The Malaysian government has announced a RM20 billion (US$4.74 billion) economic stimulus package to mitigate the economic impacts due to the Covid-19 outbreak.
Interim prime minister Mahathir Mohamad who unveiled the package yesterday (February 27) said it is anchored on three strategies, namely, mitigating the impact of Covid-19; spurring people-centric economic growth; and promoting quality investments.
Several plans are in the pipeline to ensure that Malaysia’s economy continues to enjoy robust growth, he said.
Mahathir said that the most immediate economic impact of Covid-19 has been the sharp decline in tourist arrivals throughout the region, which has badly affected hotels, airlines, travel companies and the retail industry.
To ease the impact, the government will take a three-pronged approach – first, to ease the cash flow of affected businesses; second, to assist affected individuals; and third, to stimulate demand for travel and tourism.
The measures proposed by the government will span six months beginning April. These include allowing tourism businesses to defer monthly income tax instalment payments, and allowing companies affected by the outbreak to revise their profit estimates for 2020 with respect to monthly income tax instalment payments without penalty.
As well, a 15 per cent discount on monthly electricity bills will also be extended to hotels, travel agencies, airlines, shopping malls, conventions and exhibitions centres.
Additionally, hotels and travel-related companies will be exempted from paying Human Resource Development Fund levies, while hotels will be freed from the six per cent service tax between March and August 2020.
Furthermore, the government will provide financing facilities for affected companies, in the form of two platforms.
Firstly, Bank Negara Malaysia will provide a Special Relief facility worth RM2 billion, particularly in the form of working capital for Small Medium Enterprises at an interest rate of 3.75 per cent. Secondly, Bank Simpanan Nasional will allocate RM200 million in microcredit facility offering an interest rate of four per cent to affected businesses.
In addition, the approval process for existing loan funds will be further streamlined, such as Bank Pembangunan’s Tourism Infrastructure Fund of RM1.5 billion.
Mahathir added that all banks are required to provide financial relief in the form of payment moratorium comprising restructuring and rescheduling loans for affected businesses and individuals.
He also called on industry players to play their part – for hotels to offer discounts and shopping malls to reduce rentals to their tenants. Malaysia Airport Holdings will also provide rebates on rental for premises at the airport as well as landing and parking charges.
In light of how the tourism slump has negatively impacted tourism businesses, Mahathir shared that the government will give a one-off payment of RM600 each to taxi drivers, tourist bus drivers, tourist guides and registered trishaw drivers.
To stimulate the tourism industry, Mahathir said the government will introduce initiatives such as personal income tax relief of up to RM1,000 on expenditure related to domestic tourism. Secondly, Malaysians will be eligible for digital vouchers worth up to RM100 per person for domestic flights, rails and hotel accommodation.
Thirdly, the government will relax existing guidelines limiting the use of hotels by government agencies from March to August 2020.
Malaysian Association of Tour and Travel Agents (MATTA) president, KL Tan, said the economic stimulus package will provide a “breathing space (for tourism businesses) to consolidate and recover”.
“It exceeds the RM8.1 billion allocated (by the government) during the SARS crisis in 2003 and is more comprehensive, holistic and benefits not only the tourism industry but all Malaysians,” he added.
He suggested that the government should also consider a proposal by MATTA to allow visa-free entry to tourists from India as this will further boost the economy without any additional expenditure.