Malaysia Budget 2016 bats for domestic investments, sops for capital markets & SMEs to drive growth

Emblem of Malaysia, the Petronas Twin Towers

On the back of volatile oil prices, soft regional economy and financial scandals revolving a government investment firm that led to a depressed currency, the Malaysian government has announced its national budget for 2016 on Friday, noting its top priorities to strengthen the local economy and push forth national productivity, innovation and green technology.

In his announcement speech for Budget 2016, Prime Minister Najib Razak said, the budget and future budgets will be premised on striking a balance between the “capital economy and people economy”.

“In addition, we need to achieve an inclusive and sustainable growth as well as build a competitive, progressive and morally strong nation, with a society that is united,” he said.

The 2016 Budget 2016 allocates MYR267.2 billion, compared to the revised MYR260.7 billion for 2015. Of the total, MRY215.2 billion will be channeled to operating expenditure and MYR52 billion for development expenditure.

Domestic investment

Malaysia will intensify its domestic investment activity in 2016, raising the gross domestic product (GDP) contribution to an estimated 26.7 per cent. This will be driven by the increase in private investment at MYR218.6 billion, supported by public investment of MYR112.2 billion.

Among the projects and initiatives to be implemented include developing the Malaysian Vision Valley, covering an area of 108,000 ha from Nilai to Port Dickson, as announced in the 11th Malaysia Plan. This will have an initial investment forecast of MYR5 billion in 2016.

The government will also see to the implementation of the Cyber City Centre in Cyberjaya, with a development cost of almost MYR11 billion for a period of five years.

There will also be a development of an airport township, known as KLIA Aeropolis, expected to attract an investment of MYR7 billion.

As for the Petrochemical Integrated Development Project (RAPID) Complex in Pengerang, Johor, the government will commit an investment of MYR18 billion.

To boost private investment, other projects, such as the Rubber City in Kedah, Samalaju Industrial Park in Sarawak and Palm Oil Jetty in Sabah will have allocations of MYR320 million, MYR142 million and MYR20 million, respectively.

The government will be focusing some MYR370 million worth of investments in these areas as well – chemical, electrical and electronics, machinery and equipment, aerospace, medical devices industries, and services.

Najib also noted that the government intends to encourage reinvestment among existing companies in the manufacturing and agriculture sectors, with a new incentive called the Special Reinvestment Allowance to be provided, in which the rate of claim is 60 per cent of the qualifying capital expenditure.

Invigorating the capital markets

For the capital markets, the government agrees to implement several initiatives, including tax deduction on issuance costs of Sustainable and Responsible Investments sukuk (Islamic bond) and 20 per cent stamp duty exemption on Shariah-compliant loan instruments to finance the purchase of houses. The prime minister noted that more initiatives were on the anvil.

Enabling SME growth

Not forgetting the small and medium enterprises (SMEs) that are expected to contribute 41 per cent of the nation’s GDP by 2020, the government will be providing an additional MYR1 billion for the Shariah-compliant SME Financing Scheme until December 31, 2017, with a subsidy of 2 per cent of the financing profit rate.

A sum of MYR107 million will also be allocated for the SME Blueprint to provide funds for entities at various stages of business development, while MYR60 million is planned for the Entrepreneurs Acceleration Scheme and SME Capacity and Capability Enhancement Scheme.

A MYR200-million SME Technology Transformation Fund under the SME Bank will also be established, for the provision of soft loans at 4 per cent.

Lastly, the government will allocate MYR18 million to expand the Small Retailer Transformation Programme, and Automotive Workshop Modernisation projects.

On a separate subject, the prime minister noted that Malaysia has signed 13 free trade agreements comprising six regional agreements through Asean and seven bilateral agreements.

“As an open economy, with total trade accounting for about 150 per cent of GDP, the government has agreed in principle to the Trans-Pacific Partnership Agreement (TPPA). However, the final decision will be made by the Parliament,” he said.

 

Also read:

Malaysia Budget 2016: Measures to boost revenue, productivity and support SMEs

PREVIEW-Malaysia’s Najib faces budget test amid oil slump and graft scandal

Malaysia’s Khazanah announces $1.57b domestic investments to boost local economy

Malaysia to promote private financing for R&D, commercialisation, innovation: 11th Malaysia Plan

Startups see positives in Malaysia’s 2015 budget

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.