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Local film studios in Malaysia losing steam?
Local film studio in Malaysia is losing steam?
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Local film studios in Malaysia losing steam?

by Azuan MudaDecember 7, 2016

It has been challenging for the local studio that is lack of experience on any previous film projects to remain competitive. Offering cash rebates and tax incentives are among the most popular filming incentives offered by countries.

Of course, when comparing incentives, unique factors should be considered since each country imposes different minimum requirements to qualify for the cash rebates or incentives. Cash rebates work similarly to grants and are paid in percentages based on the qualifying local expenditures. Tax incentives, on the other hand, are reimbursed based on the production company tax return on the qualifying local expenditures.

Currently, Colombia offers the highest percentage of cash rebate – 60%, follows by Fiji with 50% and Canada 30% to 70% tax credits.

For Malaysia, 30 % cash rebates ‘Film In Malaysia Incentive’ (FIMI) has been introduced on Qualifying Malaysian Production Expenditure (QMPE) including production and post production work.

The question is, would the existing incentives be sufficient for the local studio to be competitive?

It is, no doubt, an incentive-driven contest. Film producers tend to select as their production locations those that offer the best possible financial incentives.

The neighboring countries like Thailand have been working for years to remain as one of Asia’s most popular filming locations. Recently, Thailand’s deputy prime minister Tanasak Patimapragorn and Minister of Tourism and Sports Kobkarn Wattanavrangkul were both in Cannes announced a 15-20% cash rebate, with an additional 3% for productions that use key Thai cast or crew and a further 2% for films that promoting Thailand. The incentive is expected to be available from January 2017.

In Western Europe, Ireland, United Kingdom, Scotland and Belgium are the most generous with more than 25% cash rebates, tax relief and credit. And particularly France, there are 41 local film commissions with additional offerings on top of the 30% tax rebate.

German Federal Film Fund (DFFF), insofar has awarded the grant to big-budget films such as The Grand Budapest Hotel, The Monuments Men and Inglorious Bastards. The DFFF is expected to give out EUR 50 million in total for 2016.

In addition, the German Federal Ministry of Economics provides EUR 10 million in supporting international co-production feature films and television series through the new “German Motion Picture Fund” (GMPF) funding program.

The studio renting business is encouraging in Germany too. Studio Babelsberg ( the largest contiguous studio complex in Europe), for example, has completed high-profile international film productions such as Captain America: Civil War (directed by Anthony Russo, Joe Russo). In fact, the entire fifth season of the American television series Homeland was filmed in the same studio and various locations in Berlin and Brandenburg.

Tax credit on high-end TV (HETV)

Given the current economic uncertainties, offering higher cash rebates and incentives would not be sustainable for Malaysian. However, improving tax credit on high-end TV may do the trick in ramping up the demand for studio spaces.

Interestingly, it is becoming a trend for film producers including Malaysian producers to focus on television production, rather than film.

For example, production incentives in British Columbia (BC) and Ontario make Vancouver and Toronto among the busiest production hubs in North America. According to BC government, the number of American TV shows and films made in Vancouver has increased nearly 60 %, equivalent to a $2 billion a year, particularly due to the low Canadian dollar and tax incentives offered.

In Malaysia, the current incentive requires TV series production to spend a minimum of RM 385k (approx. US$95k) per broadcast hour. It appears that the incentive aims for an international market, instead of domestic productions since the average production cost of a TV series in Malaysia is about RM 30,000 per episode.

The HETV incentive for domestic productions, mostly in drama production, around the world – United Kingdom, Canada, Australia – has proven in providing a significant boost to the local TV production market and creating demand for studio space.

Additional demand may also occur from entertainment production in commercials, as illustrated by the success story of the British Broadcasting Corporation’s studio at Pacific Quay.

Certainly, a weakening of Ringgit Malaysia would make it cheaper to film in Malaysia, but, would it be practical to focus on the low-hanging fruit first – domestic TV production?

Source: by Azuan Muda

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