The new heart of Malaysia’s worrying virus resurgence is in an unlikely place – the sprawling factory complex of the world’s largest manufacturer of surgical gloves. This not only jeopardizes an important export for the Southeast Asian production center, but also an emerging economic recovery.

The government on Monday ordered Top Glove Corp. 28 of its factories are set to gradually close after the Klang, Selangor state plant registered 1,067 Covid-19 cases out of 1,884 new daily cases in Malaysia. The new infections continued, hitting a record high of 2,188 on Tuesday, more than half of which were from the Teratai cluster connected to the company’s dormitories.

Top Glove said Wednesday that the high number of cases was due to increased testing and that the outbreak at its facilities is expected to end in two to four weeks. Malaysia recorded 970 new Covid-19 infections on Wednesday.

The cluster at Top Glove shows the challenges facing the Southeast Asian nation, which apparently had the virus under control, until late September, when politicians campaigning for an election in the state of Sabah, Borneo, helped spread the infection across the country. The infection resurgence threatens to hamper economic recovery in a nation that supplies about two-thirds of the world’s latex gloves.

“The recurrence of Covid-19 infections could jeopardize the recovery in growth in the final quarter of this year and possibly early next year leading up to vaccination,” said Muhammad Saifuddin Sapuan, an economist at Kenanga Research in Kuala Lumpur.

The fight against 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 disruption. The latter is in 19th place – 10 rungs above Malaysia – although it is the virus hotspot of Southeast Asia.

Infections in the Teratai cluster are likely due to cases in the Meru area of ​​Klang in early October, according to Top Glove. The dormitories are home to thousands of migrant workers, mostly from countries such as Nepal and Bangladesh, which form the backbone of Malaysia’s rubber glove sector, which is expected to generate 29.8 billion ringgit ($ 7.3 billion in export revenue) this year.

The big leap in new cases seems “localized,” but failure to control the spread could harm businesses if social restrictions are expanded, said Mohd Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia Bhd.

“So policymaking would be very data-driven and very nimble and dynamic,” he said.

Malaysia isn’t the only one fighting an outbreak in crowded dormitories for migrant workers.

Neighboring Singapore has battled infection clusters in dormitories for foreign workers, despite the country’s success in reducing the risk of contagion. An explosion of new cases in these dormitories at the start of the pandemic forced Singapore to put in place strict nationwide lockdown measures for months.

“Malaysia must adopt Singapore’s documented worker health policy and financially support factories to implement better housing and public health policies,” opposition lawmaker Wong Chen said Tuesday. “Undocumented workers must be tracked, documented and given partial legal work status by the government. Without such commitments, they will continue to pose a public health threat to all. “

Malaysia will introduce mandatory Covid-19 screening for 1.7 million foreign workers in the country due to the high number of cases in the group, the star reported on Thursday, citing Defense Minister Ismail Sabri Yaakob.

Meanwhile, Top Glove’s shares rebounded from a two-day decline of 9.5% on Thursday. Still, the stock is set to hit its biggest monthly loss since March 2008, as the company said the closure would delay some shipments by up to four weeks and cut sales by 3% in fiscal 2021.

Whether production at these plants and other economic activity can remain normal depends on Malaysia succeeding in containing the latest wave of Covid-19 without resorting to another lockdown. Danny Wong Teck Meng, CEO of Areca Capital Sdn. said he viewed the resurgence as a “manageable situation” as the factory-related clusters could be controllable if stricter operating standards were enforced.

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