Malaysian Businesses Seek State Help in Coping With SARS Crisis

Lee Kim Yew, who runs Palace of the Golden Horses, one of Asia’s biggest resort hotels, didn’t let Sept. 11 terrorism or war in Iraq disrupt his plans to sell luxury homes in Kuala Lumpur.

Severe acute respiratory syndrome, or SARS, is different.

Lee, managing director of Country Heights Holdings, and other Malaysian business leaders are lobbying the government to cut interest rates and utility charges. They need help to cope with the deadly virus that has emptied airport lounges and hotels and shattered Asian consumer confidence.

“Of all the disasters we’ve endured in the last five years, severe acute respiratory syndrome is the most serious of all,” Lee said. “The intention is to keep the business going even while there is no business coming in.”

SARS has claimed at least two lives in Malaysia and more than 300 worldwide. Business travelers and tourists are shunning Asia and Asians are shunning restaurants, cinemas and other public places.

In Southeast Asia’s third-biggest economy, Malaysian Airline System canceled 68 weekly flights until the end of June, new-car sales fell 5.5% in March and may slip further, and hotels have between half and a quarter of normal occupancy.

Malaysia’s tourist arrivals fell 36% in March from the same period a year ago to 817,207, with the number of visitors from Singapore tumbling 49%, according to the Tourism Ministry.

Last week, Deutsche Bank cut its forecast for 2003 corporate earnings growth at Malaysian companies to 10.4% from 12.2%. Malaysian Airline, Resorts World -- a casino, hotels and cruise company -- and its parent Genting contributed to the bulk of the reduced forecast, Deutsche told clients.

The worst may be yet to come.

“SARS has not fully affected the economy yet,” said Evelyn Chan, who helps manage $600 million in Asia for Commerzbank Asset Management Ltd. in Singapore. “Previously, one of the growth engines was the consumer sector, which is showing signs of decline now.”

Acting Prime Minister Abdullah Ahmad Badawi has said the Malaysian government may cut its growth forecast for the year as the virus undermines consumer confidence and hurts tourism, the nation’s second-largest foreign exchange earner.

“We have to cut costs in any way we can think of,” said Low Gee Tat, vice president of the Malaysian Assn. of Hotel Owners. “We’re asking the government to substantially reduce our electricity, water and sewage-clearing charges.”

The group wants the government to create a special relief fund at reduced interest rates to give hotel owners some breathing space during the period.

To save on costs, some hotels are turning off lights and air conditioning on some floors.

Travel agents in Malaysia also are seeking financial help from the government, the Malaysian Assn. of Tour & Travel Agents said.

But instead of cutting interest rates, the government probably will focus on measures such as soft loans, tax rebates on utility charges and slashed aircraft landing and parking fees, said Song Seng Wun, regional economist at G.K. Goh Research in Singapore. Cutting rates might hurt returns for the state-run Employees Provident Fund, which recently announced its lowest dividend since 1962 as investment returns fell.

“Cutting rates will not really have that much of an impact in terms of lifting consumption,” Song said.

Country Heights’ Lee said the government should persuade banks to be “more lenient” on interest payments.

“Right now we are paying 8% to 9% on average on our bank borrowings,” Lee said. “We hope to get this rate reduced.”