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Highlights of Malaysia's budget 2017

Prime Minister Najib Razak tabled Malaysia's Budget 2017 in Parliament on Friday, 21 October 2016,

He based the budget on five principles of the government: national integration; sovereignty, upholding the Constitution and laws as well as national security; cohesiveness and stability; diligence through systematic planning and implementation; and, national ideology, the Rukun Negara.

Allocation of expenditure

  • Allocates a sum of RM260.8 billion, an increase of 3.4% from the 2016 Budget Recalibration.
  • Of this amount, RM214.8 billion is allocated for operating expenditure, while RM46 billion for development expenditure. This does not include contingencies of RM2 billion.
  • Under development expenditure: economic sector will receive RM25.9 billion; social sector RM12.2 billion; security sector RM5.3 billion; general administration more than RM2.5 billion.
  • Expected fiscal deficit target of 3% of GDP in 2017, compared with 3.1% this year.

"The definition of prudent spending by the Government is similar to a sensible father or head of family manages his finances to meet household needs. In other words, if previously we could afford expensive toys, however, in the present situation we could continue to do so but within our means," said PM Razak.

Strategic measures undertaken since 2010

  • Diversifying the Government’s sources of revenue, particularly to reduce the dependency on oil and gas sector related revenue from 41.3% in 2009 to 14.6% in 2016
  • Implement GST, given there are 2.1 million income tax payers out of the 14.6 million workforce.
  • Subsidy rationalisation. Bulk subsidy system replaced with targeted subsidy system.

He called out concerns about the nation's econony: "...the Government is aware of the rumours on the so called deteriorating investors’ confidence on the Malaysian economy."

He added: "But, if our own people, undermine and sabotage our economy, we are bringing down our own nation. Therefore, accusations by irresponsible internal and external parties must be stopped!"

Considerations for civil servants

  • Extend the fully paid study leave with scholarship to the support group, that is currently limited to management and professional group.
  • Grant quarantine leave up to five days without record to public servants whose children are ill and required to be quarantined.
  • Computer loan facility to encompass the purchase of smartphone. Can be utilised once every three years with a maximum loan of RM5,000.
  • Increase the motorcycle loan limit from RM5,000 to RM10,000.
  • Increase the housing loans eligibility from between RM120,000 and RM600,000 to between RM200,000 and RM750,000.
  • Extend the contract of service and contract for service officers, expiring end of this year, for at least one year.
  • To address the issues of specialist doctors leaving the public service and delays in promotion, introduce a grade 56 between grade 54 and JUSA C for medical and dental specialists.
  • To appoint the first group of doctors, dentists and pharmacists on contract latest by December 2016 due to constraints in permanent posts, benefiting nearly 2,600 doctors.

Measures for the working class

Said PM Razak: "This budget is not intended to benefit any particular group. However, it is engineered to be inclusive for the well-being of the rakyat."

"...there are three main categories of rakyat in our country, namely T20, M40 and B40. For the M40 group, the household income ranges between RM3,900 and RM8,300. This M40 group includes singles as well as most working married couples, highly educated and skilled," he said.

For the M40 group, he said although the demographic doesn't face difficulty meeting its basic needs, the Government intends to increase their disposable income.

"This includes aspects such as job security, increase in income from time to time, housing, safety, education, health as well as balanced lifestyle among work, recreational and quality time with their families," he explained.

  • Private Retirement Scheme (PRS) of youths: One-off increase of the existing RM500 incentive to RM1,000 to PRS contributors with a minimum accumulated investment of RM1,000 during the period of two years.
  • To encourage repayments of PTPTN loans, 15% discount on the outstanding debt for full settlement; 10% discount for payment of at least 50% of the outstanding debt made in a single payment; 10% discount for repayment through salary deduction or direct debit in accordance with the repayment schedule.
  • Financial assistance to poor families, including General Assistance up to RM300 per month and Children Assistance up to RM450 per month will be continued, benefitting 69,000 families.
  • Allocation of RM424 million to senior citizens, including RM300 monthly as living allowance and pocket money programme. In addition, eight Senior Citizen Activity Centres will be established.
  • RM535 million is provided to the persons with disabilities (PWDs), including employee allowance, disabled children training allowance and assistance for PWDs who are unable to work.

Improving income opportunities for the B40 group

B40 refers to the bottom 40% of households with monthly income RM3,900 and below, for whom a total of RM275 million is allocated for the following:

  • Solar panels will be installed in more than 1,600 housing units, with each participant receiving RM250 per month.
  • Expanding Mobileprenuer Programme by GIATMARA with a total allocation of RM30 million, targeting 3,000 participants using motorcycles.
  • Implementing Agropreneur programme to produce 3,000 young entrepreneurs, involved in the production of high-value agricultural products.
  • Revitalising eUsahawan and eRezeki programmes under the Malaysia Digital Economy Corporation (MDEC), comprising 300,000 participants.
  • Nearly RM10 billion for subsidy allocation such as cooking gas; toll charges; and public transport.
  • RM1.3 billion for paddy farmers to subsidise paddy price, seeds and fertilisers including hill paddy.
  • Rainy Season Assistance of RM200 monthly for three months (November, December and January), for 440,000 rubber tappers and smallholders.
  • Continue the monthly allowance of RM200 to RM300 for 57,000 fishermen.

1Malaysia People’s Aid (BR1M) enforced more stringently

BR1M’s assistance for next year will be increased as follows:

  • For households in the e-Kasih database with a monthly income below than RM3,000, BR1M will be increased to RM1,200 from RM1,050 and RM1,000.
  • For households earning between RM3,000 and RM4,000, BR1M will be increased from RM800 to RM900.
  • For single individuals earning below RM2,000, BR1M will be increased from RM400 to RM450.

Enhancement of TVET capacity

To produce local workforce that meets the industries’ requirement, TVET (Technical Vocational Education and Training institutions) education capacity will be allocated RM4.6 billion.

  • Nine unused Teachers’ Training Institutes (IPG) will be transformed - four will be become polytechnics, four will be vocational colleges and one training institute for TVET trainers.
  • M270 million is allocated to upgrade educational equipment in TVET institutions as well as RM360 million for Skills Development Fund Corporation.
  • Double tax deduction for private companies to provide Structured Internship Programme for students pursuing undergraduate degree, diploma and Malaysian Skills Certificate Level 3 and above under the TVET Programme.
  • To enhance graduate employability, RM50 million is allocated to extend the 1Malaysia Training Scheme (SL1M) programme to 20,000 graduates in 2017 compared with 15,000 graduates in 2016.

Schemes to empower taxpayers

  • Currently, there are 21 categories of individual tax reliefs. To help tax payers claim more tax reliefs, the purchase of reading materials, computers and sports equipment be combined as the lifestyle tax relief.
  • This relief is extended to include the purchase of printed newspapers, smartphones and tablets, internet subscriptions as well as gymnasium membership fees.
  • The relief is given up to RM2,500 per year and is effective assessment year 2017.

Talent needs of employers addressed

  • Four more Urban Transformation Centres (UTC) in Negeri Sembilan, Perlis, Pulau Pinang and Selangor and three more Rural Transformation Centres (RTC) in Selangor, Sabah and Sarawak will be built with an allocation of RM100 million.
  • Each UTC will be provided with a job centre to assist matching between job seekers and potential employers.
  • Other initiatives include 1Malaysia English, Coding in schools, Volunteering for International Professional and Global Entrepreneurship Community 2 with an allocation of RM40 million.

Taxi drivers included in incentives

  • Grant of RM5,000 to purchase new vehicles and offer individual taxi permits, expected to benefit 12,000 qualified taxi drivers who have ended their leasing contract with taxi companies.
  • Introduction of Social Security Organisation (SOCSO) Scheme to individual taxi drivers with a monthly income up to RM3,000. Taxi drivers are required to contribute between RM157 and RM443 per annum, for claims eligible through SOCSO in case of an accident.
  • Encourage B40 participation as ride-sharing drivers such as with Uber. To those who do not own a vehicle, down payment will be made using BR1M and a rebate of RM4,000 for Proton Iriz.

Pro-business strategies - infrastructure and capability development

  • Major infrastucture projects: upgrading of Jalan Lok Kawi – Pengalat – Papar, Sabah; Jalan Kampung Keruak – Gua Musang – Kuala Berang; construction of Batang Lupar Bridge, Sri Aman; and the reconstruction of Sandakan Power Station Project.
  • RM2.1 billion for five economic corridors, namely, Iskandar Malaysia, Northern Corridor Economic Region (NCER), East Coast Economic Region (ECER), Sabah Development Corridor (SDC) and Sarawak Corridor of Renewable Energy (SCORE).
  • RM 522 million for Malaysian Investment Development Authority (MIDA) for emphasis on chemicals; electric and electronics; and R&D activities.
  • For domestic capital market, Small and Mid-Cap PLC Research Scheme will be introduced to conduct research on 300 companies.
  • Income tax exemption extended to 2020 to entities carrying out Islamic banking and Takaful business through the International Currency Business Unit (ICBU) in foreign currencies.
  • Introduction of the first Digital Free Zone in the world, which will merge physical and virtual zones, with online and digital services to facilitate international ecommerce.

Requirements of SMEs not left out - new pass for employees

PM Razak credited SMEs with 36% of the country’s GDP last year, 65% of total employment and 18% of nation’s exports.

  • 2017 will be the Startup & SME Promotion Year, with a total of RM75 million to implement programmes under SME Master Plan.
  • RM200 million from the Working Capital Guarantee Scheme (WCGS) Fund allocated to startups.
  • A new pass category, namely Foreign Knowledge Tech Entrepreneurs will be introduced.
  • New scheme specifically for the year of assessment 2017 and 2018: reduction in income tax by stages based on a percentage increase in income compared to the previous year of assessment.

Education and teaching sector gets a boost

  • Free tablets to assist teaching to 430,000 teachers with an allocation of RM340 million.
  • Schooling Assistance Programme of RM100 each to students from families earning up to RM3,000, expected to benefit 3.5 million students.
  • RM1.1 billion to include additional assistance payment for school fees; textbook assistance and per capita grant assistance.
  • Special needs student allowance of RM150 monthly, involving 67,000 students as well as replace buses for 21 special education schools.
  • Allocation of RM600 million to Special Fund for Improvement and Maintenance of Schools.
  • RM7.4 billion is allocated for 20 public universities, out of which RM300 million is allocated for empowerment of five research universities.
  • KAFA teachers’ allowance will also be increased from RM800 to RM900 a month, benefitting nearly 33,000 KAFA teachers.

Incentives for development of Bumiputeras

  1. RM100 million to SME Bank to increase opportunities to Bumiputera entrepreneurs.
  2. RM100 million to AIM for their various entrepreneurship programmes.
  3. RM300 million to TEKUN to assist small scaled entrepreneurs including a new scheme, TEMANITA, especially for women micro entrepreneurs.
  4. RM200 million to Perbadanan Usahawan Nasional Berhad to implement the Entrepreneurship and Business Premises Financing Programme.
  5. RM120 million to MARA for various entrepreneurship programmes, among others halal industry enterprises, youth entrepreneur development and integrated entrepreneurship training.
  6. Facilitation Fund amounting to RM500 million to TERAJU to assist Bumiputera companies to expand their businesses or to start a new business.

"In a nutshell, the agenda of empowering Malays and Bumiputera will continuously be upheld," PM Razak affirmed.

Armed forces to receive special allowances

  • Special Insurgency Incentive Payment to veteran Malaysian Armed Forces amounting to RM55 million to those who are yet to receive their special incentive.
  • Veterans who have lost their abilities during their service are eligible for the above incentive. This is a new incentive in addition to Disability Pension.

Government to boost empowerment of women and working parents

PM Razak laid special focus on women's development, saying: "Women are the backbone and bedrock of a nation’s development. Since days of old, warriors were not only limited males, but also females."

  • RM2 billion is allocated for programmes such as I-KIT, I-KeuNita and Women Career Comeback.
  • RM30 million for women to undergo mammogram screening and receive Human Papilloma Virus (HPV) vaccination to prevent cancer, for free.
  • For working women who are breastfeeding, the Government will introduce a new tax relief up to RM1,000 which is claimable for purchase of breastfeeding equipment.
  • For working parents, a tax relief of up to RM1,000 will be given to individual taxpayers who enroll their children aged 6 years and below, into registered nurseries and preschools.

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