GST, weak ringgit cause 30% drop in ICT sales, says Pikom

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KUALA LUMPUR (Dec 28): Sales in the ICT industry have taken a 30% dive since April, following the implementation of the goods and services tax (GST), even as retailers, suppliers and consumers adjust to the new tax, a trade group said.

Computer and Multimedia Association Malaysia (Pikom) chairman Chin Chee Seong said sales were also affected by the massive decline in the ringgit against the US dollar this year besides the sluggish economy.

These factors have prevented sales from recovering after a slump due to the GST, and the ICT market is expected to pick up again only in the second half of 2016, Chin said.

Although sales spiked in the first three months of 2015 as consumers rushed to buy before the GST, this did not cover the losses in business that was felt in the second half of the year.

“The depreciation of the ringgit, downwards spiralling of the price of the crude oil, the overall sluggish economic situation, lacklustre confidence among consumers and the chain-effect of the removal of subsidies, all snowballed together to hamper the (industry’s) recovery.

"We expect the anticipated pickup in the ICT retail market (after the GST) to be further delayed and perhaps will only (come about) in the second half of 2016," he told The Malaysian Insider.

In an assessment of the state of the ICT industry eight to nine months after the GST, Chin said the smaller retailers were the hardest hit by the new tax as they could not claim input taxes that had been charged by suppliers.

In other words, they could not pass on the tax that was charged to them to the end consumer. According to the Customs Department, only businesses with an annual turnover of RM500,000 can charge GST to customers.

"Pikom intends to conduct a survey to gauge the sentiments and overall impact on the ICT industry, especially among its retail and SME members, in the first quarter of 2016, coinciding with one year of the GST implementation. Perhaps a clearer picture will help them," said Chin.

The weak ringgit to the US dollar has been both a boon and bane to different segments of the industry, he said.

According to financial news service Bloomberg, the currency slipped from about RM3.53 in January to RM4.42 in October, its lowest level.

While imported ICT goods and services became more expensive, the weak ringgit also helped local ICT exporters become more competitive in the global market in the short and medium term, he said.

"We say short and medium term as one cannot be sure how long such a USD-RM currency regime will continue to exist.

"However, imported ICT product prices will certainly be impacted by an increase of about 30% in ringgit terms, including any additional import duties incurred based on the current USD-RM exchange rate.

“If this trend persists, the level of importation may be affected in the medium to longer term," said Chin.

Due to the weak ringgit, companies had put off investing or buying new ICT equipment, added Chin, but this trend could change as the decline in the ringgit reverses.

"There are already signs that the ringgit may have hit 'rock bottom' and decisions to purchase may be forthcoming in 2016."