The Star Online
11 October 2019
Full text of Budget 2020 speech
PETALING JAYA: Budget 2020 has just been tabled at the Dewan Rakyat by Finance Minister Lim Guan Eng.
The Budget with its theme,"Driving growth and equitable outcomes towards shared prosperity," is the second for Pakatan Harapan since the coalition won power.
The following is the full text of Lim's speech to Parliament:
Tan Sri Speaker Sir,
2. Greetings, Salam Harapan and Salam Sayangi Malaysiaku, I bid to the Honourable Speaker, Honourable Members of Parliament of both the Government and the Opposition, and to all Malaysians. We are grateful that by God’s grace, Malaysia continues to be a peaceful, stable and prosperous nation.
3. First and foremost, allow me to convey my undivided loyalty and my congratulations on the coronation of Kebawah Duli Yang Maha Mulia Seri Paduka Baginda Yang Dipertuan Agong Ke-16, Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah Ibni Almarhum Sultan Haji Ahmad Shah Al-Musta’in Billah.
4. I am humbled to stand before you to table the 2020 Budget. This is the second budget to be tabled under the Pakatan Harapan Government. Indeed, 2020 is a special year given that Wawasan 2020 was envisioned by our YAB Prime Minister Tun Dr Mahathir bin Mohamad nearly three decades ago in 1991, to celebrate Malaysia joining the ranks of developed nations. Vision 2020 would have succeeded, if not for the massive financial scandals, corruption and mismanagement of the previous Government.
5. The first Pakatan Harapan Budget tabled in 2018 focused on fiscal consolidation and rationalisation, institutional reforms and people-centric policies to right the many wrongs of the previous administration. For this Budget, the theme is on “Driving Growth And Equitable Outcomes Towards Shared Prosperity”. The Government is committed to bringing stability to the Government’s finances and achieving the goal of Vision 2020 with a new growth trajectory under the foundation of “Shared Prosperity Vision 2030” as initiated by YAB Prime Minister, Tun Dr. Mahathir bin Mohamad.
ECONOMIC PERFORMANCE AND CHALLENGES
Tan Sri Speaker Sir,
6. The global economy has been thrown into a state of uncertainty caused by the trade war between the United States and other nations, especially the People’s Republic of China. The International Monetary Fund (IMF) has revised downwards the global economic growth forecast for the year 2019 from 3.9% in July 2018 to 3.2% in July 2019. The World Trade Organisation (WTO) has also reduced the forecast for world merchandise trade growth for 2019 from 2.6% in April 2019 to 1.2% in October 2019, the lowest since 2009.
7. As a trading nation, Malaysia cannot avoid being affected by these external headwinds. However, with economic policies and reforms implemented by the Pakatan Harapan government, our economy will remain resilient. In the first half of 2019, GDP growth was 4.7%, with a growth rate of 4.9% in the 2nd quarter. Indeed, Malaysia is one of the few economies in the world that experienced faster growth in the second quarter compared to the previous quarter.
8. The Government has also been very successful in taming inflation, with 0.2% recorded in the first half of 2019 compared to 1.0% and 3.7% for the whole of 2018 and 2017 respectively. Clearly the Goods and Services Tax (GST) implemented under the previous regime had contributed significantly to higher prices. By abolishing the GST of 6% in June 2018 and replacing it with the Sales and Services Tax (SST) regime in September 2018, the country’s inflation rate has been reduced to its lowest levels since 2007. For the full year of 2019, the inflation rate is expected to be at 0.9%. To respect the mandate given by the Rakyat in last year’s General Elections, the Government does not intend to bring back GST.
9. Despite the global trade war, Malaysian exports only shrank marginally for the first 8 months of 2019 by 0.4% from a year ago. Malaysian exports are still expected to record positive growth for 2019. During the same period, Malaysia recorded RM92.5 billion worth of trade surplus, which is 28.7% larger than the RM71.9 billion recorded during the same period in 2018.
10. This healthy trade balance will keep the country’s current account in surplus for the year. Overall, Malaysia’s balance of payments continues to be firmly positive, with the current account surplus for 2019 is expected at RM43.4 billion or 2.9% of Gross National Income (GNI). Meanwhile, as at 30 September 2019 our international reserves remain healthy at RM431.3 billion or USD103 billion, which is sufficient to finance 7.6 months of retained imports and is 1.1 times of our external short-term debts.
11. The Malaysian financial system also remains sound and stable, despite a challenging global environment and high degree of volatility in the international financial markets throughout the year.
2020 BUDGET THEME - DRIVING GROWTH AND EQUITABLE OUTCOMES TOWARDS SHARED PROSPERITY
Tan Sri Speaker Sir,
12. We as Malaysians have a shared responsibility to rebuild the nation. Therefore, extensive consultations for Budget 2020 with stakeholders were undertaken. On top of the Budget Consultation hosted at the Ministry of Finance, we had a total of 12 Focus Group sessions held together with other Ministries and state governments all around the country involving over 2,500 people representing over 1,200 organisations.
13. The four thrusts anchoring the 2020 Budget are:
FIRST : Driving Economic Growth in the New Economy and Digital Era
SECOND : Investing in Malaysians: Levelling Up Human Capital
THIRD : Creating a United, Inclusive and Equitable Society
FOURTH : Revitalisation of Public Institutions and Finances
FIRST THRUST: DRIVING ECONOMIC GROWTH IN THE NEW ECONOMY AND DIGITAL ERA
Strategy 1: Making Malaysia the Preferred Destination for Investment
Tan Sri Speaker Sir,
14. During YAB Tun Dr Mahathir’s first stint as the Prime Minister, he led Malaysia to its fastest decade of economic growth from 1988 to 1997 at an average annual GDP growth rate of 9.3%, marking the country’s ascent to be an Asian Economic Tiger. The influx of Foreign Direct Investments (FDIs) had not only brought in new jobs with better wages, new businesses into the market and new economic opportunities, it also structurally upgraded Malaysia from being an agriculture-based domestic-centric economy into an industrialised export-oriented nation.
15. However, at the turn of the century, Malaysia’s economic growth tapered off to an average of 5.1% since 2000. The premature deindustrialisation of the Malaysian economy resulted in the shift of our economy to one that is more reliant on labour intensive, low-skill, and low-cost structure. As a result, we remain trapped as a middle-income nation that has been hindered from becoming a truly developed economy based on productivity, innovation and shared prosperity.
Trade War Opportunities
16. The protracted trade war creates a unique opportunity for Malaysia to again be the preferred destination for high value-added Foreign Direct Investments (FDI). The shift in the global supply chain investments has witnessed approved FDI increasing by 47% to RM80.1 billion in 2018 from RM54.4 billion in 2017.
17. For the first half of this year, approved FDI increased by 97% to RM49.5 billion from RM25.1 billion in the same period last year. The approved manufacturing FDI from the United States of America (US) was the highest at RM11.7 billion, followed by the People’s Republic of China at RM4.8 billion. As China is our largest trading partner, FDI from China should be comparable with the US. As such, a ‘Special Channel’ to attract investments from China shall be established under InvestKL.
18. To overcome delays in approving foreign and domestic investments, we have established the National Committee on Investment (NCI), jointly chaired by the Minister of Finance and the Minister of International Trade and Industry. In our inaugural meeting on 28 August this year, three investments worth RM2.2 billion were approved.
19. This year, the Government has embarked on a comprehensive review and revamp of the existing incentive framework, comprising the Promotion of Investments Act 1986, Special Incentive Package and incentives under the Income Tax Act 1967. This new framework is expected to be ready by 1 January 2021.
20. The Government will make available up to RM1 billion worth of customised packaged investment incentives annually over 5 years, as part of the strategic push to attract targeted Fortune 500 companies and global unicorns in high technology, manufacturing, creative and new economic sectors. To qualify, these companies must invest at least RM5 billion each in Malaysia which will generate additional economic activities that will support our Small Medium Enterprises (SMEs), create 150,000 high quality jobs over the next 5 years and strengthen our manufacturing and service ecosystems.
21. To transform Malaysia’s best and most promising businesses into the most competitive enterprises in global export markets, the Government will also make available up to RM1 billion in customised packaged investment incentives annually over 5 years. These incentives are strictly conditional upon these companies proving their ability to grow and export their products and services globally. We expect this measure to significantly strengthen our local supply chain ecosystem and create additional 100,000 high quality jobs for Malaysians over the next 5 years.
22. In addition to expediting approval of investments, the Ministry of International Trade and Industry (MITI) will give additional focus on post-approval investment monitoring and realisation. For this purpose, the Government will allocate RM10 million.
23. The Government will also provide tax incentives to further promote high-value added activities in the Electrical and Electronics (E&E) industry to transition into 5G digital economy and Industry 4.0. These incentives include:
First: income tax exemption up to 10 years to E&E companies investing in selected knowledge-based services; and
Second: special Investment Tax Allowance to encourage companies in E&E sector that have exhausted the Reinvestment Allowance to further reinvest in Malaysia.
24. In addition, to encourage automation and to increase company’s productivity, it is proposed:
First: Accelerated Capital Allowance and automation equipment capital allowance for manufacturing sector on the first RM2 million and RM4 million incurred on qualifying capital expenditure is extended to the year of assessment 2023; and
Second: The incentive is also be expanded to include services sector on the first RM2 million incurred on qualifying capital expenditure from the year of assessment 2020 to the year of assessment 2023.
Tan Sri Speaker Sir,
25. The Pakatan Harapan Government is committed to continuously improve the business climate in Malaysia. One of the key reforms to be implemented is to improve the ease of doing business in Malaysia by reducing the number of steps to register a business.
26. It goes without saying that well-functioning ports and logistics system is crucial for a trading nation like ours. The World Economic Forum (WEF) 2019 Global Competitiveness Report ranks Malaysia’s sea transport infrastructures is one of the best in the world.
27. Port Klang is currently the 12th busiest container port in the world and is expected to reach full capacity in the next five years. For the next phase of growth, the Government is undertaking an in-depth feasibility study on the development of Pulau Carey. This is to make Port Klang as a regional maritime centre and cargo logistics hub combining manufacturing, distribution, cargo consolidation, bunkering and ship repairs.
28. The Government will allocate RM50 million for the repair and maintenance of roads leading to Port Klang. The Ministry of Transport will commence feasibility studies on the Serendah-Port Klang Rail Bypass for cargo shipments and the Klang Logistics Corridor, a dedicated privatised highway connecting Northport and Westport for commercial vehicles, with both projects estimated to cost RM8.3 billion.
29. To better facilitate trade movement through our ports, the Royal Malaysian Customs Department (RMCD) will introduce a deferred payment facility to expedite the clearance process of cross border transactions. This will reduce the time and cost for cross border trade significantly.
30. Beyond our sea ports, the Government intends to strengthen trade with Thailand via our 100-acre logistics hub, Kota Perdana Special Border Economic Zone (SBEZ) at Bukit Kayu Hitam. Further to the development of a Truck Depot as announced in Budget 2019, the Government will allocate an additional RM50 million to stimulate public-private partnerships for the project. The Government would provide support for the construction of primary infrastructure, while the private sector will invest in critical business assets to catalyse potential domestic investment worth RM800 million which would provide job opportunities to more than 600 people.
31. RM1.1 billion is allocated in 2020 to support projects for corridor development activities including:
First: RM50 million for the development of Chuping Valley Industrial Area in Perlis by NCIA;
Second: RM69.5 million for the Kuantan Port related projects by ECERDC;
Third: RM42 million for the construction of Sungai Segget Centralised Sewerage Treatment Plant in Johor by IRDA;
Fourth: RM55 million for infrastructure in the Samalaju Industrial Park in Sarawak by RECODA; and
Fifth: RM20 million for the Sabah Agro-Industrial Precinct by SEDIA
Strategy 2: Accelerating the Digital Economy
Tan Sri Speaker Sir,
Building Digital Infrastructure
32. YAB Prime Minister launched Malaysia into the Information and Communications Technology (ICT) era with the establishment of the Multimedia Super Corridor (MSC) in 1996. We are now entering the digital era. This Government is committed towards digital transformation.
33. For the past year, the regulatory reforms implemented by the Malaysian Communications and Multimedia Commission (MCMC) on the Mandatory Standard on Access Pricing (MSAP) has successfully lowered broadband prices by 49% and triggered a shift in consumer demand for faster internet connections. The World Bank has praised the Government for accelerating average broadband speed by 3 times in just one year.
34. Now, the Government will create the necessary infrastructure to construct a Digital Malaysia by implementing the National Fiberisation & Connectivity Plan (NFCP) over the next 5 years which will provide comprehensive coverage of high speed and quality digital connectivity nationwide including rural areas. The NFCP will adopt a public private partnership approach involving a total investment of RM21.6 billion. The Government, through MCMC, will finance at least half of the required investment with corresponding investments by the private sector telecommunications players via a matching grant mechanism.
35. As part of NFCP, we will improve connectivity in remote areas of Malaysia, especially in Sabah and Sarawak, to ensure that no one is left behind in our digital drive. MCMC will allocate RM250 million to leverage on various technologies, including via satellite broadband connectivity.
36. In addition, the Government will allocate RM210 million to accelerate the deployment of new digital infrastructure for public buildings particularly schools and also high impact areas such as industrial parks. Priority will be given to locations within states that are able to facilitate and expedite the implementation of the NFCP.
Building Digital Applications
37. The vigorous rollout of the NFCP will be key to bringing 5G technology and services to the Malaysian public. To seed technological developments by Malaysian companies to ride the global 5G wave, which is 100 times faster than 4G, the Government will introduce a 5G Ecosystem Development Grant worth RM50 million.
38. In addition, an allocation of RM25 million will be given to set up a contestable matching grant fund to spur more pilot projects on digital applications such as drone delivery, autonomous vehicle, blockchain technology, and other products and services that leverage on our investments in fibre optics and 5G infrastructure.
39. Digital content creates economic value. For instance, the global video gaming industry today has revenue upward of USD150 billion, higher than both the music and movie industries combined. Therefore, we will allocate RM20 million to Malaysian Digital Economy Corporation (MDEC) to grow local champions in creating digital content, especially in e-Games, animation and digital arts.
Building Digital Companies
40. To build a Digital Malaysia, the private sector must come onboard. More Malaysian Small Medium Enterprise (SMEs) need to adopt digitalisation measures for their business operations, including electronic Point Of Sale systems (e-POS), Enterprise Resource Planning (ERP) and electronic payroll system. The Government will provide a 50% matching grant of up to RM5,000 per company for the subscription of the above services. This matching grant will be worth RM500 million over 5 years, limited to the first 100,000 SMEs applying to upgrade their systems.
41. The Government will also allocate RM550 million to provide Smart Automation matching grants to 1,000 manufacturing and 1,000 services companies to automate their business processes. This grant will be given on a matching basis up to RM2 million per company.
42. The Government plans to build up to 14 one-stop Digital Enhancement Centres in all states to facilitate access to financing and capacity building of our businesses, especially SMEs in line with the Fourth Industrial Revolution (IR4.0). A budget of RM70 million will be allocated to MDEC to set up these centres as an extension of the ‘100 Go Digital’ programme. To also promote knowledge sharing and education through digital enabled content, the Government proposes to establish 3 new digital libraries in Kedah, Perak and Johor.
43. Programmes such as the Coach and Grow Programme (CGP) by Cradle Fund for high impact technology entrepreneurs involving 469 companies to date have generated RM2.3 billion in revenues, including RM300 million in exports. As part of the Government’s continued commitment to promote early stage innovations, the Government will provide RM20 million to Cradle Fund for the provision of training and grants to seed companies.
Building Digital Malaysians
44. To ensure gains arising from successful Digital Companies are shared with the Rakyat, the Government will introduce the concept of Digital Social Responsibility (DSR). DSR is the commitment by businesses, to contribute to digital economic development while improving the digital skills of the future workforce with initiatives such as technology scholarships, training and upskilling for digital skills for communities in need. Contributions towards DSR by the companies will be given tax deduction.
45. We will continue providing funds of RM10 million to MDEC to train micro-digital entrepreneurs and technologists to leverage on e-Marketplaces and social media platforms to sell their products. 100 of these micro-digital entrepreneurs, a majority of whom are women and youth, were able to generate RM23 million in revenues over just 6 months, unleashing life changing experiences.
46. The Pakatan Harapan government recognises the growing potential of eSports and will provide an increased allocation of RM20 million for 2020. We wish our Malaysian team the very best of luck to bring home many gold medals from the Southeast Asian Games in Manila in December 2019.
Tan Sri Speaker Sir,
47. According to Bank Negara Malaysia’s Financial Sector Blueprint for 2011 to 2020, Malaysia stands to gain about 1% in cost savings to our GDP annually by switching fully to e-payments processes and becoming a cashless society. This is at a time where mobile payment transaction volume had increased twenty-fold to over 34 million transactions in 2018 from just below 2 million transactions in 2017. However, the overall adoption of e-wallet remains low at only 8%, based on a survey report by Nielsen in January this year.
48. To significantly increase the number of Malaysians, participating merchants and SMEs to use e-wallets, the Government will offer a one-time RM30 digital stimulus to qualified Malaysians aged 18 and above with annual income less than RM100,000. All you need is to own an identity-verified e-wallet account with selected service providers. The one-time digital stimulus per person can be redeemed and used for a two-month period commencing 1 January 2020 and expiring on 29 February 2020. The Government will allocate up to RM450 million to Khazanah Nasional to implement this digital stimulus, which will benefit up to 15 million Malaysians.
Strategy 3: Strengthening Access to Financing for Businesses
Tan Sri Speaker Sir,
49. To better facilitate access to financing for SMEs in priority segments, the Government will implement enhancements to the Skim Jaminan Pinjaman Perniagaan (SJPP). For Bumiputera SMEs, export-oriented SMEs and SMEs investing in automation and digitalisation, the Government guarantee will be increased from 70% to 80% and in addition, will reduce the guarantee fee to only 0.75%. A new SJPP allocation of RM500 million in guarantee facility will also be launched, earmarked for women entrepreneurs.
50. To further support our up and coming entrepreneurs, SME Bank will introduce two new funds where the Government will provide an annual interest subsidy of 2% to reduce borrowing costs as follows:
First: a RM200 million fund specifically for women entrepreneurs, offering loans of up to RM1 million per SME; and
Second: a RM300 million fund to support Bumiputera SMEs with the potential to become regional champions, with priority given to producers of halal products and manufacturers with high local content.
51. The Government will allocate RM10 million to the Ministry of Entrepreneur Development to focus on advocacy and awareness for halal certification, halal product development and providing platforms for local players to tap on the USD3 trillion global halal market.
52. For SMEs to remain competitive, they must continually expand their exports. The Pakatan Harapan Government will increase the ceiling per company for the Market Development Grant (MDG) initiative by Malaysia External Trade Development Corporation (MATRADE) from the current RM200,000 to RM300,000 yearly. At the same time, the ceiling for the participation in each export fair will also be revised upwards from RM15,000 to RM25,000. The Government will also allocate RM50 million to encourage SMEs to engage in more export promotion activities.
53. In the era of fintech, Bank Negara Malaysia (BNM) is finalising the licensing framework for digital banks to be issued by year end for public consultation. The final framework will be issued by the first half of 2020 to invite applications.
54. The Government will support and encourage new digital financial innovations such as Equity CrowdFunding (ECF) and Peer-to-Peer (P2P) platforms. Collectively, more than RM430 million was raised as at June 2019, benefitting more than 1,200 SMEs. Building on this early success, the government will further allocate an additional RM50 million to My Co-Investment Fund (MyCIF) under the Securities Commission Malaysia to leverage such platforms to help finance the underserved SMEs.
55. To further encourage alternative sources of funding for start-ups companies and to attract more foreign investment to Malaysia, tax incentives given to venture capital and angel investors will be extended until the year 2023.
56. To catalyse and promote financing to construction consortiums bidding for projects and concessions overseas, the Government will provide a RM1 billion 1:5 matching guarantee for dedicated private equity funds to invest in Malaysian consortiums.
57. To support Bumiputera entrepreneurial development, grants amounting to RM445 million will be provided in terms of access to financing, provision of business premises and entrepreneur training. This includes:
First: RM150 million for overall entrepreneurship development and upskilling by Perbadanan Usahawan Nasional Berhad (PUNB);
Second: RM75 million by SME Corporation (SMECorp) for capacity building and export focus for Bumiputera SMEs, which includes enhancing marketing, packaging, and financial literacy;
Third: RM170 million in total for access of financing via TEKUN, SME Bank and Pelaburan Hartanah Berhad; and
Fourth: RM50 million for entrepreneurship under Unit Peneraju Agenda Bumiputera, Ministry of Economic Affairs.
58. The Government will continue to support strategic projects through financing programmes under Bank Pembangunan Malaysia Berhad, offering a 2% interest subsidy per annum via:
First: the Sustainable Development Financing Fund size increased from RM1 billion to RM2 billion;
Second: the RM1 billion Maritime & Logistics Fund; and
Third: the RM2 billion Industry Digitalisation Transformation Fund which will now also support the implementation of connectivity projects.
59. Unlike the previous administration, which handed out small business loans to their politically-linked co-operatives the Pakatan Harapan administration has separated politics and public funding, by providing RM100 million for Small Business Loans (Program Pembiayaan Usahawan Perusahaan Kecil Komuniti Cina) for the Chinese community via Bank Simpanan Nasional with more than 380 branches throughout the country, at an interest rate of 4%.
60. For Indian entrepreneurs, the Government will provide RM20 million under TEKUN Nasional’s Skim Pembangunan Usahawan Masyarakat India (SPUMI) which is expected to benefit 1,300 entrepreneurs at an interest rate of 4%.
Restructuring Development Financial Institutions (DFIs)
61. Development Financial Institutions (DFIs) play an important role as public institutions that support the nation’s development goals and serve the needs and requirements of the new economy. To strengthen the development finance ecosystem, Bank Negara Malaysia is proposing a 2-phase restructuring plan for our DFIs to form a new financial institution through the merger of Bank Pembangunan Malaysia, Danajamin Nasional, SME Bank, and the Export-Import Bank of Malaysia.
Growing Islamic Finance
62. This year, the Ministry of Finance established the Special Committee on Islamic Finance (JKKI) chaired by the Yang Berhormat Deputy Minister of Finance, with the main objective of further promoting and developing the Islamic Finance ecosystem. To position Malaysia as the centre of excellence for Islamic finance, this special committee will:
First: formulate the Islamic Economic Blueprint, with all relevant agencies;
Second: organise outreach initiatives and professional courses to promote deeper understanding of Islamic Finance nationwide.
63. The current tax deductions on the cost of issuance and additional deductions on sukuk issuance costs under the principle of Wakalah will be extended for 5 years until year of assessment 2025.
64. To further promote Islamic fund and Sustainable and Responsible Investment (SRI) fund management activity, the tax exemption for fund management companies managing Shariah compliant funds and SRI funds, and the tax deduction on the cost of issuing SRI Sukuk will be extended for another 3 years until year of assessment 2023.
Strategy 4: Strengthening Economic Diversity
Tan Sri Speaker Sir,
65. In order to achieve economic diversity to expand growth, there will be specific measures on four areas: green economy, agriculture, Research and Development (R&D), and tourism.
Green Growth and Energy for the Future
66. As part of the liberalisation of the electricity market, the Government has decided to migrate the current power purchase system towards a wholesale market in the future. Renewable energy suppliers will also be able to compete directly in the retail market. The more transparent and competitive electricity market will ensure a lower cost of electricity for Malaysian consumers.
67. The Government intends to attain Malaysia’s goal to generate 20% of our energy consumption from renewable sources by 2025. Last year, we had significantly expanded the qualifying list of green assets for Green Investment Tax Allowance (GITA) under the MyHijau directory. For Budget 2020, we are happy to announce that the GITA and Green Income Tax Exemption (GITE) incentives will be extended to 2023. A 70% income tax exemption of up to 10 years will be given to companies undertaking solar leasing activities.
68. Through Energy Performance Contracting (EPC), the upfront capital investment into energy saving equipment for Government buildings will be repaid through the savings in utility costs achieved. In 2020, the Government will accelerate EPC implementation for Government buildings, prioritising hospitals and education institutions.
69. The Government is concerned by the impact of low commodity prices on the livelihoods of Malaysians in this sector, particular the smallholders. At the same time we are disappointed and unhappy with the staged efforts aimed at curtailing market access for our palm oil exports by the European Union (EU) and the United States. For the palm oil sector, this Government intends to support this industry with the following measures:
First: RM550 million palm oil replanting loan fund for smallholders collateral-free at an interest rate of 2% per annum, with a tenure of 12 years including a 4 year moratorium on repayment. The replanting will be undertaken using the latest seedlings and also in compliance with Malaysian Sustainable Palm Oil (MSPO) standards to ensure better productivity and marketability;
Second: An allocation of RM27 million to support Malaysian Palm Oil Board’s (MPOB) efforts to market palm oil internationally and counter anti-palm oil campaigns;
Third: Enhance implementation of biodiesel, with the B20 biodiesel for the transport sector to be implemented by the end of 2020. This is expected to increase palm oil demand by 500,000 tonnes per annum.
70. The Government recognises the hardships caused by low rubber prices and low yield during the rainy seasons. Hence we will allocate RM200 million for Bantuan Musim Tengkujuh to eligible rubber smallholders under RISDA and Lembaga Industri Getah Sabah (LIGS). The Government will provide RM100 million for Rubber Production Incentive in 2020 to enhance the income of smallholders faced with low rubber prices.
71. The Government will allocate RM810 million for the welfare of FELDA community, as follows:
First: RM250 million for an income enhancement program benefiting 11,600 settlers;
Second: RM300 million to write-off the interest of the settlers’ debts;
Third: RM100 million for the FELDA water supply projects;
Fourth: RM70 million for housing the new generation of FELDA settlers; and
Fifth: RM90 million for the upgrading of FELDA roads and basic infrastructure.
72. Separately, we will provide RM738 million for RISDA and Federal Land Consolidation and Rehabilitation Authority (FELCRA) to implement various income-generating programmes to benefit the more than 300,000 RISDA and 100,000 FELCRA smallholders.
Increasing the Incomes of Farmers
73. The Government has increased the allocation to the Ministry of Agriculture from RM4.4 billion in 2019 to RM4.9 billion in 2020, with a special focus towards enhancing incomes of farmers.
74. For 2020, the Government proposes to increase the fishermen allowance from RM200 to RM250 per month, with a total allocation of RM152 million for 2020.
Tan Sri Speaker Sir,
75. To help our farmers, fishermen and smallholders diversify their income, the Government is allocating a sum of RM150 million to facilitate crop integration to help supplement their income such as through chili, pineapple, coconut, watermelon and bamboo.
76. Government also intends to make the glutinous rice a signature product of Langkawi Island and provide farmers with a higher income. To support this initiative, the Government will allocate RM30 million for the production of glutinous rice in Langkawi Island which is expected to benefit 1,200 farmers.
77. To raise the padi yield, the Government will increase the allocation for padi inputs from RM796 million in 2019 to RM855 million in 2020 under the Skim Baja Padi Kerajaan Persekutuan (SBPKP) and Skim Insentif Pengeluaran Padi (SIPP). In addition, the Government will continue the subsidy for Padi Bukit and Padi Huma.
78. Finally, we will allocate RM43 million for Agriculture Industry 4.0 to develop new crop varieties with higher productivity and quality.
Tan Sri Speaker Sir,
Enhancing Research & Development (R&D) Framework
79. Malaysia’s global ranking has improved from 37th in the world in 2017 to 35th in the world in 2019 in the Global Innovation Index (GII) as published by the World Intellectual Property Organization (WIPO). However, we must not stop there. We will continue enhancing Malaysia’s R&D framework by:
First: Intensifying R&D in the public sector with an allocation of RM524 million to Ministries and Public Agencies;
Second: The Government will also allocate RM30 million for R&D matching grants for collaborations with industry and academia to develop higher value added downstream uses of palm oil, specifically tocotrienol in pharmaceuticals and bio-jet fuel; and
Third: The Government will establish a Research Management Agency, with an allocation of RM10 million to centralise and coordinate management of public research resources;
Fourth: To promote commercialisation of R&D from the public sector, research universities beginning with the University of Malaya, will establish a one-stop Innovation Office to transform intellectual property into commercially exploitable opportunities; and
Fifth: IP-generated income based on the Modified Nexus Approach (MNA) derived from patents and copyright software will be given tax exemption for a period of up to 10 years.
80. The Government will allocate RM11 million towards initiatives by the Ministry of Education in collaboration with Ministry of Environment, Science, Technology and Climate Change (MESTECC) to inculcate the Science, Technology and Innovation (STI) culture, encouraging more students into the fields of Science, Technology, Engineering and Mathematics (STEM).
Tan Sri Speaker Sir,
Visit Malaysia 2020
81. Visit Malaysia 2020 (VMY2020) is the Government’s primary effort to brand Malaysia as a top destination for tourism, with a target of achieving 30 million tourist arrivals. The Government will continue to allocate 50% of tourism tax to respective State Governments to support their efforts in conjunction with VMY2020. To fulfil the aspirations of VMY2020, the Government has allocated RM1.1 billion to the Ministry of Tourism, Arts and Culture, including an allocation of RM90 million to drive awareness, promotions and programmes for the VMY2020 campaign. A substantial portion of the departure levy collected will be allocated for tourism infrastructure projects.
82. To amplify the economic benefits of VMY2020, the Government will roll out a host of tax incentives targeted at the arts and tourism sector, such as:
First: Income tax exemption be given for organisers of approved arts and cultural activities, approved international sports recreational competitions, and conferences organisers;
Second: New investments in international theme park projects will be given income tax exemption of 100% of statutory income or Investment Tax Allowance of 100% to be set off against 70% for 5 years;
Third: Increasing tax deductions given to companies sponsoring arts, cultural and heritage activities in Malaysia from RM700,000 to RM1,000,000 per year;
Fourth: Accelerated Capital Allowance for expenditure incurred on the purchase of new locally assembled excursion bus to be fully claimed within 2 years; and
Fifth: excise duty exemption of 50% for locally assembled vehicles be given to tour operators for the purchase of qualified new tourism vehicles.
83. The funicular train service to Penang Hill will achieve more than 2 million passengers per year, exceeding its capacity. The Government will contribute RM100 million towards the construction of a new cable car system to Penang Hill, with any additional costs to be financed by the State Government.
84. In addition, the Government will allocate RM5 million to Cultural Economy Development Agency (CENDANA) to support Malaysian visual art galleries and exhibition organisers in holding art exhibitions. In addition, RM10 million will be allocated to Think City to preserve culture and urban heritage.
85. Among the VMY2020 programmes, we are also having Malaysia Year of Healthcare Travel 2020 to solidify Malaysia’s leading position as a medical tourist destination in the region. Medical tourism is a rapidly expanding sector in Malaysia, growing 17% annually from 2015 until 2018. In 2018, it generated RM1.5 billion revenue receipts from 1.2 million healthcare travellers. The Government will allocate RM25 million to the Malaysian Healthcare Tourism Council (MHTC) to strengthen the position of Malaysia as the preferred destination for health tourism in ASEAN for oncology, cardiology and fertility treatment.
86. To date, e-visa applications are available for 10 countries, including China and India. To facilitate the visa application process, licensed travel agents under the Ministry of Tourism, Arts and Culture (MoTAC) are allowed to submit group application for up to 100 people per transaction through the eNTRI and eVISA system.
SECOND THRUST: INVESTING IN MALAYSIANS - LEVELLING UP HUMAN CAPITAL
Tan Sri Speaker Sir,
87. Growth is necessary, but not sufficient to ensure Shared Prosperity. Economic growth must see that all Malaysians can participate meaningfully, and the fruits are shared equitably. There are three interrelated challenges that we face now in our labour market that need to be addressed.
88. Firstly, we are concerned with more than half a million unemployed Malaysians in 2018, of which roughly 140,000 are graduates. Additionally out of those unemployed, about 290,000 of them were youth up to 24 years old.
89. Secondly, the gender gap in our employment remains sizeable despite making significant progress in the past few years with the appointment of the first woman Deputy Prime Minister, Chief Justice and Chief Commissioner of SPRM. Female labour force participation rate continues to stagnate at around 55%, far from our target of 60%. A recent World Bank study concluded that if all barriers against Malaysian women are removed and women’s participation in our economy is increased, the country’s income per capita could grow by 26.2%.
90. Thirdly, Malaysia has become overly dependent on low-skilled labour, especially foreign workers. Cheap foreign labour disincentivises companies from investing in more productive capital and technology. As of end-2018, there were officially 2.2 million foreign workers, or 15% of the national labour force of 15 million people. We must reverse the addiction to low-skilled foreign labour, while recognising the many challenges industries face in securing adequate workforce for their industry.
Strategy 5: Enhancing job opportunities for Malaysians
Tan Sri Speaker Sir,
91. Recognising the key challenges we face, the Government will be launching the Malaysians@Work initiative, aimed at simultaneously creating better employment opportunities for youth and women and reducing our over-dependence on low-skilled foreign workers. Very simply, Malaysians@Work is divided into four programmes directed at providing both wage incentives for workers and hiring incentives for employers as follows:
First: Graduates@Work is designed specifically for the hiring of graduates who have been unemployed for more than 12 months. The graduates who secures work will receive a wage incentive of RM500 per month, for a duration of two 2 years, while employers receive a hiring incentive up to RM300 per month for each new hire, for 2 years;
Second: Women@Work seeks to create 33,000 job opportunities per year for women who have stopped working for a year or more, and are between 30-50 years-old. The wage incentive for returning women workers is RM500 per month for two years, and a corresponding hiring incentive for employers up to RM300 per month for 2 years. On top of the above, the current income tax exemption for women who return to work after a career break be extended for another 4 years until 2023;
Third: Locals@Work is a hiring cost equalisation programme, aimed at incentivising the shift away from low-skilled foreign workers dependency. The wage incentive for Malaysians who are hired to replace foreign workers is at either RM350 or RM500 per month, depending on the sectors, for a duration of two 2 years, and corresponding hiring incentive for employers up to RM250 per month for 2 years; and
Fourth: Apprentice@Work is a TVET incentive programme, aimed at encouraging more youth to enter TVET courses, in the form of additional RM100 per month on existing allowance for trainees on apprenticeships. The Government will also extend double tax deduction on expenses incurred by companies participating in Skim Latihan Dual Nasional (SLDN) for another two years. In addition, the double tax deduction currently given to companies undertaking Structured Internship Programme (SIP) approved by Talent Corporation Malaysia Berhad (TalentCorp) will be expanded to include students from all academic fields rather than just engineering and technology.
92. The Government believes that Malaysians@Work programme will enable Malaysians who are unemployed to gain the necessary skill sets and capabilities with on-the-job training, to ensure continued employment with the relevant company, with the retention rate expected to exceed 90% after the incentive ends in two years. This will build human capital from the unemployed to become a self-reliant worker, able to contribute productively to the labour market.
93. Other than the Apprentice@Work programme, the Malaysians@Work initiatives will be managed by the EPF, and will be subsequently integrated with the Employment Insurance System (EIS) as well as other active labour market programmes. The Government anticipates that the Malaysians@Work initiative will cost RM6.5 billion over five years and create an additional 350,000 jobs for Malaysians and reduce foreign workers dependency by more than 130,000.
94. The Government will also be undertaking further measures to improve the working environment for women and parents in general. In year 2019, RM10 million was allocated for the development early childhood care facilities in government buildings. Through this, 66 new TASKAs were created in government facilities. The Government will allocate an additional RM30 million in 2020 to provide more TASKAs, focusing especially on hospitals and schools. In addition, to ease the financial burden of parents who enrol their children in registered nurseries and kindergartens, individual tax relief for fees paid will be increased from RM1,000 to RM2,000.
Strategy 6: Modernising the Labour Market
95. In addition to creating new employment opportunities, the Government will also continuously pursue efforts to modernise our labour market and enhance the employment conditions of workers.
96. In order to remain relevant with the current needs of the labour market, the Government will review the Employment Act 1955, which includes the following:
FIRST: In order to increase maternity leave from 60 days to 90 days effective 2021,
SECOND: Extend the eligibility to overtime from those earning less RM2,000 to those earning less than RM4,000 per month;
THIRD: Improve protection and procedures for handling sexual harassment complaints, and;
FOURTH: Introduce new provisions on the prohibition of discrimination on religion, ethnicity, and gender.
97. The Pakatan Harapan Government is committed to improve livelihoods, particularly for lower income groups. The Government had increased the minimum wage to RM1,100 per month effective January 2019. In balancing the needs of employees and employers, the Government takes cognisance of the higher cost of living in major urban centres, the Government proposes to increase the minimum wage rate only in major cities to RM1,200 per month effective 2020.
Tan Sri Speaker Sir,
Enhancing social protection
98. With the ever changing work environment, the existing mechanism for social protection for workers will also need to be enhanced. In this regard:
First: The Employees Provident Fund (EPF) will extend coverage to contract workers, for those under Contract for Services and Professionals. As a start, this will be a voluntary scheme for workers in the arts and entertainment industry via collaboration between EPF and the National Film Development Corporation Malaysia (FINAS) before extending the coverage to other sectors; and
Second: The current Self-Employment Social Security Scheme by the Social Security Organisation (SOCSO) will be expanded to enable contributions by other self-employed groups across 18 key sectors, such as fishermen, farmers, sole proprietors and partnerships.
99. SOCSO will build a new RM500 million rehabilitation centre in Perak to mirror the success of the SOCSO Rehabilitation Centre in Melaka. The new centre will be equipped with the latest technology including robotics, trauma treatment and with a centre of excellence for prevention of accidents, in collaboration with relevant agencies.