MEF: Early cost pressures emerge for MSMEs amid conflict

KUCHING (March 19): Early signs of rising fuel prices, freight charges, insurance premiums and input costs are being felt across key sectors, particularly among micro, small and medium enterprises (MSMEs) as the ongoing Middle East conflict begins to weigh on business operations.

The Malaysian Employers Federation (MEF) said these developments are creating cost pressures and operational uncertainties for businesses.

Its president Datuk Dr Syed Hussain Syed Husman said the situation highlights the vulnerability of Malaysian businesses especially MSMEs to external geopolitical shocks.

“Although the full extent of the impact has yet to materialise, employers are already experiencing upward cost pressures in logistics, energy, and raw materials.

“MSMEs, with their thinner margins and limited buffers, are especially exposed to these external shocks,” he said in a statement on Wednesday.

He added that prolonged disruptions could trigger wider consequences, including supply chain delays, higher production costs and reduced competitiveness in both domestic and export markets.

“If the conflict persists, businesses may face sustained cost escalations and continued supply chain uncertainty.

“This will inevitably affect pricing, investment decisions and hiring plans. Employers are striving to absorb these increases, but there is a limit before business viability is affected,” he said.

MEF noted that many MSMEs are still recovering from recent economic shocks, including the pandemic, rising compliance costs and ongoing global uncertainties, leaving them in a financially fragile position.

“Many MSMEs remain in a recovery phase and are operating under tight cashflow conditions.

“Any additional external shock, such as this geopolitical conflict, could significantly strain their resilience. Proactive and targeted support measures will be critical,” he added.

While acknowledging the government’s cautious stance, MEF called for preparedness and flexibility in policy responses should conditions worsen.

“At this stage, a broad-based stimulus may not be immediately necessary. However, the Government must remain ready to act swiftly if conditions worsen.

“Targeted measures such as temporary financial relief, facilitation of access to working capital, and cost-mitigation initiatives would be vital in supporting businesses, particularly MSMEs,” he said.

Syed Hussain also stressed the need to strengthen long-term resilience through productivity improvements and digital adoption.

“This situation underscores the urgency for businesses to enhance productivity, diversify supply chains and adopt technology to mitigate future disruptions. Policy support in these areas will be essential to ensure sustainable business continuity,” he said.

He further urged the government to take a proactive and forward-looking approach, including preparing ready-to-deploy financial assistance mechanisms.

“We cannot afford to take a ‘wait-and-see’ stance and only begin formulating financial assistance packages after the full impact has materialised. By then, the delay could prove detrimental, especially for businesses operating on thin margins.

“The Government must begin working now on ready-made financing mechanisms and contingency support frameworks that can be deployed swiftly if conditions worsen.

“Having pre-prepared solutions will ensure that response measures can be activated immediately at the action stage, helping businesses weather the crisis more effectively and preventing avoidable closures or disruptions,” he said.