PETALING JAYA, June 7 — The departure levy will drive tourists to other Southeast Asian destinations and will ultimately have a negative impact on Malaysia’s GDP.

This was the sentiment echoed by representatives of the International Air Transport Association (IATA) this week during the trade association’s annual general meeting in Seoul.

IATA Asia-Pacific regional vice president Conrad Clifford told Malaysian press members that increasing fees for tourists will drive away inbound tourism to Malaysia.

"It is a competitive market so if you keep pushing the prices up in Malaysia, people will fly to other places.

"There are plenty of examples where you can see visitor-friendly policies generating more tourism for revenue for the state versus places that keep lumping on charges and other barriers to travel,” Clifford said.

During the trade association’s annual general meeting in Seoul earlier this week, the Asia Pacific region was forecast to have the fastest growth despite a tough year ahead for the aviation industry due to slower economic growth and rising oil prices.

IATA regional vice president for Asia-Pacific Conrad Clifford at the recent annual general meeting in Seoul. — Picture by Melanie Chalil

Despite the positive projection for the region, an added expense such as the departure levy would mean Malaysia would lose out to its neighbours.

"There is growth in Asia-Pacific but if you make it more expensive to go to Malaysia, that growth will go elsewhere.

"People will go to Thailand, the Philippines or Indonesia instead,” said Vinoop Goel, IATA’s Asia-Pacific airport, passenger, cargo and security director.

Clifford added that tourism is an important contributor to Malaysia’s economy, generating millions of jobs.

"To put that under threat when the world economy is in a relatively fragile state, they need to think again,” he said.

The levy needs rethinking, amid economic slump

Given the current global economic slowdown, Clifford said the levy needed reconsidering and that it was not the right time to introduce such taxes.

"We think it needs a rethink because the whole of the aviation industry is facing a lot of headwinds with increasing costs and problems with forex.

"With the cargo sector suffering, it means that things can get tough this year so it’s not really the time to be significantly increasing costs through things like the air passenger departure levy,” he explained.

The Departure Levy Bill 2019 was proposed during the tabling of the 2019 budget last year where a rate of RM20 for Asean countries and RM40 for international destinations will be imposed to each international departure from Malaysia.

It came into effect this week on June 1.

"In terms of the actual levy itself, why have two rates instead of just one?” Clifford said, adding that the differing rates were confusing.

It is understood that IATA has submitted its analysis on the impact of the levy to the Malaysian government in April but has yet to receive a response.

What does it mean for our airlines?

IATA said an increase in prices will affect homegrown carriers such as Malaysia Airlines and AirAsia, putting them at a disadvantage to their counterparts in the region.

"Throughout the conference, you would have heard about rising costs and here’s another cost to add into the mix and that damps down demands,” Clifford said.

He explained that local airlines carried more passengers in and out of Malaysia compared to foreign carriers and thus, they will be disproportionately disadvantaged.

According to a study commissioned by IATA, the air transport market in Malaysia is expected to grow by 127 per cent in the next 20 years, resulting in an additional 66.7 million passenger journeys by 2037.

The increased demands are projected to support approximately US$23.4 billion (RM97.3 billion) of GDP and some 698,000 jobs.