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BUSINESS

Budget 2023: Shipowners hope for funds, tax breaks to tame pandemic effects

19/09/2022 05:18 PM

By Harizah Hanim Mohamed

KUALA LUMPUR, Sept 19 (Bernama) -- The domestic shipping industry hopes that the government will look closely at including sufficient financing and tax exemptions for shipowners in Budget 2023.

Malaysia Shipowners’ Association (MASA) chairman Mohamed Safwan Othman said funding and financial aid are crucial for the local players in view of the prevailing conditions surrounding the shipping industry, particularly for shipowners struggling for survival following the economic downturn and slowdown in the shipping industry due to the COVID-19 pandemic.

“A maritime or shipping fund should be extended beyond the 2022 period and (we hope) other commercial banks (will be able) to manage the financing.

“The government should also consider giving tax rebates to shipowners when constructing vessels in local shipyards, as well as grants for high technology and environment-friendly marine projects such as liquefied natural gas-fuelled vessels and other green shipping initiatives,” he told Bernama.

 Mohamed Safwan highlighted that a competitive financing rate should be made available to the shipping industry so that domestic players can compete on a level playing field with countries such as Singapore, Japan, South Korea, and China.

“The other area that we wish the government would consider is the loan moratorium period. We hope it could be extended for shipping companies beyond the current loan moratorium currently in force, irrespective of their revenue,” he said.

At the moment, a full income tax exemption is granted to Malaysian shipping companies under Section 54A of the Income Tax Act (ITA) 1967 for three years until 2023.

“While the shipping companies are grateful to the government for this waiver, such a short period will not enable the shipping companies to plan and invest in new assets.

“Furthermore, under ITA 1967, the definition of ‘ships’ does not include ferry, barge, tugboat, supply vessel, crew boat, lighter, dredger, and fishing boat, among others, resulting in these vessels not being recognised for the tax exemption regime,” he said.

On the cabotage policy, Mohamed Safwan reiterated that the current exemption scenario has made Malaysian vessels uncompetitive and vulnerable in maintaining their existing tonnages, leading to the decline of Malaysia’s shipping industry.

“This will consequently lead to a higher negative balance of payment (BoP) on shipping freight. The use of foreign tonnage for domestic trade does not provide any revenue for the government except a meagre fee to obtain the Domestic Shipping Licence.

“The government should consider reinstating and strengthening the cabotage policy as it is a universal policy being practised around the world and vital for a country’s shipping industry, not only for commercial reasons but most importantly, for security matters.

“A sizeable domestic merchant fleet can be quickly used for national defence or transporters during emergencies or conflicts, so much so that the South China Sea separates our country,” he added.

Mohamed Safwan also emphasised that the government should introduce a policy to encourage major companies, including government-linked companies (GLCs), to give more opportunities to the local players to participate in their trade activities by using Malaysia-flagged vessels to reduce the BoP deficit and contain the outflow of funds.

He said this would reassure GLCs to procure using the free on board option instead of cost, insurance, and freight.

-- BERNAMA


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