“defensive” budget analysts · 25/10/2015 · myr 1.5b and brt kota kinabalu at a cost of...
TRANSCRIPT
October 25, 2015
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SEE PAGE 32 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS PP16832/01/2013 (031128)
Budget 2016
“Defensive” Budget Budget deficit cut slightly to -3.1% of GDP (2015E: -3.2%)
Fiscal discipline not at the expense of economic growth and
people’s well-being
Gradual budget deficit reduction going forward i.e. averaging
-2.7% of GDP in 2016-2018.
Budget deficit cut to -3.1% of GDP in 2016 (2015E: -3.2% of GDP).
Low revenue growth of +1.4% due to impact of low crude oil price
on oil-related income (despite better-than-expected GST
collections) limit the rise in spending allocation to +1.7% as the
Government seek to balance between maintaining fiscal discipline
and consolidation, ensuring people’s well being and sustaining
growth momentum especially in investment.
Plenty of measures for the low and middle income groups to
deal with cost of living issue e.g. increases in BR1M, Minimum
Wage and civil service starting pay and minimum pension; adding
medicines and essential food items to GST’s zero-rated list;
increasing several personal income tax allowances that have not
changed for many years; and expediting the provision of affordable
homes.
Major public sector infrastructure and investment projects
continuing e.g. completions of KVMRT1 and LRT extension;
commencements of KVMRT2 and LRT3; RAPID Complex in
Pengerang; Pan-Borneo Highway. At the same time, several
Government-linked companies and investment funds will
undertake a number of major investment projects e.g. Malaysian
Vision Valley (Sime Darby); KLIA Aeropolis (MAHB); Khazanah will
invest MYR6.7b in nine high-impact projects in healthcare,
education, tourism, communication software & infrastructure.
Allocations and incentives to spur investment activities and
SMEs in targeted sectors, notably the Special Reinvestment
Allowance for year assessment 2016-2018 for existing
manufacturing and agriculture companies whose Reinvestment
Allowance incentive has expired. Sectors benefiting from Budget
2016 include E&E, chemicals, machinery & equipment, aerospace,
medical devices, food production and services (including tourism).
Government debt approaching 55% of GDP limit i.e. MYR627.5b
or 54% of GDP as at end-June 2015 (end-2014: MYR582.8b or
52.7%). Meanwhile, the contingent liabilities arising from the
Government debt guarantees were MYR175.8b or 15.1% of GDP as
at end-June 2015.
Real GDP growth to moderate next year. Official real GDP growth
forecast for 2016 is lower at 4.0%-5.0% (2015E: 4.5%-5.5%). We
maintain our +4.9% forecast for 2015 and lower the forecast for
2016 to +4.7% from +5.2%.
Analysts
Suhaimi B Ilias
(603) 2297 8682
Dr Zamros Dzulkafli
(603) 2082 6818
Ramesh Lankanathan
(603) 2297 8685
William Poh Chee Keong
(603) 2297 8683
October 25, 2015 2
Malaysia : Budget 2016
Highlights & Takeaways
1. The Ringgit and sen of Budget 2016
Slight narrowing in 2016 budget deficit to -3.1% of GDP (–MYR38.8b) from
the unchanged target for 2015 of -3.2% of GDP (-MYR37.25b). This is
marginally ahead of our expected -3.0% of GDP (-MYR38b) as per our
Budget 2016 preview note on 12 Oct 2015, but generally consistent with
our view that the deficit is unlikely to be less than -3.0% of GDP, and next
year’s growth in revenues and operating expenditure will be well below
the CAGR projected under the 11th Malaysia Plan (11MP, 2016-2020).
Malaysia: Fiscal Balance (MYRb)
2010 2011 2012 2013 2014 Budget 2015 (Jan 2015)
2015E 2016E
Revenue 159.7 185.4 207.9 213.4 220.6 222.9 222.5 225.7
% chg 0.6 16.1 12.1 2.6 3.4 1.0 0.8 1.4
Operating Expenditure 151.6 182.6 205.5 211.3 219.6 212.4 213.3 215.2
% chg (3.5) 20.4 12.6 2.8 3.9 (3.3) (2.9) 0.9
Current Fiscal Balance 8.0 2.8 2.4 2.1 1.0 10.5 9.1 10.4
% of GDP 1.0 0.3 0.2 0.2 0.1 0.9 0.8 0.8
Gross Development Expenditure 52.8 46.4 46.9 42.2 39.5 48.5 47.4 50.0
% chg 6.6 (12.1) 1.1 (10.1) (6.4) 22.8 20.0 5.4
Net Development Expenditure 51.3 45.3 44.3 40.7 38.4 47.5 46.4 49.2
% chg 4.7 (11.6) (2.2) (8.2) (5.5) 23.5 20.6 6.1
Overall Fiscal Balance (43.3) (42.5) (42.0) (38.6) (37.4) (37.0) (37.3) (38.8)
% of GDP (5.3) (4.7) (4.3) (3.8) (3.4) (3.2) (3.2) (3.1)
Sources: Budget 2016, Economic Report 2015/2016 (MoF)
Low growth in revenue of +1.4% to MYR225.7b next year (2015E: +0.8%,
MYR222.5b), reflecting the impact of the fall in crude oil price on oil-
related income despite the commencement of the Goods & Services Tax
(GST).
Oil-related revenue is projected to fall further in 2016 to MYR31.7b next
year after the fall to MYR43.9b this year from MYR66.3b last year.
Consequently, its share of total revenue will drop further to 14.1% in 2016
from 19.7% in 2015 (2014: 30%; record high was 40.3% in 2009).
Petroleum income tax and petroleum export duties will remain low
at MYR9.3b and MYR0.9b respectively in 2016 after the -64.6% and -
42.7% falls to MYR9.5b and MYR0.9b in 2015 (2014: MYR27b and
MYR1.6b).
The key drag to oil-related income in 2016 is Petronas dividend to
the Federal Government which will drop to MYR16b versus MYR26b in
2015 and MYR29b in 2014.
GST revenues will jump in 2016 on full-year impact i.e. +44.4% increase
next year to MYR39b after the MYR27b collection for the 9 months of 2015
following the start of GST in Apr 2015. Revenue from the previous Sales
Tax and Services Tax (SST) revenue was MYR17.2b in 2014.
October 25, 2015 3
Malaysia : Budget 2016
Total revenue up mainly on the rise in personal and corporate income
taxes. Revenues from both personal and corporate income taxes are
projected to increase by +8.5% to MYR104.7b in 2016, sustaining the
momentum after the estimated +7.6% increase in 2015 to MYR96.5b,
despite this year’s 1%-3% personal income tax rate cut and next year’s 1%
corporate income tax rate cut. This reflects higher tax compliance
following continuous efforts in enhancing tax administration and
strengthening tax audits, as well as measure like the higher personal
income tax rates for chargeable income above MYR600k and MYR1m of 26%
and 28% respectively starting next year from the current 25%. This ties in
with our view expressed in the Budget 2016 preview note that besides the
better than expected GST revenue that helps to cover some of the losses
in oil-related revenue, total revenue will have to be supported by other
non-oil revenue.
Malaysia: Personal Income Tax Rates (%)
Chargeable Income (MYR)
2014 2015 2016
1 to 5,000 0 0 0
5,001 to 20,000 2 1 1
20,001 to 35,000 6 5 5
35,001 to 50,000 11 10 10
50,001 to 70,000 19 16 16
70,001 to 100,000 24 21 21
100,001 to 250,000 26 24 24
250,001 to 400,000 26 24.5 24.5
400,001 to 600,000 26 25 25
600,001 to 1,000,000 26 25 26
Exceeding 1,000,000 26 25 28
Source: Budgets 2014-2016
Limited space for Government spending. In Budget 2016, the
Government allocates a total spending of MYR265.2b, up +MYR4.4b or
+1.7% from MYR260.7b in 2015.
OE will increase by just +0.9% to MYR215.2b, constrained by the modest
rise in revenues and the long-standing budgetary discipline of ensuring
operating surplus (2015E: +MYR9.1b; 2016E: +MYR10.4b). This follows the
estimated -2.9% cut this year to MYR213.3b that was made necessary as
a direct result of the fall in crude oil price and oil-related revenues to
ensure continued consolidation in budget deficit.
The slight rise in OE is mainly for emoluments (2016E: +2.0% to MYR70.5b
i.e. 32.7% of total OE; 2015E: +3.2% to MYR69.1b i.e. 32.7% of total OE),
retirement charges (2016E: +7.4% to MYR19.5b i.e. 9.1% of total OE;
2015E: -0.4% to MYR18.2b i.e. 8.5% of total OE) and debt service charges
(2016E: +9.3% to MYR26.6b i.e. 12.4% of total OE; 2015E: +7.9% to
MYR24.4b i.e. 11.4% of total OE).
Capping the rise in OE are lower outlays on supplies and services
(2016E: -0.9% to MYR36.3b i.e. 16.9% of total OE; 2015E: +6.9% to
MYR36.6b i.e. 17.2% of total OE), subsidies (2016E: -0.5% to MYR26.1b or
12.1% of total OE; 2015E: -34.0% to MYR26.2b i.e. 12.3% of total OE) and
grants to statutory bodies (2016E: -17.5% to MYR12.9b i.e. 6.0% of total
OE; 2015E: -4.3% to MYR15.7b i.e. 7.3% of total OE).
October 25, 2015 4
Malaysia : Budget 2016
Gross development expenditure (GDE) to increase further by +5.4% to
MYR50b next year after the +20% jump to MYR47.4b this year, led by
higher allocations for trade and industry (2016E: +23.4% to MYR8.4b i.e.
3.9% of total GDE; 2015E: +44.4% to MYR6.8b i.e. 32% of total GDE),
agriculture and rural development (2016E: +5.6% to MYR3.4b i.e. 1.6% of
total GDE; 2015E: +11.8% to MYR3.2b i.e. 1.5% of total GDE), housing
(2016E: +12.9% to MYR2.6b i.e. 1.2% of total GDE; 2015E: +271.0% to
MYR2.3b i.e. 1.1% of total GDE) and health (2016E: +13.8% to MYR1.8b i.e.
0.8% of total GDE; 2015E: +12.9% to MYR1.6b i.e. 0.7% of total GDE).
Next year’s GDE allocations for several other major items are lower
after the surge this year, but remain sizeable component of GDE i.e.
transport (2016E: -3.4% to MYR8.4b i.e. 3.9% of total GDE; 2015E: +20.1%
to MYR8.7b i.e. 4.1% of total GDE), education and training (2016E: -16.7%
to MYR4.7b i.e. 2.2% of total GDE; 2015E: +14.2% to MYR5.6b i.e. 2.6% of
total GDE) and public utilities (2016E: -19.6% to MYR3.6b i.e. 1.7% of total
GDE; 2015E: +29.8% to MYR4.5b i.e. 2.1% of total GDE).
Malaysia: Budget Balance (MYRb) Malaysia: Government Debt
Sources: BNM, Economic Report 2015/2016 (MoF) Sources: CEIC, Economic Report 2015/2016 (MoF)
Malaysia: Oil-Related Revenues Malaysia: Subsidy Spending (MYRb)
Sources: BNM, Economic Report 2015/2016 (MoF) Sources: CEIC, Economic Report 2015/2016 (MoF)
October 25, 2015 5
Malaysia : Budget 2016
2. Key macroeconomic forecasts and assumptions
The Government expects growth momentum to be sustained… amid
manageable inflation, narrower external balance, “flattish” key
commodity prices and weaker MYR.
Real GDP growth: 4.5%-5.5% in 2015 and 4%-5% in 2016
Inflation rate: 2.0%-2.5% in 2015 and 2%-3% in 2016
Unemployment rate: 3.1% in 2015 and 2.9% in 2016
Trade balance: +MYR75.3b in 2015 and +MYR73.2b in 2016
Current account balance: +MYR23.4b (+2.0% of GDP) in 2015 and
+MYR11.3b (+0.9% of GDP) in 2016
Average crude oil price: USD50/bbl in 2015 and USD48/bbl in 2016
Average CPO price: MYR2,200/t in 2015 and MYR2,300/t in 2016
Average MYR per USD: 4.05 in 2015 and 4.22 in 2016
Albeit at a slightly slower pace… As noted above, real GDP growth
forecast range for next year is 0.5ppt lower at 4.0%-5.0% compared with
the unchanged forecast of 4.5%-5.5% for this year. From the Ministry of
Finance’s Economic Report 2015-2016, the projected real GDP values are
MYR1,063.5b for 2015 and MYR1,114.8b for 2016, implying growth of +5.0%
and +4.8% respectively.
… as domestic demand softens... Domestic demand growth in 2016 is
expected to slow to +5.5% from +5.9% this year, mainly on the deceleration
in growth of private consumption (2016: +6.4%; 2015E: +6.8%), and private
investment (2016: +6.7%; 2015E: +7.3%) and Government consumption
(2016: +3.0%; 2015E: +3.6%). The impact of GST and inflation on consumer
spending is mitigated somewhat by the Budget 2016 measures targeted at
the low- and middle-income groups to ease the cost of living pressures and
raise the disposable incomes. Private investment growth, while slowing, is
supported by the various fiscal incentives and sustained by capex in the
manufacturing and services sector, particularly in the higher value-added
manufacturing industries E&E, chemicals, machinery & equipment, in high-
growth manufacturing industries like medical devices and aerospace, and
in services activities like ICT, oil & gas services, private healthcare, private
higher education, professional services, tourism and halal industry. Public
investment however is expected to register a pick up in growth (2016:
+2.3%; 2015E: +1.6%) driven by on-going and up-coming major public
infrastructure projects and investment projects of public corporations like
MRT Corp (KVMRT), Prasarana (LRT3), Petronas (RAPID/PIPC, FLNG2) and
Tenaga Nasional.
… and net external demand remains a drag. Despite the expected
rebound in exports of goods and services (2016: +0.9%; 2015E: -0.8%), net
external demand will shrink further albeit at a lesser pace (2016: -4.4%;
2015E: -12.3%) as imports of goods and services pick up (2016: +1.5%;
2015E: +0.8%) to continue outpacing exports. Overall, the external trade
performance is influenced by factors like the uneven global economic
environment, continued low crude oil price, and the opposite impact of
weak Ringgit on manufacturing exports and import bills.
October 25, 2015 6
Malaysia : Budget 2016
Malaysia: Real GDP
% chg ACTUAL MAYBANK KE OFFICIAL
2014 1H 2015 2015E 2016E 2015E 2016E
Real GDP 6.0 5.3 4.9 4.7 4.5-5.5 4.0-5.0
Manufacturing 6.2 4.9 4.8 4.7 4.5 4.3
Services 6.5 5.7 5.7 5.5 5.7 5.4
Agriculture 2.1 0.0 0.6 (0.5) 1.3 1.3
Mining 3.3 7.8 6.5 4.5 3.5 4.0
Construction 11.8 7.7 7.0 7.3 8.8 8.4
Domestic Demand 5.9 6.2 5.3 5.2 5.9 5.5
Private Consumption 7.0 7.6 6.5 6.3 6.8 6.4
Public Consumption 4.4 5.5 0.6 1.3 3.6 3.0
Gross Fixed Capital Formation 4.8 4.2 5.1 5.1 5.2 5.1
Private Investment 11.0 7.5 8.5 6.0 7.3 6.7
Public Investment (4.9) (3.7) (0.8) 3.2 1.6 2.3
Net External Demand 12.8 (10.4) (7.1) (6.1) (12.3) (4.4)
Exports of Goods & Services 5.1 (2.2) (1.4) 2.8 (0.8) 0.9
Imports of Goods & Services 4.2 (0.9) (0.6) 3.9 0.8 1.5
Inventory (chg in MYRb) (8.6) (0.3) (0.5) 3.2 (0.3) 0.4
Sources: Dept. of Statistics, BNM, MoF (Economic Report 2015/2016), Maybank KE
Malaysia: Other Key Economic Indicators
ACTUAL MAYBANK OFFICIAL
2014 2015 YTD 2015E 2016E 2015E 2016E
Gross Exports (% chg) 6.4 (1.4) (Jan-Aug) (0.7) 2.8 (0.7) 1.4
Gross Imports (% chg) 5.3 (2.0) (Jan-Aug) (1.6) 3.9 (1.2) 3.3
Trade Balance (RMb) 83.1 54.2 (Jan-Aug) 87.7 82.3 85.3 73.2
Current Account Balance (RMb) 49.5 17.6 (Jan-June) 36.9 30.7 23.4 11.3
Current Account Balance (% of GDP) 4.3 3.1 (Jan-June) 2.7 2.4 2.0 0.9
Fiscal Balance (% of GDP) (3.4) (2.8) (Jan-June) (3.2) (3.1) (3.2) (3.1)
Inflation Rate (CPI, %) 3.2 1.9 (Jan-Aug) 2.0-2.5 2.7-3.0 2.0-2.5 2.0-3.0
Overnight Policy Rate (% p.a., end-period) 3.25 3.25 (Current) 3.25 3.25 - -
Exchange Rate (RM/USD, end-period) 3.50 4.24 (23 Oct) 4.35 4.05 - -
Exchange Rate (RM/USD, average) 3.27 3.82 3.94 4.22 4.02 4.22
Unemployment Rate (%) 2.9 3.1 (Jan-July) 3.1 3.2 3.1 2.9
Crude Oil (USD/bbl, Brent average) 99 55 55 53 50 48
Crude Palm Oil (RM/tonne, average) 2,416 2,175 2,100 2,300 2,200 2,300
Sources: Bloomberg, Dept. of Statistics, BNM, MoF (Economic Report 2015/2016), EPU, Maybank KE, Maybank FX Research
3. GST-fied
Details on GST and its impact in Budget Speech and Economic Report.
In our Budget 2016 preview note, we highlighted that there will be details
on GST. From the PM’s Budget Speech and the Ministry of Finance’s
Economic Report 2015/2016 (Featured Article 1: “Update in
Implementation of GST” in Chapter 4, pages 3-5).
390,378 businesses are GST-registered as of Sep 2015, up from 300,811
during the mandatory period that ended on 31 Dec 2014, well above the
Government’s conservative target of 146,000. This among others reflects
voluntary registration and greater tax compliance.
More than 90% of GST-registered businesses have submitted their GST
returns within the stipulated period, reflecting high level of compliance.
Of these, 99% were submitted electronically.
October 25, 2015 7
Malaysia : Budget 2016
As a result, GST collection is better than expected. For the nine-month
period of Apr-Dec this year, GST revenue will be MYR27b versus the
originally budgeted MYR23.2b, and for next year, it is expected to be
MYR39b compared with 11th Malaysia Plan’s (11MP, 2016-2020) projection
of MYR31.4b p.a.
Revenues: GST Revenue: GST vs Sales & Services Taxes (SST)
Sources: BNM, Budget 2015, Economic Report 2015/2016, 11MP Sources: BNM, Economic Report 2015/2016
GST is timely as it helps to offset a major portion of the fall in oil-
related income... The lower average crude oil price this year of around
USD55/bbl caused the oil-related income to be MYR43.9b versus MYR62.4b
had crude oil price averaged USD100/bbl.
… thus prevents larger budget deficit. Had GST was not implemented
and the Sales Tax and Services Tax (SST) remain, Government revenues for
2016 would have been lower by MYR21b as SST revenue will be only
MYR18b versus GST revenue of MYR39b noted above. In turn, budget
deficit in 2016 will be -4.8% of GDP instead of -3.1% of GDP.
Key issues and challenges in GST implementation and operation include:
Improper issuance of tax invoices, where some businesses were not
well prepared to issue proper tax invoices due to failure or delay in
procuring and installing GST-compliant software and hardware on time.
To accommodate them, handwritten tax invoices to charge GST were
allowed until end-Sep 2015 provided they fulfilled certain minimum
criteria.
Confusion over GST treatment of service charge, which is a fee
charged by the services provider in the hospitality industry. The
previous 6% Service Tax was not imposed on service charge. Under
GST, the 6% rate is imposed on service charge, which is deemed as part
of payment for the supply of services.
Delays in GST refunds mainly due to submission mistakes and issues,
and the ensuing “back-and-forth” between Customs and companies.
On the issue of GST refund process taking more than 14 working days
for electronics submission and 28 days for manual submissions, there
are several contributing factors. These include claims made in the
wrong taxable period; entries in the returns for input tax claims were
incorrect, incomplete or supplies declared in the wrong boxes;
companies could not be contacted after 7 days from the date of
issuance of the notice for verification and request for information; slow
or no response from companies to the queries by GST refund officers;
false or doubtful claims that required further review by GST refund
October 25, 2015 8
Malaysia : Budget 2016
officers; Input Tax Claims made on “Blocked Input Tax” or other non-
allowable expenses; multiple companies under a group registration
submitting GST returns individually; and incorrect and incomplete
banking information of the companies.
4. People’s Well-Being
“People Economy”. Budget 2016 marks the start of 11MP, and consistent
with the 11MP’s theme of “Anchoring Growth on People”, Budget 2016 was
theme “Prospering the People”.
Focusing on the Bottom 40% (B40) and Middle 40% (M40) Households,
and civil servants to ease the cost of living burden and raise disposable
income. These include:
Continuation of cash handouts that has been in place since 2012 and
largely targeted for the B40 households.
BR1M totalling MYR5.9b to 7.4 recipients (4.7m households,
2.7m individuals). The amounts are raised by MYR50 to MYR1,000
for households earning MYR3,000 and below per month; to MYR800
for households earning between MYR3,001 and MYR4,000 per
month; and to MYR400 for single individuals aged 21 years and
above earning MYR2,000 or less per month. A new category of
recipient is those under e-Kasih database with monthly income of
MYR1,000 or less, who will get MYR1,050 under BR1M.
Schooling assistance of MYR100 to 3.5m primary & secondary
school students from households with income of MYR3,000 to be
disbursed in Jan 2016, totalling MYR350m.
1 Malaysia Book Voucher of MYR250 benefiting 1.2m students.
Increases in personal income tax rate rebates and reliefs, especially
to raise the disposable income of M40 households. In line with our
expectations, a number of personal income tax rebates and reliefs
were revised upwards to better reflect the current cost of living
considering that these have not been changed for many years.
Increase child tax reliefs i.e. to MYR2,000 from MYR1,000 for each
child under the age of 18 years; to MYR8,000 from MYR6,000 for
each child and disabled child above 18 years who is studying at
local or foreign institutions of higher learning.
Increase the individual tax relief to MYR4,000 from MYR3,000 for
individual taxpayers whose spouse does not have an income.
Increase the maximum relief on tuition fees for individual
taxpayers to MYR7,000 from MYR5,000.
Introduce a new tax relief of MYR1,500 each for a taxpayer’s
mother and father, on conditions that each parent does not have
income exceeding MYR2,000 a month and 60 years old and above.
Minimum Wage hike effective 1 July 2016, benefitting 1.9m
workers. Another Budget 2016 measure that we expected was the
review in Minimum Wage to MYR1,000 from MYR900 for Peninsular
Malaysia and to MYR920 from MYR800 for East Malaysia, although we
October 25, 2015 9
Malaysia : Budget 2016
were hoping for a single national Minimum Wage instead that is above
the national Poverty Line Income of MYR940.
A special payment to civil servants and improvements in civil
service pays and pensions, totaling MYR2.4b. The MYR1b special
payments totalling (MYR500 to 1.6m civil servants and MYR250 to
700,000 pensioners) will be made in Jan 2016. Other measures include
minimum starting salary of MYR1,200 a month for 60,000 civil servants
(vs around MYR900 a month currently); minimum pension rate of
MYR950 for 50,000 pensioners with at least 25 years of service; and
one annual salary increment for civil servants.
Expanding the list of zero-rated items under GST i.e. raising the
number of zero-rated medicines to 8,630 from 4,215; additional
essential food items; economy class of Rural Air Services within and
between Sabah, Sarawak and Federal Territory of Labuan.
Expediting the provisions of affordable housing. Measures include the
completion of 10,000 units of PR1MA houses in 2016 (out of the
175,000 units under construction currently) to be sold at 20% discount
to market prices; building 5,000 units in 10 locations within the vicinity
of the LRT and monorail stations (Pandan Jaya, Sentul, Titiwangsa) and
another 5,400 units around the MRT station in Bandar Kwasa
Damansara in Sungai Buloh (4,600 units by Sime Darby Property and
800 units by EPF); and establish the MYR200m First House Deposit
Financing Scheme to assist first-time home buyers of affordable
housing to pay the down payments.
Measures to improve the income of B40 and the social safety net
system. These include a total of MYR1.2b in allocations to funds and
micro-credit schemes for small-scale or micro-enterprises,
entrepreneurships development, business start-ups and expansions as
well as assistances for smallholders, paddy farmers and rubber tappers
(e.g. MYR852m for income and productivity enhancement programmes
under RISDA and FELCRA; improvements in the rubber production
incentive and paddy subsidy scheme). In addition, another MYR1.2b is
allocated to improve and strengthen the social safety net system in
terms of monthly allowances for the Public Welfare Department
employees and financial assistances to the poor.
5. “Capital Economy” to boost domestic investments and
human capital development
Major public sector infrastructure and investment projects to continue
and proceed as expected. These include
Completions of the MYR32b KVMRT1 (by Dec 2016 for Phase 1 Sg Buloh-
Damansara and by mid-2017 for Phase 2 Semantan-Kajang) and the
MYR10b LRT line extension projects (Ampang-Putra Heights line by
March 2016 and Kelana Jaya-Putra Heights line by mid-2016)
Commencements of the MYR28b KVMRT2 in 2Q 2016 and the MYR10b
LRT3
MYR18b RAPID Complex Project in Pengerang Johor.
October 25, 2015 10
Malaysia : Budget 2016
Construction of a toll-free 1,796km Pan-Borneo Highway (PBH) at the
total cost of MYR28.9b i.e. 1,090km in Sarawak (MYR16.1b) and 706km
in Sabah (MYR12.8b)
Other notable infrastructure and investment projects mentioned in
Budget 2016 are the MYR2b investment in public utilities (MYR877m for
clean water supply and water treatment plants; MYR515m to ensure
reliable electricity supply in Sabah); Rapid Transit Bus (BRT) projects
for KL-Klang (MYR1.5b) and Kota Kinabalu (MYR1b); Damansara-Shah
Alam Highway (DASH), Sg. Besi-Ulu Klang expressway (SUKE) and Jalan
Tun Razak Traffic Dispersal Project (MYR0.9b); MYR1.2b for High-Speed
Broadband, National Fiber Backbone Infrastructure, rural broadband
project, and undersea cable system; and a total of MYR3.1b for rural
infrastructure development (building and upgrade of 700km roads;
electric and water supplies; social amenities; drainage).
Several of the Government-linked companies and investment funds will
undertake a number of major investment projects, including the
development of Malaysian Vision Valley (MYR5b covering 108,000 hectares
of lands between Nilai and Port Dickson in Negeri Sembilan by Sime Darby);
KLIA Aeropolis (1,300 acres costing MYR7b); Khazanah will invest MYR6.7b
in nine high-impact projects in healthcare, education, tourism,
communication software & infrastructure, and allocates MYR0.5b for
venture capital and private equity fund (including a MYR50m tourism VC
fund).
Allocations and incentives for investments in targeted sectors and SMEs.
Among the key measures are:
Special Reinvestment Allowance for year assessment 2016-2018 for
existing manufacturing and agriculture companies whose
Reinvestment Allowance incentive has expired.
Various tax and funding incentives for the SMEs i.e. Shariah-
Compliant SME Financing Scheme until 31 Dec 2017 where the
Government subsidise 2% of the financing profit rate; relaxation of
conditions to SMEs to claim income tax exemption of value of increase
in manufactured exports for years of assessment 2016-2018; automatic
double tax deduction for years of assessment 2016-2018 for R&D
project expenses up to MYR50,000; Industrial Building system (IBS)
Promotion Fund of MYR500m under SME Bank to provide soft loans to
developers and contractors (Category 5 and below); MYR200m SME
Technology Transformation Fund under SEM Bank to provide soft loans
at 4%.
Funds and tax incentives for investment in chemical, E&E,
machinery & equipment, aerospace, medical devices, food
production and services, including tourism e.g. MYR730m fund to the
Malaysian Investment Development Authority (MIDA); extension of the
100% income tax exemption on statutory income for tour operators
form the year of assessment 2016 until 2018 and implement online visa
for tourists from US, Canada, China, India, Myanmar, Nepal and Sri
Lanka as well as E-Visa by mid-2016 to achieve the target of 30.5m
tourist arrivals; extend the tax incentives for food production until
2020.
October 25, 2015 11
Malaysia : Budget 2016
Meanwhile, to empower human capital and boost innovation, specific
allocations are made to construct, develop and maintain education
facilities (66 new schools and MYR500m for development and
maintenance); MYR2.45b for scholarships and MYR1.3b for Technical and
Vocational Education and Training TVET programmes; and MYR415m for
innovation (e.g. MYR200m Technology and Innovation Funding Scheme by
Malaysia Debt Venture and MYR100m for projects under the Malaysian
Innovation Agency (AIM)).
Our thoughts on Budget 2016
“Defensive” Budget. Budget 2016 is confronted with a challenging
environment. Global economic and major central bank’s policy
uncertainties are affecting domestic growth outlook. Soft commodity
prices, especially crude oil, trim our export revenues and put a strain on
Government revenues, despite the introduction of GST, which provided
some buffer. Financial market volatility, a weak Ringgit as well as rising
living and business costs are dampening consumer sentiment, business
conditions and investors’ confidence. At the same time, this budget
marks the start of 11MP that contains medium-term economic and social
targets of becoming a high income economy by 2020 that is sustainable
and inclusive. To top it off, the Government has to stay committed to
budgetary discipline. Maintaining budgetary discipline is critical to ensure
the country’s current investment grade sovereign credit rating and the
accompanying “stable” outlook can be sustained to avoid further negative
impact on investor confidence as well as to the economy in terms of
higher funding costs. The budget also has to ensure that the pursuit of
financial discipline is not at the expense of economic growth and people’s
well-being. So a slight reduction in budget deficit to -3.1% of GDP this
year from -3.2% this year is understandable given the macro background
and juggling between the objectives of budgetary discipline, sustaining
growth momentum and addressing the concerns of various “stakeholders”.
Eyes on Government debt that is approaching the self-imposed 55% of
GDP limit and on contingent liabilities. Government debt to GDP ratio
increased to MYR627.5b or 54% of GDP as at end-June 2015, up from
MYR582.8b or 52.7% as at end-2014. Meanwhile, the contingent liabilities
arising from the Government debt guarantees were MYR175.8b or 15.1% of
GDP as at end-June 2015.
Review the self-imposed limit…? With the on-going and upcoming major
infrastructure projects, especially for the funding of KVMRT and LRT3
projects as well as the planned KL-Singapore High-Speed Rail which is
expected to commence in 2018 and to be completed in 2023, either the
Government has to consider changing the “55% of GDP” cap to a higher
limit or recourse to contingent liabilities.
Or recourse to contigent liabilities…? Alternatively, the funding for these
major infrastructure projects can be done via further issuances of
Government-guarateed debt by the relevant special purpose vehicles (SPVs
like DanaInfra). The rise in contigent liabilities can also come from the
recent change in the funding authority for the civil servants’ housing loans.
Presently, under the Housing Loan Fund Act 1971, the Housing Loan Fund
(HLF) sources its annual funding in the form of term loans and Sukuk
Perumahan Kerajaan (SPK). As at June 2015, the HLF stood at MYR52b,
equivalent to 8.3% of Government debt and 4.5% of GDP. In the Ministry of
October 25, 2015 12
Malaysia : Budget 2016
Finance’s Economic Report 2015-2016, it was highlighted that in June
2015, the Government established a new statutory body called the Public
Sector Home Financing Board (LPPSA) under the Ministry of Finance to
replace HLF by end-2015, and thus its funding may involve issuances of
Government-guaranteed term loans and debt securities.
Federal Government Debt & Guaranteed Debt (MYRb) Federal Government Debt & Guaranteed Debt (% chg)
Source: CEIC Source: CEIC
Federal Government Debt & Guaranteed Debt (% of GDP)
Source: CEIC
Slower pace of reduction in budget deficits going forward…? Our
Budget 2016 preview note highlighted that challenge in achieving a near-
balanced budget of -0.6% of GDP by 2020 as this was based on the average
2016-2020 crude oil price assumption of USD70/bbl. Budget 2016’s
average crude oil price forecast is USD48/bbl. Current crude oil price
futures curve are not indicating price will hit USD70/bbl in the next five
years, averaging around USD60/bbl in 2016-2020.
Under the Medium-Term Fiscal Framework (MTFF, 2016-2018), the
budget deficit is expected to average -2.7% of GDP and crude oil price
expected to range between USD48/bbl and USD60/bbl. In addition, tax
revenue during the MTFF period is targeted to average 14.9% of GDP (2015:
14.6% of GDP) driven by enhancement in tax auditing, compliance and
enforcement to address evasions. Expenditures will also be managed, with
indicative ceiling for OE of MYR685.7b in 2016-2018, while the allocation
for GDE will be based on the 11MP figure of MYR260b. Among measures to
October 25, 2015 13
Malaysia : Budget 2016
manage expenditures include gradual subsidy rationalisation, cost-
effective procurement, streamlining the civil service and further
encouraging government entities to be financially-independent and less
reliant on grants.
APPENDIX
Malaysia: Total Government Revenue and Spending (MYR b)
Sources: Economic Report 2014/2015 and 2015/2016 (MoF)
Malaysia: Total Government Revenues (MYR b)
Source: Economic Report 2015/2016 (MoF) * Includes revenue from stamp duties and real property gains tax ** Includes government commercial undertakings, interest and returns on investments, licenses, service fees, road tax, fines and penalties, rental, petroleum royalties, revenue from Federal Territories and non-revenue receipts
211.3 219.6 221.1 213.3 215.2
42.2 39.5 42.2 47.4 50.0
213.4 220.6 225.1 222.5 225.7
-
50
100
150
200
250
300
2013 2014 2015 (Budgeted) 2015 (Revised) Budget 2016
Gross Development Expenditure Operating Expenditure Revenue
259.1 253.5 260.7 265.2 263.3
126.7
37.5
56.4
116.8
53.3
52.4
125.6
58.0
42.1
0 20 40 60 80 100 120 140
Direct Taxes (DT)
Indirect Taxes (IT)
Non Tax Revenue**
2014
2015
2016
October 25, 2015 14
Malaysia : Budget 2016
Malaysia: Total Government Revenues (MYR b)
Source: Economic Report 2015/2016 (MoF)
* Includes revenue from stamp duties and real property gains tax
** Includes government commercial undertakings, interest and returns on investments, licenses, service fees, road tax,
fines and penalties, rental, petroleum royalties, revenue from Federal Territories and non-revenue receipts
Malaysia: Total Government Spending by Sector (MYR b)
*** Includes debt service charges, transfer payments, communication, social and economic services Source: Economic Report 2015/2016 (MoF)
65.2
24.4
27.0
2.4
7.7
1.6
0.3
2.7
12.9
10.9
6.3
0.0
2.8
68.3
28.2
9.5
2.4
8.4
0.9
0.1
2.7
12.2
4.8
2.9
27.0
2.7
74.4
30.3
9.3
2.6
9.0
0.9
0.1
2.8
12.4
0.0
0.0
39.0
2.8
0 10 20 30 40 50 60 70 80
Companies Income Tax (DT)
Individuals Income Tax (DT)
Petroleum Income Tax (DT)
Co-operatives and Others Income Tax (DT)
Others* (DT)
Petroleum Export Duties (IT)
Others Export Duties (IT)
Import Duties and Surtax (IT)
Excise (IT)
Sales Tax (IT)
Service Tax (IT)
Goods and Service Tax (IT)
Others (IT)
30.3
56.6
22.1
1.3
8.3
3.6
11.4
12.6
17.6
95.2
32.1
57.4
23.2
3.0
8.1
4.8
13.5
14.7
18.7
85.3
31.9
56.3
23.4
3.3
7.7
3.8
13.8
14.7
19.0
91.3
0 10 20 30 40 50 60 70 80 90 100
Security
Education and Training
Health
Housing
Agriculture and Rural Development
Public Utilites
Trade and Industry
Transport
General Administration
Others***
2014
2015
2016
October 25, 2015 15
Malaysia : Budget 2016
Malaysia: Government Operating Expenditure (OE) by Sector (MYR b)
Source: Economic Report 2015/2016 (MoF)
* Includes general services, refund and reimbursement and foreign affairs services
*** Includes debt service charges and transfer payments
Malaysia: Government Development Expenditure (DE) by Sector (MYR b)
Source: Economic Report 2015/2016 (MoF)
* mainly electricity and water supply
** includes general services, maintenance and renovations.
*** Includes debt service charges, transfer payments, communication, social and economic services
26.0
51.7
20.7
0.7
5.4
0.1
6.7
5.4
16.2
86.5
27.1
51.8
21.6
0.7
4.9
0.3
6.8
6.0
17.0
77.0
26.9
51.6
21.7
0.7
4.3
0.1
5.4
6.2
17.4
80.7
0 10 20 30 40 50 60 70 80 90 100
Security
Education and Training
Health
Housing
Agriculture and Rural Development
Public Utilites
Trade and Industry
Transport
General Administration *
Others***
2014
2015
2016
4.3
4.9
1.4
0.6
2.9
3.5
4.7
7.3
1.3
8.6
4.9
5.6
1.6
2.3
3.2
4.5
6.8
8.7
1.7
8.1
5.0
4.7
1.8
2.6
3.4
3.6
8.3
8.4
1.6
10.5
0 2 4 6 8 10 12
Security
Education and Training
Health
Housing
Agriculture and Rural Development
Public Utilites *
Trade and Industry
Transport
General Administration**
Others***
2014
2015
2016
October 25, 2015 16
Malaysia : Budget 2016
Malaysia: Government Operating Expenditure (OE) by Object (MYR b)
Source: Economic Report 2015/2016 (MoF)
** Includes grants to Statutory Fund, public enterprise, International organizations, insurance claims , gratuities and others
66.9
18.2
22.6
6.5
34.3
39.7
1.8
1.3
16.4
11.9
69.1
18.2
24.4
7.4
36.6
26.2
1.2
1.7
15.7
13.0
70.5
19.5
26.6
7.6
36.3
26.1
0.8
0.9
12.9
14.0
0 10 20 30 40 50 60 70 80
Emolument
Pensions and Gratuties
Debt Service Charges
Grants & Transfers to State Govts
Supplies and Services
Subsidies
Asset Acquisition
Refunds and Write-offs
Grants to Statutory Bodies
Other Expenditures **
2014
2015
2016
October 25, 2015 17
Malaysia : Budget 2016
Summary of Budget 2016
Measures Key Measures, Incentives & Allocations
7 Measures to improve GST treatment, w.e.f 1 January 2016
First Zero-rating of all types of controlled medicines under the Poisons List Group A, B, C and D as well as an addition of 95 brands of over-the-counter medicines including treatment for 30 types of illnesses such as cancer, diabetes, hypertension and heart disease. This is a double increase from 4,215 to 8,630 brands of medicines.
Second Zero-rating of the following food items:
1. Soybean-based milk and organic-based milk for infant and children
2. Dhal or what is popularly known as Parpu in the north, such as chickpeas
3. green and white beans
4. Lotus root and water chestnut
5. Mustard seeds
6. Jaggery powder
7. Dried mee kolok
Third To enable small-scale farmers to benefit from the Flat Rate Scheme, the Government proposes that the annual sales turnover threshold for registration under this scheme be reduced from MYR 100,000 to MYR 50,000.
The requirement to maintain records will also be simplified. With the reduction in the threshold, more small-scale farmers will be able to register under the scheme and impose an additional 2% on sales value and this amount can be retained to offset against any GST paid on their input.
Fourth Companies involved in maintenance, repair and overhaul (MRO) activities in the aerospace industry are allowed to participate in the Approved Trader Scheme which relieves them from paying GST on the imported goods.
Fifth GST relief is also provided for reimportation of goods that were exported temporarily for the purpose of promotion, research or exhibition.
Sixth For the oil and gas industry, GST relief is provided on the reimportation of equipment such as equipment for oil and floating platforms that are temporarily exported for the purpose of rental and leasing.
Seventh GST relief is also provided on teaching materials and equipment procured by skills and vocational training providers conducting approved programmes under the National Skills Development Act 2006.
Prepaid card users
Malaysian consumers will receive rebates equivalent to the amount of GST paid, which will be credited directly to their prepaid accounts. This measure will be effective from 1 January 2016 to 31 December 2016.
Source: 2016 Budget Speech
October 25, 2015 18
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
FIRST PRIORITY: STRENGTHENING ECONOMIC RESILIENCE
Measure 1: Boosting Domestic Investment.
Domestic investment activity will be intensified with its contribution to GDP estimated at 26.7% in 2016. It will be driven by the increase in private investment at MYR218.6 b and supported by public investment of MYR 112.2b.
Under this measure, among the projects and initiatives that will be implemented are:
1. Development of the Malaysian Vision Valley covering an area of 108,000 hectares from Nilai to Port Dickson, as announced in the 11MP, with an initial investment forecast of MYR 5b in 2016.
2. Implementation of Cyber City Centre in Cyberjaya with a development cost of almost MYR 11b for a period of five years.
3. Development of an airport township or KLIA Aeropolis in an area covering 1,300 acres which is expected to attract an investment of MYR 7b.
4. Investment of MYR 6.7b by Khazanah Nasional Berhad in nine high-impact domestic projects in sectors such as healthcare, education, tourism as well as communication software and infrastructure.
5. Khazanah Nasional to allocate MYR 500m as venture capital and private equity fund including a tourism capital venture fund of MYR 50m.
6. Investment of MYR 18b estimated in 2016 for the Refinery and Petrochemical Integrated Development Project (RAPID) Complex in Pengerang, Johor.
7. To attract more private investment. Among the projects being implemented are the development of Rubber City, Kedah with an allocation of MYR 320m, Samalaju Industrial Park, Sarawak MYR 142m and Palm Oil Jetty in Sandakan, Sabah MYR 20m.
8. Focus will also be given to chemical, electrical and electronics, machinery and equipment, aerospace and medical devices industries as well as services. For this, MYR 730m is allocated to funds under the Malaysian Investment Development Authority (MIDA).
9. To further promote reinvestment among existing companies in the manufacturing and agriculture sectors whose Reinvestment Allowance incentive has expired, a new incentive that is, Special Reinvestment Allowance, will be provided. The rate of claim is at 60% of the qualifying capital expenditure and is allowed to be set off against 70% of statutory income from year of assessment 2016 to 2018.
Measure 2: Invigorating Capital Market.
To further invigorate the capital market, the Government agrees to implement several initiatives, including tax deduction on issuance costs of Sustainable and Responsible Investments (SRI) sukuk and 20% stamp duty exemption on Shariah-compliant loan instruments to finance the purchase of houses. Other initiatives will be announced later.
Measure 3: Energising Small and Medium Enterprises (SMEs)
SMEs play a key role in developing the business value chain and are expected to contribute 41% of GDP by 2020. For this, the following five initiatives will be undertaken:
1. Provide an additional MYR1 b for the Shariah-compliant SME Financing Scheme until 31 December 2017 with the Government subsidising 2% of the financing profit rate.
2. Allocate MYR 107m for the SME Blueprint to provide funds for entities at various stages of business development.
3. Allocate MYR 60m for the Entrepreneurs Acceleration Scheme, and SME Capacity and Capability Enhancement Scheme.
4. Establish a MYR 200m SME Technology Transformation Fund under the SME Bank to provide soft loans at 4%.
5. MYR 18m to expand the Small Retailer Transformation Programme (TUKAR) and Automotive Workshop Modernisation (ATOM) projects.
Source: 2016 Budget Speech
October 25, 2015 19
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
FIRST PRIORITY: STRENGTHENING ECONOMIC RESILIENCE (Continued)
Measure 4: Improving Infrastructure
The Government will continue to improve logistics infrastructure, including building and improving rail transport network and highways in 2016. These include the highways of :
1. Damansara - Shah Alam
2. Sungai Besi - Ulu Klang
3. Pulau Indah
4. Central Spine Road
To reduce traffic congestion in Kuala Lumpur, MYR 900m is provided to implement the Jalan Tun Razak Traffic Dispersal Project through a strategic public and private partnership.
The Government will also study the feasibility of constructing a coastal highway from Masjid Tanah to Klebang and from Klebang to Jambatan Syed Abdul Aziz in Melaka.
A sum of MYR 42m is provided for the construction of Mukah Airport, Sarawak as well as the upgrading of airports in Kuantan and Kota Bharu.
A feasibility study will be undertaken for the extension of the runway in Batu Berendam Airport in Melaka.
The first Phase of the Ampang LRT line extension project spanning 18.1 kilometres (km) will be ready for use in March 2016. Meanwhile, the LRT extension line from Kelana Jaya to Putra Heights spanning 17.4 km will be ready for commuters from the middle of 2016. Both these projects cost MYR 10b.
The MRT line from Sungai Buloh – Semantan will be ready for commuters in December 2016. Phase 2 of Semantan – Kajang is expected to be completed by mid-2017. These projects covering 51 km are being implemented at a cost of MYR 32b.
The Government will also implement other public transport networks:
1. MRT II project from Sungai Buloh – Serdang – Putrajaya spanning 52 km, with an estimated cost of MYR 28b, will benefit two million people. Construction will commence in the second quarter of 2016 and is expected to be completed by 2022.
2. LRT3 project from Bandar Utama, Damansara – Johan Setia, Klang spanning 36 km, with an estimated cost of MYR 10b, will benefit two million people. Construction will commence in 2016 and is expected to be completed by 2020. Meanwhile, the Government will continue negotiations on the high-speed rail with the Singapore Government.
3. For public bus services, the Rapid Transit Bus (BRT) project at a cost of more than MYR 1.5b and BRT Kota Kinabalu at a cost of almost MYR 1b, will be implemented.
To improve the telecommunication infrastructure, Malaysian Communications and Multimedia Commission (MCMC) will provide MYR 1.2b, for:
1. Four-fold increase in Internet speed from 5 megabyte per second to 20 megabyte per second.
2. National Fiber Backbone Infrastructure
3. High-speed Broadband
4. Undersea cable system
A sum of MYR 250m is allocated for the national broadcasting digitalisation project to enhance audio visual quality and provide value-add to TV content as well as interactive data transactions.
Source: 2016 Budget Speech
October 25, 2015 20
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
FIRST PRIORITY: STRENGTHENING ECONOMIC RESILIENCE (Continued)
Measure 4: Improving Infrastructure (Continued)
The Government will continue with efforts to implement infrastructure development in rural area as follows:
1. MYR 1.4b to build and upgrade 700 km of rural roads nationwide. A sum of MYR 200m is provided for the upgrading of roads in Federal Land Development Authority (FELDA) settlements.
2. MYR 878m for the Rural Electrification Project covering 10,000 houses and MYR 568m for the Rural Water Supply Project to benefit 3,000 houses.
3. MYR 60m for the Social Amenities Programme for drainage projects to mitigate floods. Emphasis will be given to states affected by floods such as Kelantan, Kedah, Terengganu, Pahang, Sabah and Sarawak.
4. As a catalyst for entrepreneurship in rural areas and for rural communities, MYR 70m is allocated for continuation of the Rural Business Challenge (RBC) and Sustainable Rural programmes.
5. MYR 67m is allocated to the MARA Bus Transport Project for operating buses on uneconomic routes in rural areas.
Measure 5: Promote and Strengthen Economic Activity
Tourism: For 2016, the Government targets 30.5 million tourists, which is expected to contribute MYR 103b to the economy. The measures are:
1. A sum of MYR 1.2b is allocated to the Ministry of Tourism and Culture.
2. Online visa applications will be implemented beginning with China, India, Myanmar, Nepal, Sri Lanka, the US and Canada.
3. To facilitate tourists to visit Malaysia, the Government will implement E-Visa by mid-2016.
4. 100% income tax exemption on statutory income for tour operators will be extended from year of assessment 2016 until 2018.
Agriculture sector: MYR 5.3b is allocated to the Ministry of Agriculture and Agro-based Industry. The programmes for 2016 are:
1. MYR 450m for various high-impact programmes such as fruit and vegetable cultivation, matching and research grants for herbal products as well as fish cage farming.
2. MYR 180m to upgrade drainage and irrigation infrastructure in the Integrated Agricultural Development areas.
3. MYR 190m to FAMA, for the Price Reduction Programme; increase farmers’ markets by an additional 50; and establish 150 new Agrobazaar Rakyat 1Malaysia (ABR1M). Of the goods sold in ABR1M, 40% are fresh food such as fish and vegetables with prices expected to be lower between 5% and 30% compared with market prices.
4. MYR 90m is allocated for:
a. Youth Agropreneur Development Programme in the form of in-kind grants
b. Agriculture Entrepreneurs Financing Fund
c. Rebranding MARDI, Department of Veterinary Services, Department of Agriculture and the Department of Fisheries
d. To implement the Multiplier Farmer Project for breeding cattle and free-range chicken.
Source: 2016 Budget Speech
October 25, 2015 21
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
FIRST PRIORITY: STRENGTHENING ECONOMIC RESILIENCE (Continued)
Measure 5: Promote and Strengthen Economic Activity (Continued)
The Government proposes the tax incentive for food production be extended until 2020. The following incentives will be provided:
1. Companies that invest in subsidiaries that undertake food production project will be given tax deduction equivalent to the amount invested.
2. Companies that undertake new food production projects will be given 100% income tax exemption for 10 years.
3. Existing companies undertaking project expansion will be provided with the same incentive for five years.
The scope of the incentive will be widen to include rearing deer, cultivation of mushroom, coconut, seaweed, honey bees and stingless honey bees and planting animal feed crops such as sweet potato and tapioca.
The Government will intensify support to strengthen exports.
1. A sum of MYR 235m is allocated to MATRADE for 1Malaysia Promotion Programme, Services Export Fund and Export Promotion Fund.
2. MATRADE and SME Corp will also increase the capacity of SMEs and mid-tier companies to export goods and services overseas.
3. To diversify the use of foreign currency in trade transactions, Bank Negara Malaysia provides the Ringgit-Renminbi credit swap facility for local banks.
4. SMEs are eligible to claim income tax exemption of 10% or 15% of the value of increase in exports. To further increase exports, SMEs are given flexibility to comply with the value-add condition that is from 30% to 20% and from 50% to 40% for manufactured products. This flexibility will be given for years of assessment 2016 to 2018.
5. To encourage evaluation and international standards compliance services to be conducted in the country, the Government will provide incentives for the establishment of Independent Conformity Assessment Bodies (ICABs).
Source: 2016 Budget Speech
October 25, 2015 22
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
SECOND PRIORITY: INCREASING PRODUCTIVITY, INNOVATION AND GREEN TECHNOLOGY.
Measure 1: Accelerating Innovation and Entrepreneurship
MYR 1.5b is allocated to the Ministry of Science, Technology and Innovation (MOSTI). The year 2016 will be declared as Malaysia Commercialisation Year towards spurring commercialisation of R&D products by local research institutions. The following initiatives will be implemented:
1. SMEs that incur expenditure on R&D projects up to MYR 50,000 for each year of assessment are eligible to claim double tax deduction automatically. This facilitation is provided for the years of assessment 2016 to 2018.
2. MYR 100m to Malaysian Innovation Agency (AIM)
3. MYR 200m under the Funding Scheme for Technology and Innovation Acceleration by Malaysia Debt Ventures Berhad.
4. MYR 35m to MaGIC as a Leading Regional Entrepreneurship and Innovation Hub, including MYR 10m as initial allocation for the Corporate Entrepreneurs Responsibility Fund.
5. MYR 30m for several youth entrepreneurship programmes such as Global Entrepreneurship Community, BAHTERA, GREAT, 1MET, National Innovation Competition and a Pilot Coding Project in schools.
6. To accelerate demand-driven innovation activities in 2016, the Government will allocate MYR 50m for a Public-Private Research Network.
Measure 2: Leveraging Advancements in Technology
To enhance the use of technology in the construction sector, the Government will promote the use of Industrialised Building System (IBS). For this, an IBS Promotion Fund of MYR 500m will be established through the SME Bank to provide soft loans to developers and contractors in category G5 and below.
Measure 3: Inculcating Green Technology
The Ministry of Energy, Green Technology and Water will implement various projects including providing clean water supply by building water treatment plants with an allocation of MYR 877m.
A sum of MYR 515m is allocated to ensure the reliability of electricity supply in Sabah.
The Government targets to reduce the intensity of greenhouse gas emissions (GHGs) to 40% of GDP in 2020 through:
1. MYR 45m for the implementation of an Electricity Mobility Action Plan including energy audit process.
2. Sustainable Energy Development Authority (SEDA) will offer a quota of 100 megawatts per year under the Net Energy Metering Scheme to encourage the use of solar photovoltaics.
3. Extend the implementation period of the Green Technology Financing Scheme until 31 December 2017 with a fund of MYR1.2 b.
Source: 2016 Budget Speech
October 25, 2015 23
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
THIRD PRIORITY: EMPOWERING HUMAN CAPITAL
Measure 1: Strengthening Malaysia’s Quality of Education.
Under the Malaysia Education Blueprint 2013 – 2025, a sum of MYR 41.3b will be allocated in 2016.
Among other, the Government will build:
30 primary schools;
27 secondary schools;
Four MARA Junior Science Colleges (MRSM) will be built in Sik, Kedah, Ketereh and Tanah Merah, Kelantan and Bagan Datoh, Perak; and
Five fully residential schools in Alor Gajah, Melaka; Pendang, Kedah; Segamat and Ledang, Johor; and Jerantut, Pahang.
A sum of MYR 44.6m is allocated to implement various programmes in, 113 pre-school classes in schools nationwide.
To increase Proficiency in Bahasa Malaysia and English, a sum of MYR 135m is allocated for upholding Bahasa Malaysia and strengthening English Language.
Given the importance of the English Language to face current global competition, another two initiatives, namely the Dual Language Programme and Highly Immersive Programme will be implemented as an option at a cost MYR 38.5m. In this respect, 300 schools have been identified as a pilot project.
To ease the burden of schooling expenses faced by parents, the MYR 100 schooling assistance will be continued. From January 2016, it will be targeted to students from households with monthly income of MYR 3,000 and below. This will benefit 3.5 million students through an allocation of MYR 350mn.
The supplementary food programme involving 550,000 students from poor families listed in e-Kasih will be enhanced.
Previously, the programme only provided meals during recess, but it will now be expanded to provide breakfast with an additional cost of MYR 173m. The overall cost for the programme is MYR 423m.
The Government will continue to provide allocation to develop and maintain education facilities for national schools, national-type Chinese schools, national-type Tamil schools, religious schools, fully residential schools, national religious assisted schools, MARA Junior Science Colleges, registered Sekolah Pondok and national-type Chinese secondary schools or Conforming schools which adopt the national curriculum, with a total allocation of MYR 500m.
Measure 2: Strengthening Higher Education
Under this measure, the scholarship programmes will be continued with allocations as follows:
MYR 1.65b through Public Service Department;
MYR 288m through Ministry of Education;
MYR 250m through Ministry of Higher Education; and
MYR 258m through Ministry of Health.
To encourage the rakyat to pursue higher education, the maximum relief on tuition fees for an individual taxpayer is increased to MYR 7,000 from MYR 5,000 a year.
This will be complemented with the continuation of the MYR250 1Malaysia Book Voucher Programme for 1.2 million students. To prevent misuse of the voucher, the redemption will only be allowed in designated book shops.
Source: 2016 Budget Speech
October 25, 2015 24
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
THIRD PRIORITY: EMPOWERING HUMAN CAPITAL (Continued)
Measure 3: Transforming Technical and Vocational Education and Training (TVET).
To enhance employees’ income, the target is to hit 60% of 1.5 million new jobs by 2020 are for workers with TVET skills. A sum of MYR 4.8b is allocated to 545 TVET institutions.
The Ministry of International Trade and Industry (MITI) will establish an Industrial Skills Committee to coordinate TVET programmes in collaboration with industries.
More than 330,000 trainees will benefit through programmes including the following:
MYR 585mn for TVET training equipment at polytechnics, community colleges, MARA Skills Institutes, National Youth Skills Institutes, Industrial Training Institutes, GiatMARA and vocational colleges;
MYR 350m to finance various TVET training programmes under the Skills Development Fund Corporation; and
MYR 80m to establish a Tourism Academy at Community College in Kota Kinabalu and Vocational College in Sandakan as well as Industrial Training Institute of Serian, Sarawak.
Measure 4: Empowering Youth, Community and NGOs.
MYR 930m is allocated to the Ministry of Youth and Sports for the following initiatives:
a. MYR 280m for technical and vocational training in National Youth Skills Training Institutes (IKBN) and National Youth Advance Skills Training Institutes (IKTBN);
b. MYR 50m to enhance youth participation in economic and entrepreneurial activities;
c. MYR 145m to prepare athletes for the 29th SEA Games and the 9th ASEAN Para Games in 2017 in Kuala Lumpur;
d. MYR 75m to produce world-class champions under the Preparation of Elite Athletes (Podium Programme);
e. MYR 22m to build two sports complexes in Bagan Datoh and Kuantan; and
f. MYR 360m to improve the National Service Training Programme (PLKN) for 20,000 trainees. The new curriculum will include creative thinking and technical skills.
MYR 160m is allocated for NGOs to implement programmes based on community development, solidarity, social welfare, health and safety.
Measure 5: Empower human capital through a quality workforce.
To improve the employability of the workforce, the following programmes will be implemented:
1. Allocate 30% of the Human Resources Development Fund (HRDF) to implement training programmes to meet the needs of local industries in Sabah and Sarawak as well as an Outplacement Centre to retrain retrenched workers; and
2. Train an additional 15,000 participants under the 1Malaysia Training Scheme (SL1M) with an allocation of MYR 250m which will be fully financed by GLCs.
To improve the management of foreign workers, a sum of MYR 77m will be provided by PSMB to implement programmes such as Train & Replace in selected fields such as hospitality, shipping and transport.
The Government remains committed to achieving at least 30% participation of women in decision-making positions in the public and private sectors. This includes at the board of directors level. The Government will continue to monitor the achievement of this policy.
Source: 2016 Budget Speech
October 25, 2015 25
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
FOURTH PRIORITY: ADVANCING BUMIPUTERA AGENDA
Measure 1: Empowering Bumiputera
A sum of MYR 150m is allocated to the Bumiputera Agenda Unit (TERAJU) to implement various
programmes including Bumiputera Entrepreneurs Startup Scheme and High Performing
Bumiputera Companies Programme.
A sum of MYR 150m is allocated to the Bumiputera Education Steering Foundation to
implement Peneraju Tunas, Peneraju Profesional as well as Peneraju Skil dan Iltizam
programmes.
Majlis Amanah Rakyat (MARA) is allocated MYR 3.7b for expenditure, including the sponsorship
of 72,000 Bumiputera students to continue studies at tertiary level.
To increase equity ownership and strengthen Bumiputera entrepreneurship and businesses, the
following initiatives are allocated with a sum of:
1. MYR 400m to National Equity Fund Limited (EKUINAS)
2. MYR 250m to Perbadanan Usahawan Nasional Berhad (PUNB)
3. MYR 150m to Pelaburan Hartanah Berhad
4. MYR 100m loan to UDA Holdings for development of Kampung Baru, Kuala Lumpur.
Measure 2: Intensifying
Development in Sabah
and Sarawak
The following development agenda will be implemented in Sabah and Sarawak:
1. Sarawak Pan-Borneo Highway spanning 1,090-km is expected to be completed in 2021
with an estimated cost of MYR 16.b. In Sabah, construction work on the 706-km
highway from Sindumin to Tawau will commence in 2016 with an estimated cost of
MYR 12.8b. The Pan-Borneo Highway will be toll-free;
2. Air transportation is one of the main modes of transportation for people in the
interior areas of Sabah and Sarawak as well as Labuan. Thus, the domestic air
transportation for economy class passengers on Rural Air Services (RAS) routes is
exempted from GST
3. As a new programme, MYR70m is provided through Bank Simpanan Nasional in
collaboration with the state government of Sabah and Sarawak for interest free loans
for the purpose of building longhouses with a maximum loan up to MYR50,000 for
every unit in the longhouse;
4. MYR 70m subsidy for hill paddy fertiliser to increase food supply and income of hill
paddy farmers in Sabah and Sarawak. The programme will cover 65,000 hectares of
crop areas in Sarawak and 11,000 hectares in Sabah.
5. MYR 260m is provided to ensure price uniformity of selected items nationwide
through the 1 Price 1Sarawak and 1 Price 1Sabah programmes.
6. MYR115m is allocated to the Special Programme for Bumiputera in Sabah and
Sarawak, such as for native customary rights, including mapping procedures and
customary land surveys as well as for building native courts. For native customary
rights, MYR20m is provided for land surveys in Sabah and MYR30m in Sarawak.
7. Enhance services of 1Malaysia Mobile Clinics in the interior areas of Sabah and
Sarawak including procurement of new boats and vehicles.
Source: 2016 Budget Speech
October 25, 2015 26
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
FIFTH PRIORITY: EASING COST OF LIVING OF THE RAKYAT
Measure 1: Increasing the quality of life of B40 households
TEKUN will provide MYR600m of which MYR 500m is for Bumiputera entrepreneurs and
MYR100m for 10,000 Indian entrepreneurs through the Indian Community Development
Scheme. In addition, SME bank will provide MYR50m to assist small-scale Indian entrepreneurs;
An additional MYR 200m to Amanah Ikhtiar Malaysia (AIM) for its micro-financing facility to B40
households;
MYR100m is provided under the Socio-Economic Development of Indian Community Programme
in collaboration between NGOs and private skills training institutes;
An additional MYR 90m is provided for microcredit to Chinese hawkers and petty traders
including MYR50m for KOJADI; and MYR40 million is allocated to implement infrastructure
projects and soft loans programme for residents in Chinese New Villages for land premium
payments and repairing houses;
MYR 50m is allocated to the Ministry of Rural and Regional Development (KKLW) for the Career
and Skills Training Programme as well as the Income Increment Programme. Through these
programmes, participants will be able to benefit from skill training and assistance in the form
of assets and raw materials; and
MYR 100m is allocated to private skills training institutions and NGOs to enhance skills of the
B40 group to help them get jobs or start business.
The Government is very concerned about the welfare and progress of the Orang Asli
community. For this, MYR300m is allocated as follows:
1. MYR 80 million for the development of Integrated Villages including in Sungai Siput,
Perak which involves the construction of connecting roads, provision of electricity
and treated water;
2. MYR 45m for supplementary food assistance, pocket money and school transport
fares; and
3. MYR 25m for development of rubber and oil palm plantations as well as cash crops
through the Orang Asli Economic Development Project.
For the B40 group, the eRezeki and eUsahawan programmes will be expanded nationwide to
increase employment opportunities and raise their income. The Government targets 100,000
people from B40 to benefit from the programme through an allocation of MYR100m provided
by the Ministry of Communication and Multimedia.
For Paddy Farmers, Smallholders and Rubber Tappers, this Budget provides MYR 852m to the
Rubber Industry Smallholders Development Authority (RISDA) and Federal Land Consolidation
and Rehabilitation Authority (FELCRA) to implement various income and productivity
enhancement programmes.
The Government intends to improve the rubber production incentive (IPG). For this, the IPG
activation price of SMR20 FOB is raised from MYR 4.60 to MYR 5.50 per kg as well as from MYR
1.75 to MYR 2.20 per kg at farm price for scrap rubber or cuplumps.
1. As an illustration, based on the average production of 250 kg for each hectare per
month, smallholders with two hectares are expected to receive income of MYR 1,000
per month, at a market price of scrap rubber of MYR2 per kg.
2. Now with an additional payment of MYR 0.20 per kg from IPG, the overall income will
be MYR1,100 per month.
3. The improvement in IPG is expected to raise the income of 300,000 rubber
smallholders with an allocation of MYR 200m.
Source: 2016 Budget Speech
October 25, 2015 27
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
FIFTH PRIORITY: EASING COST OF LIVING OF THE RAKYAT (Continued)
Measure 1: Increasing the quality of life of B40 households (Continued)
To encourage paddy farmers to increase the quality and quantity of harvests, the Government
will implement a paddy grading initiative and improve the paddy price subsidy scheme or SSHP
from 1 January 2016.
1. Paddy grading is based on standardisation of paddy prices at MYR 1,200 per metric
tonne. To complement this initiative, the Government will also raise the rate of SSHP
from MYR248.10 to MYR300 for every metric tonne.
2. This means that if a farmer produces six metric tonnes of paddy that meets the quality with a 20% discount, he is able to receive sales of MYR 5,760.
3. In addition, the farmer is also entitled to receive an additional income through SSHP with total income increasing from MYR 1,190 to MYR 1,440.
4. Overall, the farmer will receive MYR 7,200 for each harvest. A total of 155,000 farmers will benefit from the improved scheme.
Measure 2: Providing Affordable Houses
The 2016 Budget will continue with various house ownership programmes for all levels of income as follows:
1. PR1MA to build 175,000 houses which will be sold at 20% below market prices, with an allocation of MYR 1.6b. A total of 10,000 units are expected to be completed next year.
2. SPNB will build 10,000 units of Rumah Mesra Rakyat with a subsidy of MYR 20,000 for each house through an allocation of MYR 200m
3. Build 100,000 houses, priced between MYR 90,000 and MYR 300,000, under Perumahan Penjawat Awam 1 Malaysia (PPA1M) by 2018. A Facilitation Fund of up to 25% of development cost is provided.
4. Build 22,300 units of apartments and 9,800 units of terrace houses under the People's Housing Programme (PPR) with an allocation of MYR 863m to KPKT.
5. Establish a First House Deposit Financing Scheme under KPKT to assist first-time house buyers of affordable houses to pay the deposit. For this, MYR 200m is allocated.
6. Build 5,000 units of PR1MA and PPA1M houses in 10 locations in the vicinity of LRT and monorail stations, including in Pandan Jaya, Sentul and Titiwangsa.
7. Allocate MYR60m to the Department of Orang Asli Development particularly for building houses for the community.
8. Build houses for the second generation of settlers comprising 20,000 units by FELDA, 2,000 units by FELCRA and 2,000 units by RISDA. For houses built by FELDA, the maximum price is reduced to MYR 70,000 from MYR 90,000 previously.
9. GLCs to build affordable houses in the vicinity of the MRT station in Bandar Kwasa Damansara. Kwasa Land owned by EPF will build 800 units and Sime Darby Property 4,600 units.
10. Allocate MYR 40m to KPKT for reviving abandoned low and medium-cost private housing projects; In addition, exemption on stamp duty is given on financing instruments to contractors who revive the project as well as the original purchaser of the abandoned house.
Source: 2016 Budget Speech
October 25, 2015 28
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
FIFTH PRIORITY: EASING COST OF LIVING OF THE RAKYAT (Continued)
Measure 2: Providing Affordable Houses (Continued)
To provide a comfortable living environment for the people, the following measures will be implemented:
1. MYR 150m to build and repair 11,000 dilapidated houses in rural areas by KKLW; and
2. MYR 155 million for maintenance of low-cost public housing and 1Malaysia Maintenance Fund by KPKT. Among others, the Fund provides 100% financing for the repair of lifts, railings as well as rewiring.
Strengthen Technology Commercialisation Platform Programme by Agensi Inovasi Malaysia with an additional allocation of MYR 50m.
Measure 3: Quality Healthcare Services
Among the projects for health services that will be implemented are:
1. Building five new hospitals in Pasir Gudang, Kemaman, Pendang, Maran and Cyberjaya.
2. The MYR 848m Kuala Lumpur Women and Children’s Hospital will commence operations in October 2016.
3. Redevelopment of Kajang Hospital.
4. Provide MYR 260m to build and upgrade rural clinics, health clinics, dental clinics as well as quarters nationwide.
5. Allocate MYR 52m for operating the existing 328 1Malaysia clinics and establishing 33 new ones.
6. Allocate MYR 72m to provide medical assistance, including haemodialysis, which is expected to benefit nearly 10,000 poor patients.
7. MYR 4.6b will be allocated for the supply of medicines, consumables, vaccines and reagents to all Government hospitals and clinics.
Beginning 1 January 2016, the Government will impose full medical charges on non-citizens.
Measure 4: Ensuring the Welfare of the Less Fortunate and Persons with Disabilities (PWD)
The Government will continue to strengthen the social safety net system with an allocation of almost MYR2b to the Ministry of Women, Family and Community Development to assist PWD, the elderly and poor families. For this, the following programmes will be implemented:
1. Allocate MYR 445m for monthly allowance of MYR 350 for employed PWD; assistance of MYR200 for unemployed PWD; and assistance of MYR 300 for taking care of bedridden PWD. The assistance will benefit nearly 150,000 PWD.
2. MYR 100m is allocated to establish an additional 20 Community-Based Rehabilitation Centres.
3. MYR 662m is allocated for monthly assistance of MYR 100 to MYR 450 for children from poor families and MYR 300 for poor senior citizens.
Last year, the nation faced two major disasters, that is, massive floods at end-2014 and a major earthquake in Ranau, Sabah. To strengthen natural disaster management, a sum of MYR 180m will be provided including for establishing the National Disaster Management Agency under the Prime Minister's Department.
A sum of MYR 730m is provided for the Flood Mitigation Projects nationwide. Meanwhile, MYR 60m is allocated to implement the National Flood Forecasting and Warning Programme and to develop a National Earthquake and Tsunami Sub-Centre in Sabah.
Source: 2016 Budget Speech
October 25, 2015 29
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
FIFTH PRIORITY: EASING COST OF LIVING OF THE RAKYAT (Continued)
Measure 4: Ensuring the Welfare of the Less Fortunate and Persons with Disabilities (PWD) (Continued)
The Government is committed to implementing capacity-building plans for the Malaysian Armed Forces (ATM) in stages.
1. In this regard, MYR 17.3b is allocated to the Ministry of Defence. This includes the procurement of six Littoral Combatant Ships, Very Short Range Air Defence weapons system, armoured vehicles and the A-400M Airbus. ATM will be equipped with the latest technology including the use of Unmanned Airborne System to improve Intelligence, Surveillance and Reconnaissance capacity.
2. A sum of MYR 523m is allocated for the development of an ESSCOM armed forces camp in FELDA Sahabat, Lahad Datu, Sabah.
3. In appreciation of the contribution of our heroes, a sum of MYR 160m is provided to build 4,000 quarters for ATM personnel.
4. In addition, the Armed Forces Fund Board (LTAT) plans to build 2,000 units of affordable houses for armed forces personnel beginning 2016.
5. The Malaysian Maritime Enforcement Agency (APMM) is allocated MYR 864m, among others, for the acquisition of Offshore Patrol Vessels and patrol boats.
To enhance safety and security in the country as well as to continuously reduce crime rate, MYR 13.1b is allocated. Among the initiatives that will be implemented:
1. MYR 155m for building two new district police headquarters (IPD) in Lawas, Sarawak and Kota Kinabalu, Sabah while 10 IPD and five police stations are under construction.
2. Plans to build 2,000 units of affordable houses for members of Polis Diraja Malaysia (PDRM), among them, in Rawang while other areas are being identified.
3. MYR 36m is allocated to build offices, quarters and upgrading of immigration detention depots.
4. MYR 50m for enhancing security measures in prisons; and MYR20m for the Safe City Programme in 60 black areas, among others, to provide pedestrian walkways and lighting in selected areas.
5. An additional 500 motorcycles and 500 cars for the patrolling unit at PDRM with a total allocation of MYR 35m.
To enhance integrity and reduce leakages as well as corruption, Malaysian Anti-Corruption Commission (MACC) will be strengthened with relevant programmes and training. With this, the number of MACC officers will be increased as required.
To appreciate the contributions of civil servants, the Government agrees to:
1. Provide benefit of salary adjustment equivalent to one annual increment according to grade, which will benefit 1.6 million civil servants with an allocation of MYR1.1b;
2. Improve 252 schemes of service which will benefit 406,000 civil servants;
3. Set a minimum starting salary in the civil service at MYR1,200 a month, which will benefit 60,000 civil servants;
4. Set the minimum pension rate at MYR950 a month for pensioners with at least 25 years of service, which will benefit almost 50,000 pensioners; and
5. Offer permanent post to contract of service officers who have at least 15 years of service. This will benefit 43,000 contract officers.
6. All these measures will be implemented effective from 1 July 2016 with a total allocation of MYR1.4b.
Source: 2016 Budget Speech
October 25, 2015 30
Malaysia : Budget 2016
Summary of Budget 2016 (continued)
Measures Key Measures, Incentives & Allocations
FIFTH PRIORITY: EASING COST OF LIVING OF THE RAKYAT (Continued)
Measure 4: Ensuring the Welfare of the Less Fortunate and Persons with Disabilities (PWD) (Continued)
To fulfil the pledge of reducing the cost of living for the rakyat, BR1M will be continued. BR1M will be increased in 2016 as follows:
1. A new category will be introduced for all participants in the e-Kasih database, with monthly income below MYR 1,000, who will now receive BR1M of MYR 1,050.
2. For households with monthly income of MYR3,000 and below, BR1M will be increased from MYR 950 to MYR 1,000.
3. For households with monthly income between MYR 3,001 and MYR 4,000, BR1M will be raised from MYR 750 to MYR800.
4. The Bereavement Scheme of MYR 1,000 will be continued.
5. For single individuals aged 21 and above with monthly income not exceeding MYR 2,000, the assistance will be increased from MYR 350 to MYR 400.
6. In aggregate, BR1M assistance is expected to benefit 4.7 million households and 2.7 million single individuals with an allocation of MYR 5.9b.
The Government will focus on another major group known as M40. M40 denotes households with monthly income ranging between MYR 3,860 and MYR 8,320. However, this definition of M40 will be further reviewed from time to time. In this respect:
1. The tax relief for each child below 18 years of age is increased from MYR1,000 to MYR 2,000 from year of assessment 2016.
2. The tax relief for individual taxpayer whose spouse has no income is increased from MYR 3,000 to MYR 4,000.
3. Currently, individual taxpayers are given tax relief up to MYR 5,000 per year for medical treatment and care of parents who are ill. Tax relief for children who provide for their parents is given total tax relief of MYR 1,500 for the mother and MYR1,500 for the father. The relief is subject to the condition that each parent does not have income exceeding MYR 2,000 a month and must be 60 years and above.
4. Increase the tax relief from MYR 6,000 to MYR 8,000 for each child above the age of 18 years who is studying at local or foreign institutions of higher learning, from year of assessment 2016.
5. Increase the tax relief from MYR 6,000 to MYR 8,000 for disabled child above the age of 18 years who is studying at local or foreign institutions of higher learning, from year of assessment 2016. This means that if the disabled child continues his or her education in local or foreign institutions, the total relief allowable is MYR 14,000.
In addition to enable more employees to benefit from Social Security Organisation (SOCSO), the eligibility for mandatory contribution is increased from a monthly salary of MYR 3,000 to MYR 4,000. This adjustment will benefit 500,000 employees. Upon the death of the contributor, during the term of employment, the next of kin will receive a monthly payment of up to 90% of his last drawn monthly salary.
Effective from 1 July 2016, the national minimum wage will be increased from MYR 900 to MYR 1,000 per month for Peninsular Malaysia and from MYR 800 to MYR 920 for Sabah, Sarawak and the Federal Territory of Labuan. The new minimum wage will be implemented in all sectors except for domestic services or domestic maids.
To reduce the burden of rising cost of living, the Government agrees to provide a special assistance of MYR 500 to all civil servants. For the 700,000 Government pensioners, a special payment of MYR 250 will be provided. Both payments totaling almost MYR1b will be made in January 2016.
Source: 2016 Budget Speech
October 25, 2015 31
Malaysia : Budget 2016
Research Offices
REGIONAL
Sadiq CURRIMBHOY
Regional Head, Research & Economics
(65) 6231 5836 [email protected]
WONG Chew Hann, CA
Regional Head of Institutional Research
(603) 2297 8686 [email protected]
ONG Seng Yeow
Regional Head of Retail Research
(65) 6231 5839 [email protected]
TAN Sin Mui
Director of Research
(65) 6231 5849 [email protected]
ECONOMICS
Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected]
Luz LORENZO Philippines (63) 2 849 8836 [email protected]
Tim LEELAHAPHAN Thailand (66) 2658 6300 ext 1420 [email protected]
JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682
STRATEGY
Sadiq CURRIMBHOY
Global Strategist
(65) 6231 5836 [email protected]
Willie CHAN
Hong Kong / Regional
(852) 2268 0631 [email protected]
MALAYSIA
WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy
Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance
LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas Services- Regional
ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional
Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem
YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media
TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos
WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property
LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove • Ports • Shipping
CHAI Li Shin, CFA (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure
Ivan YAP (603) 2297 8612 [email protected] • Automotive • Semiconductor • Technology
Kevin WONG (603) 2082 6824 [email protected] • REITs • Consumer Discretionary
LIEW Wei Han
(603) 2297 8676 [email protected] • Consumer Staples
LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]
Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]
Cheah Chong Ling (603) 2297 8767 [email protected]
HONG KONG / CHINA
Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional
Benjamin HO (852) 2268 0632 [email protected] • Consumer & Auto
Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables
Ka Leong LO, CFA (852) 2268 0630 [email protected] • Consumer Discretionary & Auto
Mitchell KIM (852) 2268 0634 [email protected] • Internet & Telcos
Osbert TANG, CFA (86) 21 5096 8370 [email protected] • Transport & Industrials
Stefan CHANG, CFA (852) 2268 0675 [email protected] • Technology
Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials - Regional
Warren LAU (852) 2268 0644 [email protected] • Technology – Regional
INDIA
Jigar SHAH Head of Research
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• Oil & Gas • Automobile • Cement
Anubhav GUPTA
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• Metal & Mining • Capital Goods • Property
Vishal MODI
(91) 22 6623 2607 [email protected]
• Banking & Financials
Abhijeet KUNDU
(91) 22 6623 2628 [email protected]
• Consumer
Neerav DALAL
(91) 22 6623 2606 [email protected]
• Software Technology • Telcos
SINGAPORE
Gregory YAP (65) 6231 5848 [email protected] • SMID Caps • Technology & Manufacturing • Telcos
YEAK Chee Keong, CFA (65) 6231 5842 [email protected] • Offshore & Marine
Derrick HENG, CFA (65) 6231 5843 [email protected] • Transport • Property • REITs (Office)
Joshua TAN (65) 6231 5850 [email protected] • REITs (Retail, Industrial)
John CHEONG (65) 6231 5845 [email protected] • Small & Mid Caps • Healthcare
TRUONG Thanh Hang (65) 6231 5847 [email protected] • Small & Mid Caps
INDONESIA
Isnaputra ISKANDAR Head of Research (62) 21 2557 1129 [email protected] • Strategy • Metals & Mining • Cement
Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance
Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property
Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infra • Construction • Transport• Telcos
Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail
Adhi TASMIN (62) 21 2557 1209 [email protected] • Plantations
PHILIPPINES
Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy • Utilities • Conglomerates • Telcos
Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement
Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics
Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction
Michael BENGSON (63) 2 849 8840 [email protected] • Conglomerates
Jaclyn JIMENEZ (63) 2 849 8842 [email protected] • Consumer
Arabelle MAGHIRANG (63) 2 849 8838 [email protected] • Banks
THAILAND
Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer • Materials • Ind. Estates
Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector • Transport
Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]
Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy
Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy
Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel
Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce
Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem
Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property
Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap
VIETNAM
LE Hong Lien, ACCA Head of Institutional Research (84) 8 44 555 888 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities
THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 8 44 555 888 x 8180 [email protected] • Real Estate • Construction • Materials
Le Nguyen Nhat Chuyen (84) 8 44 555 888 x 8082 [email protected] • Oil & Gas
NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking
TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction
PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery
NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage
TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas
October 25, 2015 32
Malaysia : Budget 2016
APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS
This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.
This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.
Malaysia
Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.
Singapore
This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.
Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.
US
This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.
UK
This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.
October 25, 2015 33
Malaysia : Budget 2016
Disclosure of Interest
Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.
Singapore: As of 25 October 2015, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of 25 October 2015, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.
OTHERS
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Definition of Ratings
Maybank Kim Eng Research uses the following rating system
BUY Return is expected to be above 10% in the next 12 months (excluding dividends)
HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)
SELL Return is expected to be below -10% in the next 12 months (excluding dividends)
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.
DISCLOSURES
Legal Entities Disclosures
Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.
October 25, 2015 34
Malaysia : Budget 2016
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Malaysia Rommel Jacob [email protected] Tel: (603) 2717 5152
Thailand Tanasak Krishnasreni [email protected] Tel: (66)2 658 6820
Indonesia Harianto Liong [email protected] Tel: (62) 21 2557 1177
New York Andrew Dacey [email protected] Tel: (212) 688 2956
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Tel: (84) 44 555 888 x8079
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