Kota Kinabalu: Sabah’s manufacturing sector is facing mounting pressure as global geopolitical tensions disrupt supply chains, driving plastic packaging prices in the state up by as much as 40 per cent and raising concerns over potential production shutdowns within weeks.
The sharp increase is being fuelled by soaring raw material costs, with plastic resin prices jumping from about US$930 per metric tonne before the conflict in the middele East to between US$1,500 and US$1,800 currently an increase of 80 to 100 per cent.
Sabah Chairman of both the Malaysian Plastics Manufacturers Association and the Federation of Malaysian Manufacturing, Liaw Hen Kong, said the surge is affecting widely used materials such as Polypropylene (PP), Polyethylene (PE), and Polyethylene Terephthalate (PET), which are essential for food packaging, plastic bags, and beverage bottles.
He warned that the impact will inevitably be felt by consumers, as higher production costs translate into increased prices for daily goods.
“There is a severe shortage of resin, causing major issues for production of containers and packaging. All liquid products requiring containers are affected. Currently, even with funds available, raw materials are simply unavailable,” he said.
The situation has worsened following supply cancellations by resin producers after the outbreak of conflict in the Middle East, with no clear explanation provided.
Liaw cautioned that some plastic manufacturers may be forced to halt operations as early as May if the shortage persists.
“Even in the event of successful peace negotiations, recovery will not be immediate due to existing structural damage within global supply chains and ongoing shortages of resin.
“Sabah manufacturers are also grappling with what industry players describe as a “double jeopardy” — global price shocks compounded by the state’s inherently higher logistics costs.
“Disruptions in international shipping have stretched supply lines, resulting in longer delivery times, while freight, warehousing, and transportation costs remain significantly higher compared to Peninsular Malaysia. This combination continues to erode the competitiveness of Sabah-made products,” he said.
According to Liaw, in response, industry groups are urging the government to implement temporary fiscal measures to cushion the impact.
“Among the proposals is a reduction of the current ten per cent Sales Tax to five per cent, to be maintained at least until the end of 2026.
“The proposal is based on the principle of fiscal neutrality, where despite a lower tax rate, government revenue would remain stable due to the higher base prices of goods driven by increased raw material costs,” he said.
Industry leaders say such a move would provide much-needed breathing space for manufacturers while helping to moderate price increases for consumers.
Concerns over the sector’s outlook are further reinforced by findings from the 2025 FMM Business Conditions Survey Report, which points to weakening domestic and international demand, slowing sales, and a cautious “wait-and-see” approach among companies regarding expansion and hiring.
Manufacturers are also calling for broader support measures, including energy subsidies and more competitive land policies, to sustain operations during the ongoing uncertainty.
Liaw said the current surge in plastic packaging costs reflects deeper vulnerabilities in global supply chains, underscoring the need for coordinated action.
“Industry players are now calling on both state and federal governments to strengthen communication and adopt flexible tax policies to help Sabah’s manufacturing sector weather what they describe as a prolonged period of geopolitical and economic turbulence,” he said.
