‘Winter’ is coming to travel and leisure industry

As someone who is both a restaurateur and a lawyer, I offer my non-partisan opinion, strictly within my field of experience, on the RM250 billion stimulus package (Prihatin) announced on March 27.

After the medical frontline, which must obviously be recognised as the sector which is most detrimentally impacted by the Covid-19 crisis, I believe the Travel & Leisure (T&L) industry, which includes airlines, hotels, tour operators and restaurants which cater to foreign visitors, would be the next hardest hit.

• Once this pandemic tapers off and the Movement Control Order (MCO) can be lifted, many other sectors can hope to return to pre-crisis income levels. Not so for businesses in the T&L sector. Fear of the pandemic should put a screeching halt to international tourism for the discernible future.
• Even sources of income from local diners will experience some demand-side shock such as a change in their lifestyle after a prolonged period of self-isolation, and an overall reduction in their spending power.
• Some affected businesses will also feel supply-side shock, with the disruption experienced by foreign suppliers of their imported food and beverages, especially from European sources.

A wave of bankruptcies in Small and Medium Enterprises (SMEs), who account for 66 per cent of the Malaysian workforce, would set off a chain reaction of soaring unemployment and recession. This devastation of the bedrock of local community, and the nation’s taxpaying base, must be avoided at all costs.

Many news stories have reported constructive criticism of the Prihatin package by groups such as IDEAS, MEF, FMM, LCCC, SBF, MRA, among others. Some of their requests to the government, which are applicable to SMEs in the T&L and other affected sectors, include:

• Incentivise employers to not retrench staff by enhancing the RM600 wage subsidy into a tripartite sharing arrangement with the employer and the employee. This could be on an equal (33.3 per cent each) ratio, or an equitable one (where for example the government bears 60 per cent, the employer 30 per cent and the employee 10 per cent), up to a cap of say RM3,000. In this regard, the government should dispense with proof of 50% fall in business revenue to qualify for any wage subsidy.
• Direct banks to give 50 per cent discount on loan interest. In other words, to ‘give back’ a small portion of the record tens of billions in profit made by these financial institutions over the past two years.
• Pay employers’ and employees’ EPF contributions. It does not help to merely defer employers’ dues, much less to allow employees to withdraw from their own savings in Account II.

I should add my voice to the chorus which has pointed out that, commercially, it makes little sense for SMEs to borrow, even at very low interest, to pay for fixed operating expenses, such as salaries and rental, when they are facing months of zero or negligible income. For some it may amount to slapping a band-aid on a severed limb.

In addition to the abovementioned proposals, I would advocate for further measures to help keep affected SMEs afloat until the next upward wave of the global economy. Such measures should aim to reduce operating expenses without retrenchment of staff and to encourage domestic spending on the affected businesses.

• Immediate suspension of Sales & Service Tax (SST) collection and a fast-track means for those businesses to de-register from SST collection if they expect turnover to fall below the RM1.5 million threshold.
• Rent subsidy to be given by local government in the form of waiver of 2020 assessment rates. This could be done by affected businesses applying to municipal councils for waiver of their landlords’ rates as rental set-off.
• Temporary suspension or a 50 per cent reduction in customs duty on imported food and beverages purchased by affected SMEs.
• Tax and other start-up incentives given to encourage local corporations to embark on large scale production of fruit and vegetables at competitive prices. This would in a broader sense also reduce Sarawak’s reliance on imported food.
• Tax incentives by making entertainment expenses from corporate patronisation of affected SMEs fully deductible.
• Active listing and promotion of local restaurants on official tourism websites and campaigns to attract back domestic and regional visitors.

There are other things which affected dining establishments can attempt, such as tying up with online payment agencies like SarawakPay to create a virtual ordering platform, but I would not go into such microscopic detail in the present opinion.

If some of the ideas contained herein find support, I urge readers to share and spread the Borneo Post online link with your friends and family so that the government may become aware of issues which need to be urgently addressed to head off a collapse of an important sector of the economy.

The writer would be happy to receive feedback or enquiries on F&B matters through [email protected] or, on legal matters, [email protected].