Malaysia’s trade says US$8.2 billion stimulus “insufficient” to buoy tourism sector

Malaysia's fresh US$8.2 billion stimulus not enough to buoy the tourism sector, which is only poised to recover from the pandemic in 2021, says trade

Tourism players in Malaysia have criticised the RM35 billion (US$8.2 billion) stimulus package unveiled on Friday to boost the economy reeling from the impact of Covid-19 as inadequate to sustain the hard-hit sector.

The package was announced by the prime minister, Muhyiddin Mohd Yassin, on Friday, and encompasses 40 initiatives. Out of the total, RM10 billion will be used as direct fiscal injections.

Malaysia’s fresh US$8.2 billion stimulus not enough to buoy the tourism sector, which is only poised to recover from the pandemic in 2021, says trade

Among initiatives of the short-term economic recovery plan unveiled on Friday included a three-month extension of the wage subsidy programme which allocates RM600 per worker. Employers in the tourism and other sectors who are not allowed to operate during the conditional movement control order can apply for the subsidy.

To assist the tourism sector, various tax incentives will be rolled out. For starters, a RM1 billion Penjana tourism financing (PTF) scheme will soon be made available to finance the transformation initiatives by SMEs in order to boost their competitive position in the new normal. Details of this scheme will be announced in July.

Other initiatives that will benefit the tourism and hospitality sector include a three-month extension of the deferment of tax instalment payments to December 31, 2020; a one-year exemption of tourism tax from July 1, 2020; and further exemption of service tax on lodging and accommodation services until June 2021.

As well, the government will grant individual income tax relief of up to RM1,000 for domestic travel expenses until December 31, 2021.

Although the trade welcomes the initiatives, they were quick to point out inadequacies and shortcomings of the plan.

The Malaysian Association of Tour and Travel Agents president, Tan Kok Liang, said: “We seek details on the mechanism of the PTF facility where we are looking at extremely low-interest rates or interest-free loans for digitalisation under the new norm where most procedures and sales are contactless, and are also done extensively through e-marketing platforms.

“Also, in order to remain competitive, investment in health and safety protocols is necessary to boost travellers’ confidence and simultaneously safeguard both employees and tourists.”

However, Tan pointed out that to date, for the allocation of the special relief facility fund under the previous economic stimulus package, there has been no drawing down of the fund yet for tourism players.

He added that he has received complaints from members that they were either disqualified for the fund or the allocation had been fully used up, urging the government to “monitor and supervise this funding facility to ensure fairness to all”.

He added that the tourism tax and service tax exemptions will inject a booster to the tourism industry in 2021 when demand picks up, with the reopening of regional and international borders.

Extension of income tax relief for tourism expenses will also “rejuvenate the local tourism industry”, but Tan said that “the conditions should include spouse and children”. “The eligibility should also be limited to tour packages bought from licensed travel agents and tour operators which include hotels, tours and transfers to ensure effectiveness,” he added.

On the extension for deferment of tax instalment for the tourism sector, Tan pointed out that it would be more helpful if taxes made payable for year of assessment 2019 was set off against current period losses.

“As tourism companies are in a tax loss position, they will also not be able to enjoy tax relief or incentives for Covid-19 testing and purchase of PPE and thermal scanners, and renovation of business premises. Government grants or subsidies would be more appropriate under these circumstances.”

He also said that the three-month extension of the wage subsidy programme has to be reviewed again as the tourism industry will only recover by year-end. He also hoped that the government will continue with the staff retention programme.

Malaysian Association of Hotels CEO, Yap Lip Seng, said in a press statement that while the industry welcomes the new initiatives and extension of the wage subsidy programme, he deemed the amount of RM600 for another three months as “insufficient” to sustain the industry.

Yap elaborated: “The hotel industry has long proposed a 50 per cent wage subsidy for employees with monthly pay of RM4,000 or below, and 30 per cent for those between RM4,000 to RM8,000.”

He added that the government needs to develop a concrete plan to stimulate both domestic and international travel, ahead of the country’s reopening of borders.

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