Budget 2022: Technology budgets reflect post-pandemic priorities

FACED with the threat of severe national-level economic hardship caused by COVID-19, Iskandar Investment Berhad (IIB) applauds the Malaysian government’s concerted effort to support the economy while trying to contain the pandemic. The survival and recovery packages introduced well supplement the substantial tax incentives in Malaysia. Considering the factors supporting the economic recovery for 2021, particularly the gradual reopening of the economic sectors and social activities by the end of the year and the continued strong external demand, we see the trend of economic recovery to continue well into 2022.

The recently announced Budget 2022 with a total allocation of RM332.1b, the largest ever for the country truly indicates the Government’s seriousness to carve the path towards economic recovery and building ‘A Prosperous Malaysian Family’. We applaud the Government's effort to redistribute wealth and intensify support for small businesses and families affected by the pandemic. We also want to thank the Ministry of Finance for formulating a budget that emphasises accelerating the commercialisation of technology research and development, emerging technologies, and talent development in these economic segments.

1. Investment in Technology and Connectivity

Malaysia’s 2022 budget reflects the Government’s focus on innovation, digitalisation, and propelling the nation towards becoming a key player in the Fourth Industrial Revolution (IR4.0). We are excited about the proposed measures that translate to more significant opportunities for Malaysian businesses and organisations to sustain and navigate the rapidly evolving digital innovation landscape.

A total of RM30 million has been allocated to implement the Innovation Hub: Industrial Revolution 4.0 at Technology Park Malaysia (TPM). The hub will act as a centre of excellence and support the innovation ecosystem by developing new technology clusters such as drones, robotics and autonomous vehicles and is expected to benefit 10,000 potential entrepreneurs.

It is hoped that there will be a spill-over effect from the innovation hub in TPM with potential collaboration extending to Medini, which has been proclaimed the Digital Hub of the Southern State of Johor.

Other initiatives to attract foreign investments in the Budget 2022 include a further RM45 million allocation to encourage technological transformation towards the IR4.0 among SMEs. As the largest urban integrated development in South East Asia, Iskandar Puteri hosts a community of start-ups and entrepreneurs that can benefit from this allocation.

To fully realise the digital transformation, high-quality access to communication networks and services must be made available at affordable prices. This involves investing in significantly upgrading communication infrastructures to address the increasing demand for data generated by the billions of devices coming online in the near future.

The provision of the 5G service can create a new technological landscape and offer a seamless user experience, thus bridging the digital gap and opening up new job opportunities. In this regard, we applaud the Government's commitment to expand 5G services to 36 per cent of high-density areas, including major cities in Johor, Selangor, Penang, Sabah and Sarawak in 2022.

2. Talent Development, Education Incentives and e-sports

The 2022 budget outlined a clear approach to preparing the nation’s workforce for future work opportunities. This budget sets a target of training 220,000 people via various upskilling and reskilling programmes with RM1.1 billion allocation.

IIB has launched several talent building initiatives to support talent development and job creation, namely the Johor Digital and Emerging Technology Talent (JDETT) and PERANTIS Iskandar initiatives.

In August 2021, IIB launched the JDETT programme to develop, nurture and create talent to support the emerging technology sector in the Iskandar Puteri region.

JDETT is an upskilling and reskilling programme in collaboration with the federal and Johor State Government and supported by industry, talent, training and funding partners to create high-value job opportunities for Johoreans in the digital and emerging technology sectors. We look forward to increasing our role in developing the talent pool, including upskilling and reskilling programmes, training partnerships, and new education. In this light, we welcome the Government’s continued emphasis on our nation’s education system, apportioning the lion’s share of the 2022 budget into the education sector.

IIB, through its subsidiary EduCity Iskandar Malaysia Sdn Bhd, is also embarking on PERANTIS Iskandar, a programme supporting the government initiative under PENJANA scheme to revive the economy via human capital development. Modelled from Germany’s Apprenticeship programme, PERANTIS Iskandar is designed to meet the industry’s demands and needs via reskilling and upskilling initiatives. The aim is to produce skilled talent for employment and gig-economy, enhance the region’s economic development and address the unemployment issues caused by the COVID-19 pandemic.

In addition, e-sports is an industry with many components that can benefit from the allocation. We hope the allocation will impact player development and other talents associated with the industry – tournaments and leagues, e-sports teams and organisations, broadcasters and media, developers/publishers, and marketing platforms.

We welcome the new investments into the nation’s talent development, and we are pleased to see that the government has outlined clear targets to be achieved.

3. Tax Measures for Business Revival

The most significant impact to large corporates is the announcement of the “Cukai Makmur”, which proposes a higher income tax rate of 33% on chargeable income above RM100 million, for the Year of Assessment 2022 only. Chargeable income of up to RM100 million will continue to be taxed at 24%.

Other notable corporate income tax proposals were the extension of the carry-forward period for unabsorbed business losses (7 to 10 years), a tax deduction for rental reduction and a tax deduction for renovation and refurbishment. These proposals will be welcomed by companies suffering from the pandemic as well as companies looking to reinvest as the business climate improves.

The removal of the Real Property Gains Tax (RPGT) for property sales after the sixth year will help spur the sub-sale market by increasing property transactions and indirectly help invigorate the supply chain and rejuvenate the property industry.

4. Green Budgeting

We applaud this year’s green budgeting to enable movement towards the implementation of environmentally friendly development projects and programmes. The Government sees the potential of electric vehicles (or EVs) with Energy Efficient Vehicle (or EEV) features as means to minimise vehicle smoke pollution in the atmosphere. We see this as an excellent opportunity to promote Iskandar Puteri by using our roads as a testbed for self-drive EVs.

Overall, Budget 2022 outlines a balanced and pragmatic approach to the nation’s finances, where all levels of society would have to come together to contribute towards the betterment of the nation. IIB continues to align itself with the Malaysian Government’s Shared Prosperity Vision 2030 through embarking on initiatives that will restructure the economy, address inequalities and build the nation.

ISKANDAR INVESTMENT BERHAD