Under the recalibrated budget 2016, there were 11 measures to do two important things. Ensuring growth by encouraging it and maintaining the fiscal deficit goal of 3.1 percent for 2016. The new budget would be based on oil price staying at around US$30 – 35 per barrel. This is a big change from the previous assumption of US$48 per barrel. I think it’s quite clear that the government is pushing for domestic consumption and thus growth. It is also unimaginable to increase the fiscal deficit forecasted earlier, especially with all the focus from the international rating agencies. Current Investment grade rating assigned to Malaysia is already the lowest possible by all three rating agencies. What are the 11 measures? They are as follow, with some brief explanation.
1. Beginning March 2016 until December 2017, employees portion for the Employees Provident Fund contribution would be reduced by 3 percent. This would increase the money available for spending. Employees who do not wish for this may still opt not to.
2. One time special tax relief of RM2,000 for individual taxpayers with monthly income of RM8,000 or below for the year of assessment 2015. This is another measure to ensure these individuals have more money to spend or even invest.
3i.Liberalising the control on import or Approved Permits (APs) on eight agricultural produce including, buffalo meat, raw coffee beans, beef and mutton. With more competition, hopefully prices would go down.
ii – Ten MyFarm markets by Federal Agriculture Marketing Authority selling agricultural produce directly priced between 5 per cent to 20 per cent below market price.
iii- MyBeras programme – 20kg rice for the hardcore poor every month until December 2016.
iv – More Fair price shops. 640 to 1,000 and more stricter enforcement by Domestic Trade, Co-operatives and Consumerism
v – RM50 cash provided for every metric tonne of cleaned paddy given to farmers as input incentive.
4. New projects for houses with prices up to RM300,000 is reserved only to first-time home buyers. I think this is a good move. Everyone deserves a roof over their head. Else the investors would buy these and rent it out.
People’s Housing Programme for homes priced at RM35,000 will get a financing package at 4 per cent through Bank Simpanan Nasional and Bank Rakyat. This is significant because most of the time, this group of buyers would never be able to obtain any financing due to the nature of their job.
5. Thirty per cent from the levy contribution to the Human Resources Development Bhd will be provided to enhance competency and skills of employees through reskilling and upskilling, including for retrenched workers. (Seriously, please make sure the programmes are really useful ones)
6. Enhance the efficiency and amount of tax collection by following steps:
i- Government will give special considerations on relaxation for penalty on taxpayers to declare past years’ income, and tax arrears must be settled before 31 Dec. (Pay soonest, else get penalty)
ii-Selling channel of cigarettes and liquors in duty free islands would be limited to duty-free outlets licensed by Customs Department. (Ensures as high collection of tax as possible)
iii-Free duty treatment on imported vehicles in duty-free islands to be tightened. (I think the restrictions to bring out these vehicles would be tightened)
iv-Government will get more revenue from bidding and redistribution of telecommunication spectrum. (Hopefully, more competition which meant cheaper broadband)
7. Levy for foreign workers to be clustered into two categories excluding foreign domestic maid. Government to implement the Rehiring Programme to provide opportunities to Foreign Workers Without Permits (PATI). (Easy to understand, illegal ones meant the government gets nothing. With these programmes, levy can be collected instead of nothing from the illegals)
8. This one is tough but the government said it will be prudent in spending in supplies and services, continue to rationalise the provision of grants to Government Trust Funds, federal statutory bodies and government linked companies (GLCs), as well as rationalise and restructure entities. Without penalising / punitive measures against those who simply spend, this is hard to enforce.
9. For development expenditure, focus is on projects which benefits the people and high multiplier effect as well as low import content. Physical projects that will be prioritised include construction of affordable houses, hospitals, schools, roads and public transport as well as security. I think construction sector can heave a sigh of relief, more jobs are coming.
Non physical ones including those under study would be postponed. This should save RM5 billion and would not affect the economy.
10. Development Financial Institute (DFIs) and government owned financial venture capital (VCs) to increase financing funds by RM6 billion for small medium enterprises (SMEs). Always note that countries with a huge pool of SMEs is much better than one where only MNCs operate. SMEs will not run away but MNCs may close with very short notice, as what has happened recently.
11. GLCs urged to narrow the income gap between higher management and employees gradually. To be paid higher, the role must be enhanced and not just being paid higher. Else, Malaysia would soon be uncompetitive as all the under-qualified ones are also paid way above those of other cheaper countries.
Last but not least, the government will expedite the e-Visa and free Visa is given to Chinese tourists from March 1 to December 31 2015. I think tourism is a serious money generation industry because the visitors needs to fly in, book hotels, shop till they drop, lots of food and many other miscellaneous expenditure. Great money with the weak Ringgit and lots to offer. No special measures to reduce the cooling measures in place for the property market. I think the time has yet to come. Even Singapore has not done anything yet despite the falling prices and transactions coupled with a huge incoming supply of new units into the market. Happy spending though I would prefer whatever extra money is used wisely.
written on 28 Jan 2016
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