Don’t let tourism sector bleed to death, says Daim

 

Daim Zainuddin says there is a need for all resources employed at the right places to overcome problems. (Daim Zainuddin pic)

PETALING JAYA: The multi-billion ringgit tourism industry is “bleeding to death” and out-of-the-box strategies are needed to save this crucial industry, says finance minister Daim Zainuddin, calling for new tax laws by which businesses can recover their losses, and a tax refund to help with their cash flow.

Daim, who is also a business tycoon, called for business losses to be carried forward indefinitely, as in other countries such as Britain and Singapore or for 20 years, as in Canada.

“Currently, losses incurred by businesses can (only) be carried forward and offset against future profits for seven years. This is one way of mitigating cash flow problems faced by businesses. The government should remove restrictions on group company losses and allow offsets not only for start-ups but for all companies to alleviate cash flow constraints,” he told FMT in an email interview.

He had been asked for his views on solutions to save the tourism industry, which has been brought low by restrictions on domestic and foreign travel and other measures to contain Covid-19 infections.

Daim called for immediate measures that required little or no financial commitment. The most effective way was to mandate a freeze, stop-the-clock or a moratorium on all repayments to financial institutions, government agencies and GLCs; including monthly interest, penalties or lease payments by companies in the industry.

“This is not an exemption but a deferment. This will allow the sector to focus their energies, time and resources on how to regroup, rebuild and survive the pandemic.

“There was a moratorium. Unfortunately, it was limited to small and medium industries and with a very vague message about others being considered on a case-by-case basis. This was a recipe for disaster, creating unnecessary confusion,” he said.

In a crisis, Daim said, there was a need for all resources to be employed at the right places to overcome the problem.

“The vague messages and confusion had people wasting time and money in a long back-and-forth marathon with their lenders over whether they could apply for moratorium as many do not fall under the SME bracket.”

End the tug-of-war with banks

Daim emphasised that the private sector thrived on certainty, confidence, positivism and trust, adding that many were still in a tug-of-war with their financial institutions.

“This has to stop before the damage is permanent. The banks can afford the moratorium. What is the alternative? Do banks want to be saddled with physical assets that they will not be able to offload anyway? They must not kill the goose that lays the eggs,” he said.

He said many of the initiatives he had proposed were within the authorities’ scope without requiring new or additional budgetary allocations, adding that most utilities are government monopolies or heavily regulated.

“As such, waivers, discounts, deferment and possible extensions of time must be significant and generous to have an impact and instil investor confidence. The current initiatives are clearly insufficient as can be seen by the continued cries of desperation from industry players.”

Daim said the travel and tourism industry will need a longer time to heal, as recovery will only come when infection rates are down, vaccinations accelerated, inter-state travel allowed and international borders reopened.

He said various tax incentives currently provided should be extended to at least 2022. These incentives include tourism tax exemption, extension of service tax exemption, income tax relief of RM1,000 for tourism expenses; and extension of period for deferment of tax instalment payments.

He said international tourism would remain difficult because of escalating concerns over new Covid-19 variants and many cross-border travel restrictions still in place.

“This situation is likely to persist for some time. As such, domestic tourism must be prioritised to drive the recovery. Once virus containment measures and domestic travel restrictions are lifted, policies and stimulus measures must be put in place.

“A cautious approach, however, is important to avoid a resurgence of domestic virus transmissions which, in turn, can jeopardise the recovery,” he said.

Tackling the Covid-119 crisis

Daim said businesses will have to effectively implement the hygiene protocols and also communicate them in a clear and simple manner so travellers can make well-informed decisions.

The government should draw up immediate plans to retrain and upskill workers from these industries.

“In the UK and Europe, for example, flight attendants were retrained to work in hospitals alongside doctors and nurses in the fight against Covid-19. Hospitality workers should look at retraining to work in the care sector, as it is a sector that will be important to us as Malaysia’s society continues to age.

“We know the vaccination efforts will require a great deal of manpower and community outreach, so this could be another area where unemployed workers can be redeployed,” he said.

He said that since teachers were greatly overworked and stay-at-home parents are struggling to adopt remote classroom technology, workers could be trained as teaching assistants to help shoulder the burden of teachers.

“There are many things, short-term and long-term, that can be done if there is someone in the government who could think things through. Think outside the box. Unprecedented times like these require unprecedented solutions,” he said.

However, Daim said Malaysia also needed contingency plans if Covid-19 was indeed here to stay, adding many virologists were predicting that the coronavirus would become endemic among the population.

“The government must thus plan appropriately. It cannot take the approach that it will cross that bridge when it comes to it. By then it will be too late.” - FMT