FMM proposes tax breaks, subsidy support and port tariff freeze amid Middle East disruption

It also called for a double tax deduction on crisis-related logistics costs, covering war risk surcharges, elevated freight charges from rerouted shipments, higher marine insurance premiums, as well as demurrage and port storage fees.

As an interim step, FMM urged the Inland Revenue Board to clarify that these costs are deductible in the year incurred.

In addition, FMM proposed extending diesel subsidy coverage to fuel-intensive industrial sectors such as ceramics, quarrying, glass manufacturing and heat-intensive food processing, noting that these industries currently pay market rates despite sharp increases in fuel costs.

Marine logistics operators serving Sabah and Sarawak should also be prioritised, it added.

To address tightening supply of key inputs, the federation urged the government to prioritise domestic allocation of critical petroleum-based feedstocks, facilitate temporary duty exemptions on alternative sources of imports, and establish a national inventory monitoring system to manage shortages before they become acute.

FMM also called for a deferment of all remaining port tariff increases at major ports, including Port Klang, Johor Port, Tanjung Pelepas and Penang Port, warning that further hikes – some of which are scheduled through 2027 – would exacerbate cost pressures already heightened by the crisis.

Finally, it urged the Ministry of Transport to introduce greater transparency and oversight of freight rates and surcharges imposed by shipping lines, including the establishment of a formal monitoring mechanism and measures to address port congestion caused by excess empty containers.

FMM said the proposals are aimed at stabilising costs, sustaining production and preserving export competitiveness as manufacturers face mounting external pressures.

The federation noted that the ongoing conflict triggered by United States and Israeli military action against Iran since Feb 28, 2026 has led to the closure of the Strait of Hormuz and continued disruption in the Red Sea shipping corridor, creating significant shocks to global energy markets and trade flows.

It said the Strait of Hormuz, which handles about 20% of global oil and LNG trade, has been severely impacted, while vessel rerouting via the Cape of Good Hope has extended transit times by up to 14 days.

This has driven up freight-related charges, war risk surcharges and marine insurance premiums by between 200% and 400%.

Energy prices have also surged, with Brent crude rising to about US$106 per barrel as at March 27, up roughly 28% from its January level and about 47% higher than pre-conflict levels, directly impacting industrial fuel and petrochemical costs.

At the same time, supply constraints are emerging across key petroleum-based raw materials such as naphtha, LPG, resins, synthetic rubber inputs and sulphur.

With most manufacturers holding only two to six weeks of inventory, prolonged disruption could begin to affect production continuity across multiple sectors.

FMM warned that the combined impact of rising costs, supply delays and operational uncertainty is already affecting output and export fulfilment, adding that existing policy frameworks are insufficient to address such externally driven shocks.

FMM president Jacob Lee Chor Kok said the situation requires a coordinated, whole-of-government response, noting that other countries such as Thailand, India and South Korea have already implemented joint government-industry mechanisms to manage similar disruptions. — TMR