THE actions taken to contain COVID-19 has caused a sudden and severe contraction in economic activity and has posed challenges to governments across the world. The Malaysian government has made a concerted effort to support the economy while trying to curb the pandemic.

COVID-19 survival and recovery packages have been introduced, which supplement the substantial tax incentives already on offer in Malaysia.

At the sectoral level, the hardest hit sectors continue to be those with a high dependence on face-to -ace contact or physical interaction.

Regionally, there has been some variation in impact largely by differences in industry and occupation composition, with the impact being greatest where employment has less 'work from home' potential.

Although there have been some signs of improvement - following the phased reopening of the economy - the overall level of activity still remains well below pre-COVID-19 levels and the challenge ahead will be to move from re-opening safely to sustainable recovery.

In such a scenario, all the economic sectors expect relief in the upcoming Budget 2022 announcement.

1. Incentives in Digitalisation

Several automotive companies have steadily enhanced their digital capabilities through re-organisation and creation of digitalisation business units while many others are partnering, acquiring and forming joint ventures to create a more resilient business.

NAZA Group’s transformation plan, the NAZA2.0, already in motion is set to sharpen its focus through strategic divestitures. From the present highly diversified group structure, spread over multiple sectors, NAZA2.0 looks at transforming into a centralised structure across four verticals – Property and Construction, Asset Management, Automotive and Other Businesses.

As the NAZA Group progresses in the transformation, we learned quickly, the automotive industry must meet consumer demands for a digitally enhanced seamless vehicle buying experience. Adoption of digital technologies and cognitive business practices will help reshape sales systems, supply chain logistics, and manufacturing processes.These are the trends currently transforming the automotive industry.

Digital technologies have played a crucial role in keeping society functioning during the COVID-19 pandemic, whether by enabling remote working, automating processes or facilitating contactless transactions. The increased use of digital technologies has also brought society closer to developing a smart economy, which promises new ways for businesses to grow and be more productive. We believe that the government need to accelerate these developments by placing digital incentives at the core of the post COVID-19 recovery and sets out how digital technologies can be used to drive this recovery.

2. Electrification of Automotive Industry

In effecting the shift towards Malaysia’s green economy, NAZA is currently open for collaboration with partners to introduce hybrid or electric vehicles in line with the future direction of NAZA2.0. This initiative promotes clean and energy efficient transportation for the country, in fulfilment of the National Policy on Green Technology.

Designated allocation for innovative electric automotive projects, ranging from the development of high-performance battery packs and electrified construction equipment, to hydrogen-powered engines, as well as helping to support the establishment of future supply chains are essential to boost electrical vehicle (EV).

Incentives in the form of tax relief for manufacturing parts as well as import and excise duty exemption for EVs can be considered for year 2022.

3. Embrace Digitalisation and Reduce Conventional Bureaucracies

The automotive industry must meet consumer demands for a digitally enhanced seamless vehicle buying experience. Adoption of digital technologies and cognitive business practices will help reshape sales systems, and supply chain logistics. It is important we embrace digitalisation to provide user-friendly services and consider removal of conventional bureaucracies. The implementation and acceptance of digital signature which enables digital transactions without the conventional way of physical documentation should be expedited.

4. Extension of Subsidies for New Vehicles Purchase

In June 2021, The Ministry of Finance (MOF) has announced the extension of the vehicle sales tax exemption period by a further six months until December 31, 2021 as part of the Malaysian Government’s PENJANA program to stimulate the local economy.

The Government had previously given a sales tax exemption for the purchase of new vehicles for the period of January 1 to June 30, 2020. The full sales tax exemption was implemented for locally assembled completely knocked down (CKD) passenger vehicles, including multi-purpose vehicles (MPVs) and sport utility vehicles (SUVs). A 50 per cent sales tax exemption is levied on completely built up (imported) passenger cars, including new and used MPVs and SUVs.

We hope the vehicle sales tax exemption will continue further in year 2022 to spur demand within the local automotive market.

5. Extension of Home Ownership Campaign

The government first unveiled the Home Ownership Campaign (HOC) as one of the housing initiatives under Budget 2019. The campaign was launched in January 2019 and was originally supposed to end on 30 June, but due to high demand, the Government approved to extend the HOC for another six months until December 31, 2019. Six months down the road, the HOC has been reintroduced in response to Covid-19 and was running from 1 June 2020 until 31 May 2021.

On 31 May, the MOF announced that the residential home stamp duty exemption scheme under the HOC will be extended for yet another six months until 31 December 2021.

In an effort to stimulate the property market and provide financial relief to home buyers following the COVID-19 outbreak, NAZA is hopeful the government will extend the nation-wide HOC in year 2022. It will also address the issue of property overhang, which is a massively detrimental issue to the country if left unaddressed long-term.

6. Incentives for Hospitality Projects

Incentives for investments in hospitality projects are already in place and an eminent review of existing incentives could see an even more robust framework take shape for the sector in Malaysia. Tax, customs and duty exemptions for operators of various types of hospitality and tourism projects deemed to have the potential to contribute to the growth of the sector.

NAZA welcomes the sizeable, temporary, and targeted measures that have been put in place to mitigate the impact of COVID-19 while also pointing to the need, in time, to bring down the deficit and debt ratios to more sustainable levels and doing so in a way that builds economic resilience to future shocks.

Malaysia's ability to manage the immediate impact of the COVID-19 is partly a result of the policy implementation and continued focus is crucial face future challenges. Given the tremendous uncertainty ahead, policy will need to be flexible and ready to adapt as necessary.

NAZA Group is Malaysia's privately-owned business conglomerate that operates a diverse portfolio of businesses in automotive, property, engineering and construction, manufacturing and asset management.