Prime Minister Dr Mahathir Mohamad is expected to unveil a fresh economic stimulus package o­n Wednesday in an effort to boost the the sluggish economy and offset the impact of the Sars outbreak, a top government official said Monday.

"The travel and hotel industry is the main focus of the stimulus package," the official told AFP today o­n condition of anonymity.

"Among the incentives they may get (are) tax rebates," he added.

Price war

Severe Acute Respiratory Syndrome (Sars) has had a major adverse impact o­n tourism, which is Malaysia's second largest foreign exchange earner after manufacturing.

Malaysian hoteliers have sought tax deferments and a cut in interest rates to cope with the Sars outbreak, which cost them RM82.70 million in lost revenue last month.

Room occupancy rates in April dropped to an average 42 percent, down from 61.5 percent in the same month last year, said the Malaysian Association of Hotels president Mohamad Ilyas Zainol Abidin.

Hotels in Malaysia have now engaged in a price war, with First World Hotel in Genting Highlands, just north of the capital Kuala Lumpur, recently offering rooms for just about RM10 each. The usual rate is about RM160.

Bleak outlook

For his part, Mahathir today said the stimulus package was in the final process and would be announced soon.

"I hope everyone would be patient. The announcement would be made soon," he was quoted as saying by Bernama news agency.

Mahathir said the government would introduce measures to fuel growth since the private sector is unable to lead the economy, adding that the prospects for the world economy in 2003 do not seem as good as Malaysia had hoped.

Mahathir said that with the continuing conflicts in the Middle East and the outbreak of Sars, the world's economic recovery is expected to take longer.

"And for Malaysia, we can't escape from the effects of the world economy that has slowed down, just as it would be for all the other countries in the Asian region," he said.

Catastrophic levels

Tunku Iskandar Tunku Abdullah, chairman of the Malaysian Association of Tour and Travel Agents, told AFP that he hoped the government would consider proposals submitted to the government following a recent dialogue.

"At the moment, the situation has reached catastrophic levels as the Sars virus is discouraging travel," he said.

Tunku Iskandar had sought immediate soft loans to be disbursed as quickly as possible to members at low interest rates.

Some eight percent of the country's 10 million workforce are engaged in the travel and tourism industry and experts have advised the government to cut taxes to offset a prolonged slump caused by the Iraq war and Sars.

Economists said the government had little option but to encourage consumer spending, as both foreign direct investment and domestic investment are falling.

The Malaysian Institute of Economic Research (MIER) recently cut its 2003 economic growth forecast for Malaysia after the outbreak of Sars to 3.7 percent from an earlier projection of 5.7 percent. -- AFP