On 11 October 2019, #Belanjawan2020 (Malaysia Budget 2020) was announced in Malaysian Parliament by Minister of Finance, Lim Guan Eng. Human Resources Online summarises the key HR and manpower developments and allocations delivered from the Budget speech.
The 2020 Budget will allocate a total expenditure of RM297bn, excluding contingency reserve of RM2bn (a drop from the RM314.5bn for Budget 2019). This comprises operating expenditure of RM241bn and development expenditure of RM56bn.
With the theme of 'Driving Growth And Equitable Outcomes Towards Shared Prosperity', Budget 2020 is anchored by four key thrusts:
- Investing in Malaysians: Levelling up human capital
- Creating a united, inclusive, and equitable society
- Revitalisation of public institutions and finances
- Driving economic growth in the new economy and digital era
Investing in Malaysians: Levelling up human capital1. The Government will be launching the Malaysians@Work initiative, aimed at simultaneously creating better employment opportunities for youth and women and reducing our over-dependence on lowskilled foreign workers. Malaysians@Work is divided into four programmes directed at providing both wage incentives for workers and hiring incentives for employers as follows:
- Graduates@Work is designed specifically for the hiring of graduates who have been unemployed for more than 12 months. The graduates who secures work will receive a wage incentive of RM500 per month, for a duration of two years, while employers receive a hiring incentive up to RM300 per month for each new hire, for two years.
- Women@Work seeks to create 33,000 job opportunities per year for women who have stopped working for a year or more, and are between 30-50 years-old. The wage incentive for returning women workers is RM500 per month for two years, and a corresponding hiring incentive for employers up to RM300 per month for two years. On top of the above, the current income tax exemption for women who return to work after a career break be extended for another four years until 2023.
- Locals@Work is a hiring cost equalisation programme, aimed at incentivising the shift away from low-skilled foreign workers dependency. The wage incentive for Malaysians who are hired to replace foreign workers is at either RM350 or RM500 per month, depending on the sectors, for a duration of two years, and corresponding hiring incentive for employers up to RM250 per month for two years.
- Apprentice@Work is a Technical & Vocational Education & Training (TVET) incentive programme, aimed at encouraging more youth to enter TVET courses, in the form of additional RM100 per month on existing allowance for trainees on apprenticeships. The Government will also extend double tax deduction on expenses incurred by companies participating in Skim Latihan Dual Nasional (SLDN) for another two years. In addition, the double tax deduction currently given to companies undertaking Structured Internship Programme (SIP) approved by Talent Corporation Malaysia Berhad (TalentCorp) will be expanded to include students from all academic fields rather than just engineering and technology.
3. The Government will also be undertaking further measures to improve the working environment for women and parents in general. In year 2019, RM10mn was allocated for the development early childhood care facilities in government buildings. Through this, 66 new TASKAs were created in government facilities. The Government will allocate an additional RM30mn in 2020 to provide more TASKAs, focusing especially on hospitals and schools. In addition, to ease the financial burden of parents who enrol their children in registered nurseries and kindergartens, individual tax relief for fees paid will be increased from RM1,000 to RM2,000.
4. In order to remain relevant with the current needs of the labour market, the Government will review the Employment Act 1955, which includes the following:
- In order to increase maternity leave from 60 days to 90 days effective 2021.
- Extend the eligibility to overtime from those earning less RM2,000 to those earning less than RM4,000 per month.
- Improve protection and procedures for handling sexual harassment complaints.
- Introduce new provisions on the prohibition of discrimination on religion, ethnicity, and gender.
6. The existing mechanism for social protection for workers will be enhanced as follows:
- The Employees Provident Fund (EPF) will extend coverage to contract workers, for those under Contract for Services and Professionals. As a start, this will be a voluntary scheme for workers in the arts and entertainment industry via collaboration between EPF and the National Film Development Corporation Malaysia (FINAS) before extending the coverage to other sectors.
- The current Self-Employment Social Security Scheme by the Social Security Organisation (SOCSO) will be expanded to enable contributions by other selfemployed groups across 18 key sectors, such as fishermen, farmers, sole proprietors and partnerships.
8. In 2020, i-Suri programme will be expanded whereby husbands may voluntary elect to contribute 2% from his 11% EPF employee contribution to his wife’s EPF Account.
9. The Government will also allocate RM20mn in 2020 to further extend the benefits under i-Suri via social safety coverage under SOCSO.
10. The Government is increasing the allocation from RM5.7bn in 2019 to RM5.9bn in 2020 on TVET, including to:
- Further strengthen the public and private sectors’ synergy on the TVET programme through increased funding of the State Skills Development Centres (SSDC). The Government will provide RM50mn through Perbadanan Tabung Pembangunan Kemahiran (PTPK) to fund TVET courses conducted by SSDCs.
- Promote greater industry collaboration by Public Skills Training Institutions (ILKA) by:
- Allowing ILKAs to utilise surplus revenues generated from TVET courses provided to the industry for expenditures such as upgrading equipment and hiring trainers from industry
- Providing matching grant fund of RM20mn to support customised TVET courses undertaken in collaboration with industries.
- The Government will expand pathways for TVET graduates to pursue further studies and securing jobs. The Malaysia Technical University Network (MTUN) universities will offer degree courses for trainees graduating from Vocational Colleges (Kolej Vokasional) next year.
- The Human Resource Development Fund (HRDF) will collaborate with the industry to provide TVET training linked to employment opportunities. For this purpose, the Government will provide RM30mn to train more than 3,000 youths from low income households.
12. The Government will allocate RM20mn to be matched by another RM20mn from HRDF towards encouraging working adults to undertake professional certification examinations in fields relating to IR4.0.
13. The Government will continue to emphasise learning opportunities under MARA and Yayasan Peneraju Pendidikan Bumiputera (Yayasan Peneraju).
- The total allocation for education institutions under MARA for 2020 amounts to RM1.3bn, with a further RM2bn allocated for student loans benefitting 50,000 students.
- RM192mn is also allocated for professional certification programmes under Yayasan Peneraju.
Creating a united, inclusive, and equitable society1. The Government will allocate RM5bn for Bantuan Sara Hidup (BSH) and expand the scheme to cover 1.1 million single individuals aged above 40 years old who are earning less than RM2,000 per month. In addition, all disabled persons aged 18 years old and above, with an income less than RM2,000 per month will also be covered. They will be entitled to receive BSH payment of RM300, and qualify automatically as a recipient of the free MySalam Takaful Scheme..
2. The Government will allocate RM20mn to expand skills training and programmes that meet the national TVET standard for inmates in areas such as food & beverage, carpentry, laundromat and metal works.
3. To support the growth of social enterprises, which help to improve the socio-economy of local communities, the Government will provide RM10mn to Malaysian Global Innovation & Creativity Centre (MaGIC) to support such enterprises.
4. Currently, income tax exemptions is given for all income received by religious institution or organisation established for the purpose of religious worship or the advancement of religion and registered under the Registrar of Societies Malaysia. Beginning 2020, similar tax exemption will be extended to religious institution or organisation registered as a Company Limited By Guarantee with the Companies Commission of Malaysia.
5. Expansion of MySalam & PEKA B40 starting January 2020:
- Cover 45 illnesses from the existing 36, including polio and terminal illness.
- Those aged up to 65 years old, compared to the current 55 years old, benefiting an additional 1.5 million individuals.
- Those with gross annual income up to RM100,000. They will receive critical illness pay out of RM4,000 and RM50 daily hospitalisation income replacement for up to 14 days when diagnosed and warded at Government hospitals. This will benefit an additional up to five million Malaysians.
Revitalisation of public institutions and finances1. A new band for chargeable income in excess of RM2mn will be introduced and taxed at 30%, which is a 2 percentage point increase from the current 28% rate. This increase will only affect approximately 2,000 high income earners in the country.
2. To further support the growth of the SME, the chargeable income subjected to 17% rate will be increased to RM600,000, subject to the SME having paid-up capital of not more than RM2.5mn and annual sales of not more than RM50mn.
3. Improvements will be made to civil servant remuneration as follows:
- The Cost of Living Allowance (COLA) will be increased by RM50 per month for support group, with an additional allocation of RM350mn annually.
- Civil servants will be allowed early redemption of Accumulated Leaves (Gantian Cuti Rehat) for up to 75 days as replacement pay, for those who have at least 15 years of service.
- The Public Sector Home Financing Board (LPPSA) will offer new borrowers free Group Personal Accident Insurance coverage worth of RM100,000 for two years.
- Introduce an Ex-Gratia Death Benefit of up to RM150,000 payable to dependants of the deceased.
- The Annual Salary Movement (PGT) is brought forward for civil servants who have died in service before the Salary Movement Date (TPG).
6. All personnel of the Fire and Rescue Department of Malaysia will receive a special allowance of RM200 a month, with an allocation of RM35mn. This will benefit 14,400 personnel.
7. A one-off payment of RM500 to the 70,000 holders of the Malaysian Service Medal (Pingat Jasa Malaysia), with an allocation of RM35mn.
8. A special payment of RM500 will be given to civil servants Grade 56 and below. For government retirees, a special payment of RM250 will be paid and this will be extended to non-pensionable veterans. All will be paid before end of this year.
Driving economic growth in the new economy and digital era1. In 2019, the Government has embarked on a comprehensive review and revamp of the existing incentive framework, comprising the Promotion of Investments Act 1986, special incentive package and incentives under the Income Tax Act 1967. This new framework is expected to be ready by 1 January 2021.
2. Up to RM1bn worth of special investment incentives packages will be made available annually, over five years to attract targeted Fortune 500 companies and global unicorns in high technology, manufacturing, creative and new economic sectors. This is expected to create 150,000 high quality jobs over the next five years and strengthen Malaysia's manufacturing and service ecosystems.
3. Up to RM1bn in customised packaged investment incentives will be made available to Malaysia’s best and most promising businesses annually over five years. This is expected to create an additional 100,000 high quality jobs for Malaysians over the next five years.
4. Tax incentives will be provided to further promote high-value added activities in the electrical and electronics (E&E) industry to transition into 5G digital economy and industry 4.0. This includes:
- Up to 10 years of income tax exemption for E&E companies investing in qualifying knowledge-based services.
- Special Investment Tax Allowance to encourage companies in E&E sector that have exhausted the Reinvestment Allowance to further reinvest in Malaysia.
- Accelerated capital allowance and automation equipment capital allowance for manufacturing sector on the first RM2mn and RM4mn incurred on qualifying capital expenditure is extended to the year of assessment 2023.
- The incentive is also expanded to include services sector on the first RM2mn incurred on qualifying capital expenditure from the year of assessment 2020 to the year of assessment 2023.
7. RM20mn will be allocated to the Malaysian Digital Economy Corporation (MDEC) to grow local champions in creating digital content, expecially in e-games, animation and digital arts.
8. RM550mn will be allocated to provide smart automation matching grants to 1,000 manufacturing and 1,000 services companies to automate their business processes. The grant will be given on a matching basis with up to RM2mn per company.
9. RM70mn will be allocated to MDEC to set up 14 one-stop Digital Enhancement Centres in all states to facilitate access to financing and capacity building of Malaysian businesses, especially SMEs in line with the Fourth Industrial Revolution (IR4.0).
10. RM20mn will be provided to Cradle Fund for the provision of training and grants to seed companies.
11. RM10mn will be provided to MDEC to train micro-digital entrepreneurs and technologists to leverage on e-Marketplaces and social media platforms to sell their products.
12. To push towards cashless payments, a one-time RM30 digital stimulus to qualified Malaysians aged 18 and above with annual income less than RM100,000.
13. To better facilitate access to financing for SMEs in priority segments, the Government will implement enhancements to the Skim Jaminan Pembiayaan Perniagaan (SJPP).
- For Bumiputera SMEs, export-oriented SMEs and SMEs investing in automation and digitalisation, the Government guarantee will be increased from 70% to 80% and in addition, will reduce the guarantee fee to only 0.75%.
- A new SJPP allocation of RM500mn in guarantee facility will also be launched, earmarked for women entrepreneurs.
- RM200mn fund specifically for women entrepreneurs, offering loans of up to RM1mn per SME.
- RM300mn fund to support Bumiputera SMEs with the potential to become regional champions, with priority given to producers of halal products and manufacturers with high local content.
16. To support Bumiputera entrepreneurial development, grants amounting to RM445mn will be provided in terms of access to financing, provision of business premises and entrepreneur training. This includes:
- RM150mn for overall entrepreneurship development and upskilling by Perbadanan Usahawan Nasional Berhad (PUNB).
- RM75mn by SMECorp for capacity building and export focus for Bumiputera SMEs, which includes enhancing marketing, packaging, and financial literacy.
- RM170mn in total for access of financing via TEKUN, SME Bank and Pelaburan Hartanah Berhad (PHB).
- RM50mn for entrepreneurship under Unit Peneraju Agenda Bumiputera (TERAJU), Ministry of Economic Affairs.
- Sustainable Development Financing Fund size increased from RM1bn to RM2bn
- RM1bn Maritime & Logistics Fund
- RM2bn Industry Digitalisation Transformation Fund which will now also support the implementation of connectivity projects..
19. The Government will provide RM100mn for Rubber Production Incentive in 2020 to enhance the income of smallholders faced with low rubber prices.
20. The Government will allocate RM810mn for the welfare of FELDA community.
21. The Government has increased the allocation to the Ministry of Agriculture from RM4.4bn in 2019 to RM4.9bn in 2020, with a special focus towards enhancing incomes of farmers.
22. For 2020, the Government proposes to increase the fishermen allowance from RM200 to RM250 per month, with a total allocation of RM152mn for 2020.
23. The Government will allocate RM11mn towards initiatives by the Ministry of Education in collaboration with Ministry of Environment, Science, Technology and Climate Change (MESTECC) to inculcate the Science, Technology and Innovation (STI) culture, encouraging more students into the fields of Science, Technology, Engineering and Mathematics (STEM).
24. In line with Visit Malaysia 2020 (VMY2020), the Government will roll out a host of tax incentives targeted at the arts and tourism sector, such as:
- Income tax exemption be given for organisers of approved arts and cultural activities, international sports and recreational competitions as well as conferences organisers.
- New investments in international theme park projects will be given income tax exemption of 100% of statutory income or Investment Tax Allowance of 100% to be set off against 70% for five years.
- Increasing tax deductions given to companies sponsoring arts, cultural and heritage activities in Malaysia from RM700,000 to RM1,000,000 per year.
- Accelerated Capital Allowance for expenditure incurred on the purchase of new locally assembled excursion bus to be fully claimed within two years.
- Excise duty exemption of 50% for locally assembled vehicles be given to tour operators for the purchase of qualified new tourism vehicles.