RGM: Govt’s moves to boost consumer spending power

MD Tan believes general retail spending will improve as consumer confidence rises

By SHAHEERA AZNAM SHAH

The government’s approach to increase and equalise the minimum wage, coupled with the newly reduced zero-rated Goods and Services Tax (GST) across Malaysia, is expected to boost consumer spending power despite possible cost pressures on retailers and manufacturers.

Retail Group Malaysia (RGM) MD Tan Hai Hsin believes general retail spending will improve as consumer confidence rises.

“The government’s move to equalise and increase the minimum wage across the country will raise consumers’ purchasing power, particularly the low-income group.”

However, higher minimum wages will render an increase in operating cost, especially for the retail and manufacturing sectors.

Tan said by switching from GST to Sales and Services Tax, retailers need time to establish new administrative work.

“In 2015, it took retailers about a year to adjust their operating system to GST, thus it may require retailers four to five months to make this adjustment again.

“Retailers are willing to tolerate this major change, so long as it boosts consumers’ spending in return.”

The Finance Ministry announced on Wednesday that the GST will be set at 0%, from the current 6%, beginning June 1, 2018.

Tan said at this time, retailers are operating in accordance with the current projection that the industry will see a 4.7% growth this year.

“It is still too early to determine whether the move would have much impact on the country’s retail prospects for the year 2018. We maintain our projections for the time being,” he said.

“In the anticipation over the implementation of the zerorate GST, Malaysians may delay purchasing high-value goods, such as cars, furniture as well as electronic goods, in hopes of lower prices.”

Malaysia Retail Chain Association president Datuk Seri Garry Chua said in order to adjust the internal accounting and billing system, a marginal cost will be imposed upon the retailers.

“In order to put a system in place that works, retailers need to do adjustments to their billing system, otherwise, they would need to set up an entire new system,” he said.