Malaysia has unveiled the 2020 Economic Stimulus Package worth US$4.75 billion (RM20 billion) to combat the effects of the coronavirus (Covid-19) outbreak on the tourism industry and to ensure the country’s economy remains on strong foundation .
The stimulus package has three strategies – to manage the impact of Covid-19, spur a people-centric economic growth and promote quality investment.
At the package’s launch on February 27 former Prime Minister Tun Dr Mahathir Mohamad said that although Covid-19 virus outbreak has been well-contained the disease has a significant impact on the global economy and Malaysia (29 infected patients).
“Therefore, the government is introducing the economic stimulus package 2020 to ensure the risks related to the outbreak can be tackled effectively,” he added.
Dr Mahathir noted that the most immediate economic impact of Covid-19 has been the sharp decline in tourist arrivals throughout the region with hotels, airlines, travel companies and, more broadly, the tourism-dependent retail industry have been badly affected.
Malaysia is hosting Visit Malaysia 2020 to attract 30 million tourist arrivals and RM100 billion in tourism receipts, but the targets may not be achieved with restrictions in travel implemented by numerous countries and consumers cutting back on overseas trips. It is now turning to domestic tourism to offset the fall in international arrivals.
To cushion the impact, the government will implement a three-pronged approach in the package — first, to ease the cash flow of affected businesses; second, to assist affected individuals; and third, to stimulate demand for travel and tourism.
The proposed measures will be for a period of six months beginning April.
Incentives to stimulate tourism sector
- Personal income tax relief of up to RM1,000 on expenditure related to domestic tourism
- Digital vouchers for domestic tourism of up to RM100 per person for domestic flights, railway and hotel accommodation for all Malaysians. Additional matching grants for tourism promotion will be provided – an allocation of RM500 million for the vouchers and tourism promotion
- Relaxation of existing guidelines limiting use of hotels by Government agencies as part of mitigating the reduced demand
- A 15% discount in monthly electricity bills to hotels, travel agencies, airlines, shopping malls, conventions and exhibitions centres.
- Hotels and travel-related companies will be exempted from paying Human Resource Development Fund (HRD) levies.
- Double deduction on expenses incurred on approved tourism-related training.
- Up to RM100 million on a matching grant basis to HRDF to fund an additional 40,000 employees from the tourism and other affected sectors
- Hotels will be exempted from paying the 6% service tax between March and August 2020.
- Postponement of income tax monthly instalments for income tax allowed for tourism-related companies
- One-off payment of RM600 each to taxi drivers, tourist bus drivers, tourist guides and registered trishaw drivers.
Dr Mahathir called on all industry players to play their part “in the spirit of shared responsibility to overcome current challenges … for hotels to offer discounts and shopping malls to reduce rentals to their tenants.
Malaysia Airport Holdings Berhad (MAHB) has responded by providing rebates on rental for premises at the airport, as well as landing and parking charges.
Malaysia has revised its Gross Domestic Product (GDP) forecast to between 3.2% and 4.2%. as it expects the ongoing coronavirus outbreak to dent growth.
The stimulus package may see the fiscal deficit increased slightly to 3.4% of the GDP compared to the original target of 3.2% of the GDP.
Matta and MAH say concerns addressed
The Malaysian Association of Tour and Travel Agents (Matta) and the Malaysian Association of Hotels (MAH) have given their thumbs up for the stimulus package, as the proposed measures will help address their main concerns.
Tan Kok Liang welcomes the incentives given to boost domestic tourism.
“The comprehensive package covers many sectors, including requests made by MATTA and key stakeholders for the tourism industry,” said Matta president Tan Kok Liang.
He lauded the personal income tax relief up to RM1,000 for domestic tourism, although MATTA had asked for RM2,000, as it will be a timely boost for the local tourism industry. However, he proposed “the eligibility be limited to tour packages purchased from companies licensed by the Ministry of Tourism, Arts and Culture (MOTAC), and these domestic tours can be for resident taxpayer, spouse or children.” (Matta will hold a special fair, Cuti-Cuti Malaysia, in Kuala Lumpur on 4-5 April to promote domestic travel.)
Tan added “the priority now is for all to start working on recovery measures. With concerted efforts, it will be much swifter.”
Meanwhile, MAH stated that although the stimulus package may “not address current challenges, the commitment by the government is encouraging”. Its CEO Yap Lip Seng said that the association’s two main concerns, “to ease cash flow and financial burden as well as to drive tourism”, have been addressed directly.
He said the government also took the association’s proposals on the personal income tax relief, special deductions, grants and incentives for training and development via HRDF. MAH is encouraging hotels at operational level to conduct and provide more skill trainings to employees during this period so that they will be prepared when the market recovers.
According to MAH, hotels in the country suffered RM66 million in revenue due to the cancellation of over 157,000 room bookings hotel as of 17 February.
UPDATES
1. The political crisis in Malaysia last week has led to the formation of a new government under newly installed Prime Minister Tan Sri Muhyiddin Yassin. The recently-unveiled stimulus package, launched by the previous adminstration, will go ahead as the new PM has directed the federal government agencies to effectively implement it to benefit the people.
2. Malaysia has recorded 55 Covid-19 infected cases as of 5 March, bringing the total number to 55 (from the 29 as originally stated in the article).
• Featured image (Kuala Lumpur cityscape) credit: jamesteohart/Getty Images
