KUALA LUMPUR: The tough economic climate fuelled by the Covid-19 pandemic has cast a pall over the Malaysian advertising and marketing industry.
As such, there have been calls by industry leaders for the government to help stabilise and pump-prime the industry which has been reeling from the impact of the movement control order (MCO) since March 18 amid the pandemic.
In the last four months, only 80% or less of businesses were operating at full capacity while some were temporarily suspended operations.
Realising the difficulties faced by the industry in the wake of the Covid-19, the Association of Accredited Advertising Agents Malaysia (4As) recently submitted a joint memorandum to the government appealing for tax and non-tax-based temporary relief support for its members.
It requests an exemption from the sales and service tax (SST) and double deduction relief of advertising expenditure incurred by all Malaysian-owned companies to be exempted from claims submission, with extensions on qualifying criteria for tax deduction.
Industry observers and media analysts have given the thumbs up to these proposals, adding that it would help the ad industry bounce back and placed it on a stronger footing to ride on the challenges posed by the pandemic.
Commenting on the 4As proposals, its president Andrew Lee told StarBiz that the ad and marketing industry needs some form of assistance from the government to encourage brands to increase their advertising spend as it is the seed to revive the country’s economy.
“Tax incentives from the government will enable brands to increase their advertising activities to encourage consumer spending and in the process, boost business for advertising agencies, media agencies and media owners as part of the economic recovery.
“The financial support and relief to assist the industry’s recovery are for all advertisement creation, production and placement by Malaysian companies and all local companies providing services to advertising companies, ” he noted.
There has been a decline of 20% in advertising spend in the first five months of this year on the back of decreased revenue streams ranging between 20% and 50%.
Based on estimations, adspend is projected to drop by 20% year-on-year by year-end while revenues are expected to be flattish.
Meanwhile, IPG Mediabrands chief financial officer Murali Ramasamy (pic, above) said the joint memorandum submitted by the 4A’s to the government is not only imperative, but timely.
“The Covid-19 pandemic has had an unprecedented impact on businesses, the advertising industry no less. Businesses are not only experiencing regression in profits but more importantly a marked deterioration of cash flow.
“Pressure exerted by clients and vendors alike from payment delays, fee cuts and contract variability has resulted in ripple effects, causing some businesses to shut down for good.
“The proposals for SST exemptions, double deductions and other operational tax reliefs for 2020 and 2021 will reduce cost of operations and boost the cash flow of companies.
“These measures will help businesses stay afloat, revive business activities and crucially salvage key assets and jobs, ” he said.
The government, Murali added, should also consider reduced income tax rates for industries that have been especially affected by this pandemic, specifically the hospitality, airlines, tourism, property, entertainment and leisure industries.
Furthermore, he said, tax or financial relief should be afforded to companies for providing personal protection equipment, sanitation, temperature scanners and other necessities to facilitate the required SOPs for returning to the workplace.
Incentives and tax reliefs such as those mentioned above would provide the impetus for companies to reinvest in marketing activities, he noted.
Murali added: “In this ‘business unusual’ climate and shifting of consumer behaviour patterns, advertising and media agencies must rethink and reshape advertising strategies to maximise the relevancy of clients’ messaging and results.”
Over the longer term, the association said the industry believes that there are still opportunities to drive economic recovery as it has re-strategise on several fronts to adapt to changing consumer behaviour. One such area is the shift to digital space.
The recent lockdown witnessed a tremendous increase in digital traffic, digital media consumption and online transactions.
As the digital economy has been identified as a new development driver and e-commerce projected to contribute up to 20% of the country’s gross domestic product (GDP) this year, the industry stands ready to support the government in accelerating technology adoption by creating effective digital content and campaigns to lift consumer spending patterns to pre-Covid-19 levels, boost business and household confidence as this would reinvigorate economic recovery.
To do this, 4As said the advertising industry needs to be in a reasonably healthy position over the next six to 18 months.
The detailed joint memorandum, prepared in consultation with the Commercial Radio Malaysia, Malaysian Media Specialists Association, Malaysian Advertisers Association, Malaysian Newspaper Publishers Association and Outdoor Advertising Association of Malaysia, was submitted by the 4As to the government through the finance, international trade and industry and communications and multimedia ministries.
The association, formed in 1971, is the Malaysian advertising industry’s foremost body engaged in promoting the value of advertising agencies in the marketing communications industry to advertisers, media, suppliers, government and the public.
It encompasses more than 60 home-grown and international member agencies who are the key players in Malaysia’s advertising industry.
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