Najib's Budget a Significant Boost for Business and Corporate Sector

The Edge, 28 September 2012

KUALA LUMPUR: Prime Minister Datuk Seri Najib Razak today announced what was surely a bountiful list of incentives to further invigorate the corporate and business sectors and entrench Malaysia's position on the radar of global investors.

Tabling the 2013 Budget in the Dewan Rakyat, Najib, who is also Finance Minister, announced perks to boost investments designed to further advance the Economic Transformation Programme (ETP) and achieve the objectives of Malaysia becoming a high-income nation.

He said efforts would be made to expand retail participation in the bond and sukuk markets, provide a platform to raise sukuk for agricultural and agro-based industries and create global Malaysian companies.

The Umno President also said efforts to raise Bumiputera equity would continue unabated to ensure they can compete on a level-playing field in acquiring ownership in large companies, creating high-income employment plus investing in key economic sectors.

Najib said the 2013 budget would cost RM251.6 billion, of which RM201.9 billion would be for operating expenditure and RM49.7 billion for development expenditure.

Of the money set aside for the development expenditure, RM30 billion is allocated for the economic sector to finance infrastructure, industrial, agriculture, and rural development.

While announcing a mildly expansionary budget, he told the august House that the government would continue to be prudent and persevere to reduce the budget deficit to 4.0 per cent in 2013 and 3.0 per cent by 2015 with government debt not exceeding 55 per cent of gross domestic product (GDP).

The prime minister announced a RM1 billion Domestic Investment Strategic Fund under the Malaysian Investment Development Authority (MIDA) to be made available to boost domestic investments and hasten the participation of local firms in the global supply chain.

He also said incentives encouraging the takeover of foreign firms would be reintroduced besides giving special tax rates to encourage local service providers to merge into bigger entities to be able to have an impact on the global marketplace.

The construction and property sector also received a boost when he announced a sum of RM1.9 billion to build affordable housing and steps to revise the Real Property Gains Tax (RPGT) to curb speculative activities in the real property market.

He also announced a RM100 million allocation to revive 30 abandoned housing projects, which means increased business opportunities for property developers.

To encourage international financial institutions to choose Kuala Lumpur as their preferred investment destination, tax exemptions on income would be given for 10 years for companies with Tun Razak Exchange or TRX-status as well as stamp duty exemption and industrial building allowance.

He also said capital allowances would be speeded up for TRX Marquee-status companies besides the tax exemption already given to property developers.

The government, he said, would continue to accelerate implementation of the 12 National Key Economic Areas (NKEAS), where next year, some RM3 billion would be set aside for implementation of more Entry Point Projects (EPPs).

This includes RM1.5 billion for agricultural projects such as oil palm, rubber, high-value herbs, and paddy while RM500 million would be given for the "River of Life" project for the beautification of the Klang River.

A total of RM432 million will be used for oil palm replanting, increasing the annual oil palm yield to 26.2 tonnes per hectare in 2020 from 21 tonnes currently.

In ensuring the people's well-being and spurring the nation's development, the government will allocate RM6 billion next year under the Private Financing Initiative (PFI2) to implement various projects and programs such as refurbishment and maintenance of schools and clinics, housing projects, and flood mitigation plans.

Najib also said following the successful listing of corporate giants such as Felda Global Ventures Holdings Bhd and IHH Healthcare Bhd, the Securities Commission will provide a framework on the issuance of AgroSukuk for companies in the agriculture sector, whereby capital can be raised to finance agriculture activities and agro-based industries.

To encourage the issuance of AgroSukuk, the expenses for issuing them will be given a double deduction for a period of four years effective from year of assessment 2012 to 2015.

To encourage retail investors in the stock market, SC has prepared a framework for retail bond and sukuk issuances to enable investors to acquire stakes in the bond and sukuk markets.

"For a start, DanaInfra Nasional Bhd will issue retail bonds worth RM300 million by end of 2012 to finance Mass Rapid Transit (MRT) development project," Najib said.

He said the government would also provide double tax deductions on additional expenses for the issuance of retail sukuk and retail bonds.

At the same time, individual investors are also given stamp duty exemptions on instruments relating to the transactions of retail bonds and retail sukuk.

The SC will establish a Capital Market Promotion Centre to ensure effectiveness and holistic promotion of Malaysian capital market in the international scene.

Besides that, SC will introduce Graduate Representative Programme initiative, which will train 1,000 graduates to fulfil the need of securities and derivatives industry.

To encourage more companies to gain access into the capital market, the government has raised Danajamin's capital by RM400 million in two years, which will multiply the value of issuance between RM4 billion to RM6 billion.

The government also announced the establishment of a Capital Market Foundation to facilitate the development of small and medium scale enterprises and encourage product innovation and human resources development.

Towards this end, RM100 million will be made available to the foundation through the Capital Market Development Fund under SC's supervision.

The government also announced a 100 per cent investment tax allowance for 10 years for qualified oil and gas companies undertaking investments in refinery activities on petroleum products as part of efforts to transform Malaysia from a producer to a global integrated trading hub for oil and gas.

In line with global demand for liquefied natural gas (LNG), which is expected to reach 400 million tonnes a year in 2025, the Global Incentive for Trading (GIFT) programme will be enhanced with a 100 per cent income tax exemption on statutory income for the first three years of operations for LNG trading companies.

He also said commodity trading approved under GIFT will be extended to include other commodities such as agriculture, refined raw materials, and chemicals.

The government will also continue to assist Bumiputera entrepreneurs, whereby RM9 billion or 43 per cent of the infrastructure cost of MRT project will be given to Bumiputera firms, a move destined to further raise their equity in the corporate sector, which in 2010 rose to 23 per cent from 22 per cent in 2008.

SME Bank will make available a RM1 billion Bumiputera Financing Fund to finance local small and medium entrepreneurs' takeover of subsidiaries of government-linked companies (GLCs) which undertake non-core activities and which have been identified for acquisition. "

So far, two GLCs have identified potential subsidiaries to be sold to Bumiputera investors," Najib said. He also announced a RM10 billion Working Capital Guarantee Scheme would be made available to help SMEs.

Under the Tabung Ekonomi Kumpulan Usaha Niaga (TEKUN) or Entrepreneur Fund Programme, the government has allocated RM350 million, of which RM50 million has been apportioned for the Indian community.

To further boost the production and usage of green technology-based products, the fund for the Green Technology Financing Scheme (GTFS) will be increased by RM2 billion and the application period has been extended for another three years until Dec 31, 2015.

Turning to efforts to enable SMEs to further expand their businesses by using intellectual property rights (IPR) as collateral to obtain financing, the government will establish an Intellectual Property Financing Fund Scheme worth RM200 million to be offered through the Malaysian Debt Ventures Bhd.

He said the government will provide a two per cent interest rate subsidy and a guarantee of 50 per cent through Credit Guarantee Corporation while RM19 million will be allocated for training programmes for local intellectual properties' evaluators by the Intellectual Property Corporation of Malaysia (MyIPO) as well as create an intellectual property right market platform.

As for research and development, the government will allocate RM600 million to fund research universities to conduct high-impact research in strategic fields such as nanotechnology, automotive, biotechnology, and aerospace.

To intensify venture capital investments by individual investors, the government has proposed that a reduction equal to the amount of investment made by an angel investor in a venture company be allowed to be set off against all his income.

To further promote the halal industry, Najib also announced that the SME Bank with the cooperation of the Islamic Development Bank (IDB) will provide RM200 million to the halal industry fund to finance working capital of participating SMEs.

Also, Perbadanan Nasional Bhd would provide soft loans to hawkers and small businesses of up to RM25,000 for licensees and RM500,000 for licensors to modernize their operations and enhance their competitiveness besides providing guidance and advisory services on new business concepts such as mobile shops, kiosks, and online businesses. – Bernama

(Web Source: http://www.bernama.com/bernama/v6/newsbusiness.php?id=698175)