Virus cases at world’s top glove maker imperils Malaysia economy

The new heart of Malaysia’s worrying virus resurgence is an unlikely place — the sprawling factory complex of the world’s largest maker of surgical gloves. It’s putting at risk not just a key export for the Southeast Asian manufacturing center, but also a nascent economic recovery.

The government on Monday ordered Top Glove Corp. to close 28 of its factories in phases, after its facility in Klang, Selangor state recorded 1,067 Covid-19 cases, out of 1,884 new daily cases in Malaysia. New infections continued and hit a record high of 2,188 on Tuesday, of which more than half came from the Teratai cluster linked to the company’s worker dormitories.

Top Glove said Wednesday that the high number of cases was due to increased testing, and that it expects the outbreak at its facilities to end in two-to-four weeks. On Wednesday, Malaysia recorded 970 new covid-19 infections.

The cluster at Top Glove illustrates the challenges facing the Southeast Asian nation, which seemed to have the virus under control, until late September, when politicians campaigning in an election in the state of Sabah in Borneo helped spread the infection around the country. The resurgence of infections threatens to hinder economic recovery in a nation that supplies about two thirds of the world’s latex gloves.

“The resurgence of Covid-19 infections could threaten growth recovery in the final quarter of this year and possibly in the early part of next year until we have the vaccine,” said Muhammad Saifuddin Sapuan, an economist at Kuala Lumpur-based Kenanga Research.

The struggle to stem the resurgence has put Malaysia behind Indonesia in Bloomberg’s Covid Resilience Ranking, which measures countries’ success in fighting the virus with minimal social and business disruptions. The latter is ranked 19th — 10 rungs above Malaysia — despite it being Southeast Asia’s virus hotspot.

Top Glove said infections in the Teratai cluster likely originated from cases in early October in the Meru area of Klang. The dormitories are home to thousands of migrant workers, mostly from nations including Nepal and Bangladesh, who are the backbone of Malaysia’s rubber glove sector that is projected to rake in an export revenue of 29.8 billion ringgit ($7.3 billion) this year.

The big jump in new cases appears “localized,” but a failure to control the spread could harm businesses if social restrictions are extended, according to Mohd Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia Bhd.

“So policy making would be very data dependent and it has to be very nimble and dynamic,” he said.

Malaysia isn’t alone in fighting an outbreak in tightly packed migrant worker dormitories.

Neighboring Singapore has battled infection clusters in foreign worker dormitories, although the country has managed to contain the risk of contagion. An explosion in new cases in these dormitories near the start of the pandemic forced Singapore to adopt strict nation-wide lockdown measures for months.

“Malaysia needs to adopt health policies used by Singapore for documented workers and provide financial support to factories to implement better housing and public health measures,” Wong Chen, an opposition lawmaker, said on Tuesday. “As for undocumented workers, the government needs to track, document, and provide partial legal work status to them. Without such engagements, they will continue to pose a public health threat to all.”

Malaysia will impose mandatory Covid-19 screening for 1.7 million foreign workers in the country because of high number of cases in the group, the Star reported Thursday, citing Defense Minister Ismail Sabri Yaakob.

Meantime, Top Glove’s shares Thursday rebounded from a two-day, 9.5% slump. Still, the stock is set for its biggest monthly loss since March 2008, as the company said the closures would delay some deliveries by up to four weeks and cut fiscal 2021 sales by 3%.

Whether the production at these plants and other economic activity can remain normal will depend on whether Malaysia manages to curb the latest wave of Covid-19 without resorting to another lockdown. Danny Wong Teck Meng​, Chief Executive Officer at Areca Capital Sdn. said he sees the resurgence as a “manageable situation,” as the factory-related clusters could be controllable if stricter operating standards are enforced.