Malaysia’s interim Prime Minister Mahathir Mohamad has announced an economic stimulus package worth RM20 billion (US$4.7 billion) to cushion the impact of the coronavirus (COVID-19).
In a speech on February 27, Mahathir said the most immediate economic impact of COVID-19 has been the sharp decline in tourist arrivals throughout the region as hotels, airlines, travel companies and, more broadly, the tourism-dependent retail industry have been badly affected.
To mitigate the impact, the government will implement a three-pronged approach. This involves easing the cash flow of affected businesses, assisting affected individuals, and stimulating demand for travel and tourism.
To ease the cash flow of affected businesses, the government proposes to allow, from April until September 2020, the deferment of monthly income tax installment payments for businesses in the tourism sector, Mahathir said. In addition, affected companies will be allowed to revise without penalty their profit estimates for 2020 with respect to monthly income tax installment payments.
Also proposed is to provide 15% discount in monthly electricity bills to hotels, travel agencies, airlines, shopping malls, conventions and exhibitions centers.
The third proposal is to exempt Human Resource Development Fund levies for hotels and travel-related companies.
And fourth is to exempt the 6% service tax for hotels. However, this exemption will be made effective earlier, that is, from March to August 2020.
The government will also provide financing facilities for affected companies including a special relief facility worth RM2 billion, particularly in the form of working capital for small and medium enterprises at an interest rate of 3.75%, added Mahathir.
In addition, all banks are required to provide financial relief in the form of payment moratorium comprising restructuring and rescheduling loans for affected businesses and individuals.
Malaysia Airport Holdings Berhad will also provide rebates on rental for premises at the airport as well as landing and parking charges.
Meanwhile, to show appreciation for government staff directly involved in the containment efforts, they will be eligible for a special monthly critical allowance of RM400 for medical doctors and other medical personnel, as well as RM200 for immigration and related front line staff, commencing February 2020 until the end of pandemic.
To stimulate the tourism industry, the government will introduce personal income tax relief of up to RM1,000 on expenditure related to domestic tourism.
He said all Malaysians will be eligible for digital vouchers for domestic tourism of up to RM100 per person for domestic flights, rails and hotel accommodations, while additional matching grants for tourism promotion will also be provided, involving a total allocation of RM500 million.
The minimum Employees Provident Fund contribution by employees will be reduced by 4% from 11% to 7%, with effect from April 1, 2020 to December 31, 2020, he said, adding that this will potentially unlock up to RM10 billion worth of private consumption.
Photo courtesy of Prime Minister’s Office of Malaysia