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Saturday, 24 October 2009

Budget 2010: Malaysia To Drive Towards High-Income Economy

KUALA LUMPUR, Oct 23 (Bernama) -- Prime Minister Datuk Seri Najib Tun Razak has laid down a firm foundation to drive the nation towards embracing a high-income economy in the 2010 budget through bold proposals to raise private equity, invigorating the stock market, further developing Islamic finance while emphasising on micro-credit programmes.

Najib, who is also Finance Minister, said green technology would be promoted via a RM1.5 billion fund while small-and medium-scale industries development programmes and the construction sector -- both vital backbones to the economy -- would be given additional injection of funds.

As for the stock market, he said the government would liberalise the commission-sharing arrangements between stockbrokers and remisiers in two stages to enhance retail participation in the bourse.

Tabling the 2010 Budget in the Dewan Rakyat today, the prime minister said 100 per cent foreign equity participation would also be allowed in corporate finance and financial planning companies.

All public-listed firms too would be required to offer e-Dividend to shareholders to increase efficiency of the payment system.

Existing tax incentives for financial services, particularly Islamic finance, will be extended until 2015, with new measures put in place comprising a 20 per cent stamp duty exemption on Islamic financing instruments and deductions on expenditure incurred in the establishment of islamic stockbroking firms.

On the Ar-Rahnu micro-credit programme, the government will encourage all Syariah-compliant financial and banking institutions such as Bank Muamalat and Bank Islam to offer this scheme to assist those unable to secure financing from financial institutions and to obtain business capital fast.

To support implementation of private sector projects in regional corridors, the government will allocate RM3.5 billion next year as part of efforts to ensure they are developed according to schedule.

Planned investments totalling RM221 billion have exceeded the Ninth Malaysia Plan target of RM145 billion.

The government will issue 1Malaysia Sukuk (Islamic Bond) totalling RM3 billion to all Malaysians aged 21 and above, with a minimum investment of RM1,000 and a maximum of RM50,000 plus a maturity period of three years, with a five per cent annual return paid quarterly.

To further promote the construction industry, Najib said RM9 billion has been allocated to finance infrastructure projects including RM4.7 billion for road and bridge projects and RM2.6 billion for water supply and sewerage services.

He said RM899 million will be allotted for rail facilities, RM820 million for ports and sea services and RM276 million for airport projects.

Najib also said the maximum individual income tax will be reduced to 26 per cent from 2010 from 27 per cent as a result of which, the tax rate for cooperatives will be reduced to 26 per cent while the fixed tax rate for non-resident individuals will dwindle to 26 per cent.

This is to ensure the individual income tax remains competitive and continues the economic agenda based on creativity, innovation and high-value added, he said.

The government will also privatise companies under the Ministry of Finance Inc and other viable government agencies to enable them to operate more efficiently and ease financial dependence as part of efforts to gradually phase out involvement in economic activities especially in areas where it competes with the private sector.

In intensifying foreign direct investment, the Prime Minister said Khazanah Nasional Bhd and Permodalan Nasional Bhd (PNB) would join hands with foreign investors in education, tourism and infrastructure and allow them to have equity ownership in firms and joint ventures in local projects.

In focusing on niche areas, Najib said the tourism industry has been allocated RM899 million next year to initiate programmes including upgrading the quality of related infrastructures nationwide.

To promote the medical tourism industry, the government will raise the income tax exemption to 100 per cent from 50 per cent now to enable healthcare service providers to offer high-quality health services and attract more health tourists.

To raise computer literacy, the government proposed to give tax relief to broadband subscription fees by up to RM500 a year from 2010 to 2012 to individual taxpayers while civil servants can now apply for computer loans once in three years from five years before up to a maximum of RM5,000.

Najib said the government will also implement a more open automotive policy and will charge RM10,000 for each Approved Permit (AP) to distribute APs effective Jan 1 next year.

A portion of the fee will be channelled to the Bumiputera Development Fund in the automotive sector.

In ensuring fuel subsidies benefit the intended target groups, a fuel subsidy management system will be implemented in early 2010 by utilising the MyKad and existing infrastructures.

Najib said this approach of providing subsidies only for the targeted groups will also be used for other commodities.

Najib also announced that contributions to the Employees Provident Fund (EPF) can be increased voluntarily to 11 per cent again from eight per cent with immediate effect but it will be made compulsory in 2011 due to the expected recovery in the economy.

He said a basic insurance and takaful scheme will be offered to ensure the people continue to have access to motor insuranc protection as the current motor insurance scheme structure was rigid as it failed to take into account rising business costs and claims.

It will be introduced by mid-2010, he said.

The government also proposed that a five per cent tax be imposed on gains from the disposal of real property from Jan 1, 2010.

Meanwhile, the Government will allocate RM2.3 billion to build and upgrade infrastructures in rural areas.

Najib also brought cheer to civil servants when he announced a special contribution of RM500 to support staff recently will also be extended to all government employees from Grade S41 to Grade S54 to be paid in December.

This works out to RM400 million, he said.

In winding up his maiden budget speech themed "1Malaysia, Together We Prosper" which lasted for more than 90 minutes, the Prime Minister said the 2010 Budget was 11.2 per cent lower than this year's budget, amounting to RM191.5 billion.

Of the total, RM138.3 billion or 72.2 per cent was for operating expenditure and RM53.2 billion or 27.8 per cent for development expenditure.

Under the development expenditure, RM25.4 million has been provided for the economic sector to support the needs of infrastructure, industry and agriculture and rural development, he said.

In advancing towards a high-income economy, the Government will take a new approach based on innovation, creativity and high value-added initiatives.

These measures are expected to more than double the per capita income of the people in the next 10 years.

Najib also emphasised the private sector contribution in driving the economy will be intensified, with priority given to enhance domestic investment and encourage local firms abroad to remit their profits and re-invest in the country.

To provide a business-friendly environment and ensure an effective delivery system, individuals and companies are only required to use a single reference number in their dealings with government agencies.

"For individuals, the initiative known as MyID, uses MyKad number, while for companies MyCoID utilises the Companies Commission of Malaysia (CCM) business registration number," he said.

The Prime Minister also said a National Innovation Centre will be established, supported by a network of innovation excellence centres under the Science, Technology and Innovation Ministry and in collaboration with the Higher Education Ministry.

"This is part of efforts to intensify research and development initiatives and commercialisation. A strong foundation is needed for the economy to shift towards a high-income economy, he added.


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