Winners and losers here amid weak ringgit
THE weaker ringgit has been a boon to Singapore shoppers and travellers, but the impact on businesses here is mixed.
While some companies with operations in Malaysia say costs are now slightly lower, others say the currency's fluctuations have affected cashflow and demand for Singapore exports.
The ringgit slumped to a historic low of RM2.67 against the Singdollar last month, as plunging crude oil prices hit revenue from Malaysian petroleum exports.
The currency has since recovered slightly to about RM2.64 against the Singdollar - still down 3 per cent from RM2.57 in June.
Willy Koh, chief executive of precision engineering firm Racer Technology, said the company has benefited as its sales are denominated in United States dollars, while labour and rental costs are denominated in the relatively cheaper ringgit.
Racer Technology has a factory in the Iskandar region, employing 250 to 300 Malaysian workers.
However, the impact has been "very slight" as cost savings were offset by year-end bonus payouts to staff, said Mr Koh.
"If not for year-end bonuses, it might have been easier to see the impact of the weaker ringgit," he added.
While the depressed currency means lower operating costs for some, it has also made Singapore products relatively pricier in Malaysia.
Jonathan Phoon, executive director of wet-towel maker Freshening Industries, said its sales in Malaysia have dipped 5 to 8 per cent in recent months.
Its products are all made in Singapore.
"Retail and medical products are less price sensitive, so we have not been badly affected...We've also seen stronger sales from new product lines, which have helped offset the effect of the weaker currency," said Mr Phoon.
Chan Chong Beng, CEO of interior-furnishing firm Goodrich Global, said Malaysian customers have been "holding back payments to Singapore in the hope that the currency will recover".
"For SMEs, this means they might not get money as quickly, which would affect cashflow," said Mr Chan.
However, neither he nor Mr Koh expect the positive or negative effects to last for long.
"People will get used to the weaker currency after some time," said Mr Chan.
Firms - especially those with factories located close to Singapore - will also eventually have to raise Malaysian workers' wages if the ringgit's weakness is sustained, said Mr Koh.
The impact is negligible for companies like Hai's, which has a factory in Johor making sauces and pastes.
General manager Darren Lim said the company's business there is all conducted in ringgit, so it has been largely unaffected.
"The raw materials we use are bought in Malaysia and our Malaysian business sells the final products to our company in Singapore in ringgit...We're not feeling much of an impact," he said.
Analysts do not expect a strong pick-up in the ringgit, given that commodity prices are likely to remain subdued in the coming year.
Sim Moh Siong, senior currency strategist at the Bank of Singapore, said oil-exporter currencies like the ringgit and the Russian rouble "will likely face more risks this year".