves, Malaysia controls 63% of the world market share compared to 21% by Thailand, 5% by China and 3% by Indonesia.