Budget 2021 – continuing the help for our flagging tourism sector

By Jason Loh,

It is noteworthy that under Budget 2021, Finance Minister Tengku Zafrul Abdul Aziz has continued to provide help for our flagging tourism industry which continues to go through a rough patch with the persistence of the Covid-19 epidemic, but hopefully there’s more in store in the short, medium as well as long-term.

Our tourism industry has traditionally been the third largest contributor in terms of foreign exchange earnings – after manufacturing (particularly, electrical and electronics or E&E) and commodities (palm oil, oil & gas). The Director General of Tourism Malaysia Datuk Musa Yusof was optimistic that tourism earnings could reach RM122.94 billion by 2025 but that was just before the outbreak of Covid-19.

Be that as it may, it could be argued that the strategic focus of Budget 2021 for the tourism sector and related services is business resilience driven by capacity-building – which more or less mirrors that of previous stimulus packages underpinned by cushioning the business impact of Covid-19 and surviving to restart.

The Tourism Infrastructure Scheme included as part of a RM3.7 billion fund, RM50 million for training, reskilling and placements targeted at 8,000 airline employees, employment opportunities in ecotourism for local and Orang Asli communities to work as tour guides at all national parks, etc. are some examples under Budget 2021.

Thanks to the government, the Wage Subsidy Programme (WSP) has also been extended for another three months for the tourism sector at a rate of RM600 per month for employees with wages of RM4,000 and below.

The WSP, among others, is critical for according to EMIR Research’s third quarterly poll findings, a staggering 85% of Malaysians continue to worry over their job security.

Given that the tourism sector is indeed one the most affected in terms of job security and losses, more could be done by the government under the purview of Budget 2021. That is, in terms of implementation and adjustments to help preserve jobs and even expand job opportunities, both directly as well as indirectly.

EMIR Research would like to, therefore, recommend some policy proposals to supplement and complement the provisions of Budget 2021 for the tourism industry and proposals made by others, e.g. vouchers for physical as well as virtual tourism.

Indirect measures – from 1st quarter of January 2021 onwards for green travel bubbles:

  1. The government should suspend the departure levy by way of the exercise of ministerial power in the form of an executive order to provide for exemption under section 31(1) of the Departure Levy Act (2019).
  2. Suspend the passenger service charge (PSC) for six months – reviewable for the purpose of extending the suspension.
  • Substantially reduce the pick-up and drop off charges for taxis, e-hailing cars, vans and buses/ coaches – at KLIA & KILA2 for three months and reviewable for the purpose of extending the suspension.

Other indirect measures:

  • The government in synergy with TNB to reactivate the provision of discount on electricity tariff bills for one year from Jan 2021 onwards. From Apr 1 till Sep 30 2020, the tourism sector enjoyed a 15% rebate.

Going forward, a special industry tariff could also be considered.

Direct measures:

  • To help ease cash flow difficulties, the Ministry of Finance (MOF) and Ministry of Tourism, Arts, Culture (Motac) together with interested parties (in the form of a consortium) could establish a special purpose vehicle (SPV) to provide the following financing services:
  • Bridge financing;
  • Working capital loans; and
  • Invoice factoring services – cash advance will be made on full-term or 100% basis; and cost of financing to be subsidised by the government (in effect, interest free for the interested or applicable tourism players).
  • In relation to the Special Fund for Tourism (SFT3) under the Small Medium Enterprise Development Bank Malaysia Berhad (SME Bank), Motac and the Tourism Fund Financing Committee to work with the Ministry of Entrepreneur Development and Cooperatives (Medac) and SME Bank to implement interest-free financing for SMEs in the tourism sector. And the government could also subsidise repayment by up to 30% of the loan value.
  • MOF in conjunction with Motac to extend the amount as well as remit and scope of the Gamelan (Galakan Melancong Malaysia) matching grant (under Motac) for reimbursables by tourism players.

The amount should be increased from RM5 million to RM15 million whilst the allotted sum per eligible company or association or agent could be increased from RM200,000 to RM500,000 as the maximum ceiling.

Accordingly, the band of reimbursement should, therefore, by correspondence be upped to RM500,000 or 50% of the total actual expenditure, whichever is lower.

In terms of the remit and scope, this should be extended beyond the marketing, promotional and advertising activities such as participation in expos and fairs and roadshows.

Extensions could include promotional packages in the form of virtual tourism based on augmented reality (AR) technology, time-period generous discounts, loyalty and reward programmes, membership schemes, vouchers, free gifts, work from hotel schemes, etc.

In addition, the grant could also be deployed by hotels and resorts to promote sustainability and eco-friendliness – such as the installation of rainwater harvesting mechanisms, artificial waterfall using recyclable water, solar panels or photovoltaic (PV) modules, smart LED lighting, green walls (i.e. with plants), mini-greenhouses, etc.

And also, to promote digitalisation and adoption of and adaptation to smart technologies – throughout the customer service, business process and workflow.

The Internet of Things or IoT would, for example, apply to the setting within the hotel room. A single remote-control device in the form of a decoder app acts as the central dashboard. This for activities ranging from switching on the aircon to closing the curtains.

All of these can enhance the branding and profile of the hotels and resorts in particular, and of the Malaysian tourism industry in general.

  •  Reduction in corporate tax at the prevailing rate of 24% to 20% for all hotels (resident and non-resident) with a paid-up capital of more than RM2.5. million.

It’s reported that the Malaysian Association of Hotels (MAH) are deeply concerned with what they feel to be “falling short of expectations”.

Moving forward, the government can be expected to continue engaging with all stakeholders from the tourism sector and make further progress along the way.

Jason Loh Seong Wei is Head of Social, Law & Human Rights at EMIR Research, an independent think tank focussed on strategic policy recommendations based on rigorous research.

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