The Malaysian government has allocated RM1 billion ($242.02 million) as a special incentive package for the high value-added technology sector in a bid to drive new investments into the country as it grapples to recover its pandemic-hit economy.
The fund aims to support research and development (R&D) investment in aerospace as well as electronic clusters such as in Batu Kawan, Penang and Kulim, Kedah industrial parks, Finance Minister Tengku Zafrul Aziz said in his Budget 2021 proposal on Friday.
“In addition, a High Technology Fund worth RM500 million ($121 million) will be provided by Bank Negara Malaysia to support high technology and innovative companies. The fund will enable Malaysia to remain competitive in the global supply chain and protect high skilled jobs,” he said.
The government is also extending the special tax rates offered earlier in the so-called PENJANA incentive package to select manufacturing companies that relocated their businesses to Malaysia.
A National Development Scheme valued at RM1.4 billion ($338.9 million) will also be introduced to support the implementation and development of the domestic supply chain and increase the production of local products such as medical devices, Zafrul said, as he tabled the first budget by the Muhyiddin Yassin-led government.
As equity crowdfunding or ECF is one of the alternative financing methods, especially for technology startups, Zafrul said income tax exemption of 50 per cent of the investment amount or limited to RM50,000 ($12,103) will be extended to encourage more individual investors to take part in financing through the ECF platform.
“RM30 million ($7.26 million) will also be allocated through matching grants to be invested on ECF platforms under the supervision of the Securities Commission,” he said.
To support peer-to-peer financing platforms, especially those based on invoice financing, the Budget has allocated RM50 million ($12.1 million) based on a matching investment basis.
Zafrul said the country’s economic growth for 2020 is expected to contract 4.5 per cent. As for 2021, the economy is expected to recover and expand at a rate between 6.5 to 7.5 percent, he added.
Commenting on Budget 2021, CGS-CIMB economists Michelle Chia and Lim Yee Ping said Budget 2021’s expansionary stance was within their expectations.
“The government’s plans to press ahead with an expansionary fiscal stance was well-telegraphed ahead of Budget 2021 and the projected budget deficit of 5.4% of GDP in 2021 (versus 6.0% of GDP in 2020) was within our expectations.” they wrote in a note dated Nov 7.