The Edge Markets
25 October 2016
BUDGET 2017: BUDGET 2017 AT A GLANCE
PRIME Minister Datuk Seri Najib Razak’s Budget 2017 is one that attempts to cover broad strokes amid a constrained environment of uneven global economic growth, low oil prices and ongoing fiscal consolidation.
Budget 2017’s total allocation of RM260.8 billion is a slight 3.4% higher than the total stipulated under the 2016 Budget Recalibration.
However, the prime minister adopted a cautious tone to underscore prudence and discipline that the federal government needs in order to meet its targeted 3% deficit of GDP next year.
To illustrate his point, Najib likened the government to a “sensible father or head of family” who has to manage the finances to meet the household’s needs.
Although Najib had earlier maintained that this was not an “election budget”, he still had something for almost everyone: civil servants, low to middle income households, small and medium enterprises, capital markets, healthcare, education, sports, agriculture, rural communities and even taxi drivers.
“It is engineered to be inclusive for the well-being of the rakyat,” he said.
Here are the key points of Budget 2017, titled “Ensuring unity and economic growth, inclusive prudent spending, well-being of the rakyat”, that was tabled in Parliament on Oct 21.
- RM130 million via through the National Export Promotion Fund for export promotion programmes
- RM286 million provided to increase exports of palm oil, rubber, cocoa and pepper
- RM50 million allocated for scientific research to enhance the quality of palm oil products
- RM30 million grant provided through Malaysian Palm Oil Board to smallholders for palm oil replanting
RM75 million for programmes under the SME Master Plan to promote the development of small and medium enterprises
- Guarantee of up to RM15 billion provided under the various schemes of Syarikat Jaminan Pembiayaan Perniagaan (SJPP) to be extended until 2025
- To boost export-oriented SMEs, the government will provide a 2% rebate on interest rates charged to SME borrowers under the SJPP scheme. This rebate is limited to a total accumulated funding of RM1 billion, which involves an allocation of RM100 million for a period of five years.
- Exim Bank to provide SMEs with loan financing totalling RM200 million and insurance credit facilities with coverage valued at up to RM1 billion
- SME and micro-financing aplenty:
- RM50 million for SME loans via Koperasi Jayadiri Malaysia Bhd (Kojadi)
- RM20 million in microcredit loans under the supervision of the Malaysian Chinese Women Entrepreneurs Foundation
- RM20 million for the 1Malaysia Hawkers and Petty Traders Foundation to provide loans to Chinese hawkers
- RM150 million for business financing programmes through Tekun and Amanah Ikhtiar Malaysia (AIM) for the Indian community
- RM100 million for SME Bank to increase bumiputera entrepreneurs’ opportunities
- RM100 million to AIM for its various entrepreneurship programmes
- RM300 million to Tekun to assist small-scale entrepreneurs in developing their businesses, with a new scheme, Temanita, included that is especially for women micro entrepreneurs
- RM200 million to Perbadanan Usahawan Nasional Bhd to implement the Entrepreneurship and Business Premises Financing Programme
- RM120 million to Majlis Amanah Rakyat (Mara) for various entrepreneurship programmes, including halal industry enterprises, youth entrepreneur development and an integrated entrepreneurship training programme
- RM500 million facilitation fund for Unit Peneraju Agenda Bumiputera (Teraju) to assist bumiputera companies in expanding or starting new businesses
- RM100 million for the export fund under Teraju for bumiputera companies to penetrate into international markets
- RM100 million through Yayasan Peneraju Pendidikan Bumiputera for Peneraju Skil dan Iltizam, Peneraju Professional as well as Peneraju Tunas programmes
- RM200 million from the Working Capital Guarantee Scheme fund will be specifically allocated to start-ups
- A new pass category, namely Foreign Knowledge Tech Entrepreneurs, will be introduced to encourage investment in high technology start-ups
- RM162 million allocated via the Malaysia Digital Economy Corporation (MDeC) to implement programmes such as an e-commerce ecosystem and Digital Maker Movement as well as the introduction of a new location category — Malaysia Digital Hub
- The government will introduce the first digital free zone in the world that will merge physical and virtual zones, with additional online and digital services to facilitate international e-commerce and internet-based innovation
- Effective January 2017, fixed-line broadband service providers will offer services at a higher speed for the same price. Within the next two years, the speed will be doubled with a 50% reduction in prices.
- Malaysian Communications and Multimedia Commission will provide RM1 billion to ensure the coverage and quality of broadband nationwide reaches up to 20 Mbps
- Small and Mid-Cap PLC Research Scheme to be introduced to conduct research on 300 companies to invigorate the domestic capital market
- Government-linked investment companies will allocate a special fund of up to RM3 billion for fund managers licensed by the Securities Commission Malaysia to invest in potential small and mid-cap companies
- Establishment of the Capital Market Research Institute etablished with initial funding of RM75 million, provided through the Capital Market Development Fund
- Period of income tax exemption to entities carrying out Islamic banking and takaful business through the International Currency Business Unit in foreign currencies as well as stamp duty exemption on instruments of such activities will be extended to the year of assessment 2020
TO STIMULATE PRIVATE INVESTMENT
- The major infrastructure projects to be implemented include:
- upgrading Jalan Lok Kawi-Pengalat-Papar in Sabah
- upgrading Jalan Kampung Keruak-Gua Musang-Kuala Berang
- construction of Batang Lupar Bridge in Sri Aman
- reconstruction of the Sandakan Power Station Project
- The five economic corridors — Iskandar Malaysia, Northern Corridor Economic Region, East Coast Economic Region, Sabah Development Corridor and Sarawak Corridor of Renewable Energy — will be allocated a sum of RM2.1 billion
- The Malaysian Investment Development Authority will get a RM522 million fund with a special emphasis on industries such as chemicals, electric and electronics as well as research and development activities
Individual income tax
- New lifestyle tax relief to combine existing tax relief, namely the purchase of reading materials, computers and sports equipment
- Lifestyle tax relief to include purchase of printed newspapers, smartphones and tablets, internet subscriptions and gymnasium membership fees. The relief is given up to RM2,500 per year and will be effective from year of assessment 2017.
- New tax relief of up to RM1,000 for purchase of breastfeeding equipment, claimable biennially effective year of assessment 2017
- Relief of up to RM1,000 for individuals who enrol their children, aged six and below, in registered nurseries and preschools, from the year of assessment 2017
Company income tax
- Double tax deduction given on expenses incurred by private companies to provide structured internship programmes to students pursuing undergraduate degree, diploma and Malaysian Skills Certificate Level 3 and above under the TVET Programme. This incentive is extended for a period of three years from the year of assessment 2017 until year of assessment 2019.
- New tax scheme for companies that have successfully increased their revenue, specifically for the year of assessment 2017 and 2018. This scheme will provide a reduction by stages as follows:
- One percentage point reduction for increase in chargeable income of 5% to below 10%;
- Two percentage points reduction for increase in chargeable income of 10% to below 15%;
- Three percentage points reduction for increase in chargeable income of 15% to below 20%; and
- Four percentage points reduction for 20% increase in chargeable income.
- For all SMEs, the tax rate on chargeable income up to the first RM500,000 is reduced from 19% to 18% effective from year of assessment 2017
- To boost the local vendor development programme in the manufacturing and services sectors, double deduction on expenses incurred by the anchor company will be extended until Dec 31, 2020
- Pioneer Status promotion and Investment Tax Allowance for new four and five-star hotels will be extended to Dec 31, 2018
MyBeautiful New Home
- New initiative, MyBeautiful New Home, to build an initial 5,000 housing units priced between RM40,000 and RM50,000 per unit. This is especially for the B40 households nationwide. The government will finance RM20,000 of the purchase price while the remainder will be paid in instalments by the unit owners.
People’s Housing Programme
- The Ministry of Urban Wellbeing, Housing and Local Government to build 9,850 houses under the People’s Housing Programme (PPR) in 2017 (RM134 million allocation)
- A total of 11,250 PPR houses are being built to be sold below cost at between RM35,000 and RM42,000 (RM576 million allocation)
- Around 10,000 houses in urban areas to be built and made available for rent for eligible youths with a permanent job
First homebuyers’ initiatives
- Vacant government land in strategic locations to be given to government-linked companies and Perumahan Rakyat 1Malaysia (PR1MA) to build over 30,000 houses, priced between RM150,000 and RM300,000
- Syarikat Perumahan Negara Bhd to be allocated RM200 million to build 5,000 units of People’s Friendly Home. The government to subsidise up to RM20,000 per unit.
- New special “step-up” end-financing scheme for the PR1MA programme to make financing easier and more accessible from Jan 1, 2017. Total loan of up to 90% to 100%, with loan rejection rates to be reduced drastically. This scheme is a collaboration between the government, Bank Negara Malaysia, the Employees Provident Fund and four local banks, namely Maybank, CIMB, RHB and AmBank.
- Stamp duty exemption to be increased to 100% on instruments of transfer and housing loan instruments, to help reduce the cost of first-home ownership, compared to 50% at present. This exemption is limited to houses with a value of up to RM300,000 for buyers of first homes and is only for the period between Jan 1, 2017, and Dec 31, 2018.
- Rate of stamp duty on instruments of transfer of real estate worth more than RM1 million will be increased from 3% to 4% effective Jan 1, 2018
FOR THE PEOPLE
TO EASE COST OF LIVING
- Government will provide nearly RM10 billion for subsidy allocation for fuel subsidies, including cooking gas, toll charges and public transport
- Bantuan Rakyat 1Malaysia (BR1M) payments to be increased across the board in 2017
- BR1M increased to RM1,200 from RM1,000 and RM1,050 for households in the e-Kasih database with a monthly income below RM3,000
- BR1M increased to RM900 from RM800 for households earning between RM3,000 and RM4,000
- BR1M increased to RM450 from RM400 for single individuals earning below RM2,000
TO BOOST INCOME
- RM275 million allocation to improve rakyat’s income opportunities, especially the B40 group:
- Expand the MySuria Programme where solar panels will be installed in over 1,600 housing units, with each participant receiving RM250 a month (RM45 million allocation)
- Expand Giatmara’s Mobileprenuer Programme targeting 3,000 participants using motorcycles (RM30 million allocation)
- Implement Agropreneur Programme to produce 3,000 young entrepreneurs involved in high-value agricultural products (RM100 million allocation)
- Revitalise MDeC’s eUsahawan and eRezeki programmes (RM100 million allocation)
FOR RURAL FOLK
- A total of 616km of village roads and bridges will be built and upgraded (RM1.2 billion allocation)
- Maintenance of state roads (RM4.6 billion allocation)
- Construction and refurbishment of 17,000 units of dilapidated houses in remote villages and Orang Asli settlements (RM350 million allocation)
- Improving clean water supply, targeting 5,200 houses, including the upgrading of the FELDA water supply system (RM732 million allocation)
- About 10,000 houses in rural areas to get electricity supply (RM460 million allocation)
- Public transport infrastructure upgrades:
- A 600km East Coast rail line project to connect townships such as Port Klang, Bentong, Kuantan, Kemaman, Kerteh, Kuala Terengganu, Kota Baru, ending in Tumpat (RM55 billion allocation)
- Accelerating the implementation of the Pan Borneo Highway in Sabah and Sarawak
- Restore the East Coast railway line along Gua Musang-Tumpat that was destroyed during floods (RM100 million allocation)
- Increase the trip frequency of the electric train service (ETS) for the Johor Bahru-Padang Besar route, involving procurement of nine train sets until 2019
FOR URBAN FOLK
- 1Malaysia Maintenance Fund (TP1M) to repair facilities at flats and 113 PPR in urban and suburban areas (RM300 million allocation)
- People-Friendly Projects to upgrade and build surau, small bridges, drainage, community halls, markets and kiosks (RM800 million allocation)
- Reintroduce grants of up to RM10,000 to registered residents associations to pay for security equipment and neighbourhood maintenance (RM40 million allocation)
- Padi farmers: Subsidies for padi price, seeds and fertilisers as well as hill padi (RM1.3 billion allocation)
- Rubber smallholders: Purchase floor price to be implemented (RM250 million allocation) and rainy season aid of RM200 monthly for November, December and January
- Fishermen: Continuation of monthly allowances of between RM200 and RM300
- Farmers: Development of agricultural infrastructure such as drainage and irrigation, farm roads and marketing of agricultural products (RM1.3 billion allocation)
- More TVET institutions to produce local workforce that meets industry requirements (RM4.6 billion allocation)
- To boost graduate employability, the 1Malaysia Training Scheme (SL1M) programme by GLCs is extended to 20,000 graduates in 2017 (RM50 million allocation)
- Book vouchers replaced with student debit card worth RM250 which can be used to purchase books and internet access
- One-off increase of RM500 incentive to RM1,000 for young Private Retirement Scheme contributors with a minimum accumulated investment of RM1,000 for a period of two years (RM165 million allocation)
- RM7.4 billion allocated to 20 public universities to ensure higher education is on a par with global standards
- Scholarships will continue to be awarded with an allocation of RM4.3 billion in 2017, including:
- RM1.6 billion through the Public Service Department
- RM2 billion through Mara
- Existing computer loan facility is extended to encompass the purchase of smartphones. This facility can be utilised once every three years with a maximum loan of RM5,000.
- Motorcycle loan limit increased from RM5,000 to RM10,000
- Housing loans eligibility increased from between RM120,000 and RM600,000 to between RM200,000 and RM750,000
- 1Malaysia Civil Servants Housing (PPA1M) to complete 30,000 units with selling prices of between RM90,000 and RM300,000, which are 20% below the market price
- Contracts of service expiring end of this year will be extended for at least one year
- A special assistance of RM500 to all public servants and a special payment of RM250 for government retirees to be paid out in early January 2017
- Reconstruct 120 destitute schools across the country and upgrade 1,800 science laboratories (RM570 million allocation)
- Complete construction of 227 primary and secondary schools nationwide, including eight new schools (RM478 million allocation)
- Additional assistance payment for school fees, textbook assistance and per capita grant assistance (RM1.1 billion allocation)
- Special fund for improvement and maintenance of schools (RM600 million allocation)
- RM25 billion allocated to enhance the health level of the rakyat and quality of healthcare in the country via the following programmes:
- Upgrade hospital facilities with an allocation of RM536 million
- Funding operations of 340 1Malaysia clinics, 11 1Malaysia mobile clinics, 959 health clinics and more than 1,800 rural clinics (RM4.5 billion allocation)
- Supply of drugs, consumables, vaccines and reagents to all government hospitals and health facilities (RM4 billion allocation)
DEFENCE AND SECURITY
- The Ministry of Defence will be allocated a sum of RM15.1 billion. This includes RM1.8 billion earmarked for defence asset maintenance such as aircraft, patrol vessels, communication equipment, buildings and weaponry. RM1.3 billion is allocated for communication devices, rations and uniforms.
- To enhance effectiveness of Eastern Sabah Security Zone operations, a sum of RM323 million is allocated for personnel deployment at the eastern border of Sabah
- The armed forces will build and upgrade roads in the interior of Sarawak under the Jiwa Murni Programme (RM114 million allocation)
- The Ministry of Home Affairs is allocated RM12.8 billion, including a sum of RM8.7 billion for the Royal Malaysian Police. Major programmes and projects include building 12 district police headquarters and 69 commando training centres as well as procuring vehicles and equipment.