Malaysia idles for twin festivals

Malaysia idles for twin festivals

By Christina Pantin

KUALA LUMPUR (Reuter): Malaysia's economic boom is grinding to an almost complete halt, but festivals, not fiscal measures, are responsible for the production pause.

For the second straight year, the country is observing two major holidays back-to-back -- the Chinese Lunar Year and the Moslem Eid al-Fitr. The festivities will shut down most factories, plantations and businesses for a week.

Malaysia, with a 21 million multicultural population of Malay, Chinese and Indians, already provides a string of public holidays to mark key ethnic and religious celebrations.

Normally it is only every 30 years or so that two of the biggest festivals fall one after another. This year, most businesses will be closed from Feb. 6 to 11.

Economists say while month-on-month growth and output may show a dramatic drop due to February's double festivals, the impact is discounted as an explainable, one-time event.

Producers make up for the shortfall by speeding up assembly lines before or after the holidays and some high-demand sectors including the electronics industry may not even shut down.

"To the extent that it's expected, some businesses try to ship out more (product) before the holiday period," said Rajeev Malik, senior economist at Jardine Fleming.

When dual festivals were observed last year, Malaysia's gross exports dropped 19.3 percent from January. But exports then surged 39.8 percent in March from February.

The impact was more muted when the festivals were in separate months. In 1995, for instance, Chinese New Year was observed at the end of January-early February and Eid al-Fitr in March. Gross exports slipped 6.2 percent in January from December, fell 4.5 percent in February from January and rose seven percent in March from February.

All in all, the festivals will not divert Malaysia from wrapping up a decade of over eight percent growth, analysts said.

K. Gopalan, industry and trade division manager at the Penang Development Corp, said that with demand for electronics products on the upswing since slumping badly last year, some companies may be prepared to pay overtime this holiday.

Northern Penang island state is the hub of Malaysia's electronics and electrical production. Electronics parts are the biggest export earners for Malaysia, generating about 20 percent of total export income.

For the electronics manufacturers, having the two holidays together may actually be a blessing, an industry analyst said. "They can shut down once" instead of twice in two separate months, said Bernard Tan, analyst at Merrill Lynch in Singapore.

Agricultural production, still an important component of Malaysia's economy, will show a contraction this month, industry experts said.

Palm oil mills will be closed for about four days, while estates will be shut for a week or longer if most workers are Indonesian. Many workers will spend a long holiday in neighboring Indonesia.

Output could drop by at least 15 percent in February, an official at a major palm oil plantation firm said.

Some rubber tappers will be idled for seven to 10 days, also reducing crop production. But because stocks are ample, supply should see minimal impact from the lost work days, dealers said.

"Production should drop by between 20 to 30 percent due to the fewer working days this month and coupled with wintering which has started in the northern region," said a plantation source. "There will be very limited tapping activities for about a week," he said.