A boost for ad industry


Bala: Several measures in the budget represent the government’s ambitious and progressive approach to accelerating economic recovery.

PETALING JAYA: The revised Budget 2023 is an indirect shot in the arm for the advertising industry, according to agency leaders.

They concurred that some of the measures to spur the economy are positive for the industry, adding that this would boost consumption, among others.

Mediabrands Malaysia chief executive officer Bala Pomaleh, who is also the Media Specialists Association (MSA) president, told StarBiz that several measures in the budget represent the government’s ambitious and progressive approach to accelerating economic recovery.

He said they would help to spearhead sustainable growth and foster an inclusive society going forward.

“This augurs well for the ad industry as domestic consumption will rise amid renewed confidence by international investors, which will further boost businesses and the economy.

“There are measures that will strengthen digital connectivity and financing for the digitalisation of businesses.

“Such a move will help drive the digital economy forward and open opportunities not only for digital brands but also players in e-manufacturing, digital startups and the digital education fields,” he said.

Mun: As this is a creative business, it would be a dream if the government would empower associations like the 4As to manage self-policing of all advertising materials prior to publication or airing.Mun: As this is a creative business, it would be a dream if the government would empower associations like the 4As to manage self-policing of all advertising materials prior to publication or airing.

The government under the budget has indicated that it would accelerate the implementation of the Jendela project as a national effort to provide access to the Internet – providing RM725mil in 2023 for the implementation of digital connectivity projects at 47 industrial areas and around 3,700 schools.

On the film production side, he said the proposed import duty and sales tax exemption on studio and filming production equipment, which would be granted to providers of studio equipment, production and post-production for a period of three years, would spur creativity.

“This will certainly play a role in boosting the level of creativity of industry players and allow the local creative industry to generate high-value content and compete on a global scale,” he noted.

Bala said taxes on luxury goods such as premium watches and fashion could directly affect the growth of ad spends on luxury goods brands.

However, he said new regulations imposing excise duty on nicotine-containing vape products, although still illegal under the law, could herald new opportunities for those brands as the industry is estimated to be worth over RM2bil.

On the sports side, he said the relevant allocations provided in the budget would encourage the private sector to co-brand themselves, sponsor and organise more sports events.

It would also boost partnerships and more innovation in the sports marketing space, Bala said.

The government has allocated RM324mil for sports development, upgrading sports facilities and enhancing training programmes for athletes, with a matching grant of RM50mil to drive private sector sponsorship, especially for unity-based sports and the organisation of national-level competitions.

The Association of Accredited Advertising Agents Malaysia (4As) senior adviser and Oxygen Advertising managing director Datuk Johnny Mun said the budget did not provide any direct incentives for the ad industry.

However, he said the benefits for the industry would come from incentives given to the various business sectors.

“The service sector is expected to expand by over 5% this year on the back of improved domestic demand.

“This is buoyed by the wholesale and retail trade, transportation, storage information, communications, food and beverage, accommodation, finance and insurance sub sectors as reported in the budget. These are plus points for the ad industry.

“The government is also expected to spend RM250mil to promote tourism. All these are opportunities for the ad industry,” Mun added.

Navin: Many in the MSME sector are eager to advertise but sadly, often get duped into spending on ineffective avenues that are more short term than long.Navin: Many in the MSME sector are eager to advertise but sadly, often get duped into spending on ineffective avenues that are more short term than long.

He said the government’s drive to end hard core poverty via the Inisiatif Pendapatan Rakyat, designed to empower the poor and increase their earnings potential, is also a commendable move.

This would see better personal earnings that would directly impact businesses from retail to local tourism and boost to the ad industry.

On the other hand, Mun felt the new luxury tax could see some apprehensions in acceptance if the tax rate proved exorbitant. The “entry level” of the luxury goods to be taxed may be a little worse off than the more established brands, he noted.

Malaysian Advertisers Association (MAA) president Claudian Navin Stanislaus agreed with Mun on the budget not providing direct incentives for the ad industry but the efforts to put the economy back in momentum would help spur the industry.

“The huge incentives and tax reliefs announced in the recent budget will set the right trajectory for the nation as it will turn the wheels of the economy and will benefit about 50% of the workforce on a longer term.

“Not only will this benefit brands in the ad sector but many supporting businesses of the marketing sector like the media, digital, creative or production side will stand to benefit.

“However, how exactly these businesses will benefit directly from the funds and loans made available will have to be evaluated as more of such funds become transparent,” Navin said.

So what measures should the government had incorporated in the recent budget that would have further boosted the ad industry?

Bala said while there have been some measures that would boost domestic consumption, it is also important to upskill the nation’s workforce.

Currently the government has set aside funds to upskill and build capacity of poor communities, including to help young people join businesses such as delivery driving and ride-hailing.

However, he said grants could also be offered for youth to build specialised skills such as design, data and analytics which could help the industry’s talent pool flourish.

Mun said boosting the ad industry could be two pronged. First is the increase in revenue and improved income. The cost of operating an ad agency is rather prohibitive with the bulk of the expense coming from human resources.

“The margins that agencies earn at most times can just barely cover operating expenses and it would have been a welcomed surprise if the industry could have been provided with some incentives in the revised Budget 2023.

“Some form of tax relief as an incentive – usually given to the other creative industries like the film industry – should have been accorded to the ad industry as well,” Mun noted.

Secondly, he said for more efficiency, there ought to be less bureaucracy in obtaining approvals particularly for TV commercials.

Mun said what is needed is just a one-stop centre where approvals and certificates are issued.

“As this is a creative business, it would be a dream if the government would empower associations like the 4As to manage self-policing of all advertising materials prior to publication or airing,” he said.

Navin said with the benefits given to the micro, small and medium enterprise (MSME) sector, it would have been ideal to extend the incentives to support their marketing needs as well, as a reduction in costs would enable them to optimise the incentives given.

Under the budget, a financing fund of RM1bil was allocated to support MSMEs to automate their business processes and digitalise their operations.

“Many in the MSME sector are eager to advertise but sadly, often get duped into spending on ineffective avenues that are more short term than long.

“It would have been welcomed under the revised budget if similar focus on brand building had been placed as has been on sustainability and greentech, and some tax breaks and incentives should be considered for companies that invest in legitimate channels of marketing.

“This could perhaps help manage the ever increasing media rates that do not always correspond with the reach that’s shrinking for some,” he added.

Navin said the MAA has in the past suggested that consideration should be given for campaigns that promote MSME brands, especially for a push across the region, akin to the carbon credits, where work on campaigns promoting MSMEs would earn agencies credits that are tax deductible.

This would have bridged the gap between the business owner, who will now have the resources to grow, and those in the marketing ecosystem, who have the expertise to empower their growth, he added.

“Instead, we might see much of these funds go to charlatans and sifus, and further public resources will have to be spent on penalising or rectifying more ill-informed efforts that are already commonplace,” Navin stressed.

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