Budget 2016: Not A Year For Entrepreneurs?

The perceived importance of entrepreneurship to the growth of Malaysia’s economy is evidenced by the sheer amount and variety of supporting mechanisms and policies that exist for entrepreneurs, including funding, physical infrastructure and business advisory services.

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These include economic globalisation and liberalisation, the need to strengthen national competitiveness, and the need to foster greater capacity for technology and innovation.

Among the more salient are ensuring a healthy, conducive and stable political and economic climate, matching the most appropriate funding models to suit the needs of businesses, making funds available to stop the liquidity crunch, promulgating guidelines and regulations to ensure intellectual property right protections, and encouraging corporate governance.

This year, the focus was definitely not on entrepreneurs. That doesn’t mean there weren’t any announcements for them.

Here’s what budget 2016 looking like for entrepreneurs:

Bumiputera entrepreneurs

The Malaysian government has continuously encouraged the involvement of its people, especially the Bumiputeras in entrepreneurship. This is evidenced by the number and diversity of programmes and policies that have been formulated to enhance the development of entrepreneurs.

Under the TEKUN allocation of RM600 million for entrepreneurs, RM500 million is allocated for Bumiputera entrepreneurs. This is RM150 million more than the previous year.

Besides that, a sum of RM150 million is allocated to the Bumiputera Agenda Unit (TERAJU) to implement various programmes including Bumiputera Entrepreneurs Startup Scheme and High Performing Bumiputera Companies Programme.

Also, to increase equity ownership and strengthen Bumiputera entrepreneurship and businesses, the following allocations are made for:

• National Equity Fund Limited (EKUINAS): RM400 million
• Perbadanan Usahawan Nasional Berhad (PUNB): RM250 million
• Pelaburan Hartanah Berhad (PHB): RM150 million
• RM100 million loan to UDA Holdings for development of Kampung Baru, Kuala Lumpur

Allocations under EKUINAS is downsized in allocations by RM200 million compared to 2015. However, the reduction has been allocated to various other institutions to cover a larger range of Bumiputera entrepreneurs from different segments of entrepreneurships.

This totals up to RM1.55 billion for Bumiputera entrepreneurs, compared to RM980 million in 2015.

Indian entrepreneurs

In Budget 2015, Indian entrepreneurs were allocated just RM50 million that was set to benefit 5,000 Indian entrepreneurs. However, Budget 2016 turned out to be even a brighter year ahead for Indian entrepreneurs with allocations that will be benefit a larger portion of entrepreneurs.

Under the TEKUN allocation of RM600 million for entrepreneurs, RM100 million will be channelled to 10,000 Indian entrepreneurs through the Indian Community Development Scheme. In addition, SME bank will provide RM50 million to assist small-scale Indian entrepreneurs nationwide.

RM100 million under the Socio-Economic Development of Indian Community Programme for collaboration between NGOs and private skills training institutes.

This totals up to RM250 million for Indian entrepreneurs, compared to RM50 million last year.

Chinese entrepreneurs

Next year seems to be another disappointing years for Chinese entrepreneurs compared to other entrepreneurs with only a very small allocation going into entrepreneurship development for them.

Under Budget 2015, they were allocated RM50 million for Chinese small and medium enterprises (SMEs) seeking soft loans of between RM25,000 to RM50,000. To date, only half of it or RM26.6 million has been utilised.

In Budget 2016, RM90 million is provided for microcredit to Chinese hawkers and petty traders including RM50 million under Koperasi Jayadiri Malaysia Berhad (KOJADI).

This totals up to RM140 million for Chinese entrepreneurs, which while not as large a jump as the others is still better than in Budget 2015, where only RM50 million was allocated.

Young entrepreneurs

Entrepreneurship is one of the main drivers of economic growth in which it creates wealth, innovation and technology deployment and reduces poverty.

It is also one of the economic strategies to perpetuate the country’s competitiveness by nurturing youth in dealing with the increasing trend of globalisation – which was not really explored in the previous budgets.

To enhance youth participation in economic and entrepreneurial activities, RM50 million has been allocated for this purpose. Above that, RM30 million has been allocated for several youth entrepreneurship programmes such as Global Entrepreneurship Community, BAHTERA, GREAT, 1MET, National Innovation Competition and a Pilot Coding Project in schools.

RM90 million is allocated for Youth Agropreneur Development Programme in the form of in-kind grants; Agriculture Entrepreneurs Financing Fund; rebranding MARDI, Department of Veterinary Services, Department of Agriculture and the Department of Fisheries; as well as to implement the Multiplier Farm Project for breeding cattle and free-range chicken.

This totals up to RM170 million for youth entrepreneurs.

Small and medium enterprises (SMEs)

Small and medium enterprises (SMEs) play a key role in developing the business value chain and are expected to contribute 41% of GDP by 2020.

In line with that, the Government has lined up various benefits for SMEs in this budget:

• RM1 billion for the Shariah-compliant SME Financing Scheme until December 31, 2017 with the Government subsidising 2% of the financing profit rate
• RM107 million for the SME Blueprint to provide funds for entities at various stages of business development
• RM60 million for the Entrepreneurs Acceleration Scheme, and SME Capacity and Capability Enhancement Scheme
• RM200 million SME Technology Transformation Fund under the SME Bank to provide soft loans at 4%
• RM18 million to expand the Small Retailer Transformation Programme (TUKAR) and Automotive Workshop Modernisation (ATOM) projects
• IBS Promotion Fund of RM500 million will be established through the SME Bank to provide soft loans to developers and contractors in category G5 and below
• RM235 million is allocated to MATRADE for 1Malaysia Promotion Programme, Services Export Fund and Export Promotion Fund. MATRADE and SME Corp will also increase the capacity of SMEs and mid-tier companies to export goods and services overseas
• Currently, SMEs are eligible to claim income tax exemption of 10% or 15% of the value of increase in exports. To further increase exports, SMEs are given flexibility to comply with the value-add condition that is from 30% to 20% and from 50% to 40% for manufactured products. This flexibility will be given for years of assessment 2016 to 2018.
• SMEs that incur expenditure on R&D projects up to RM50,000 for each year of assessment are eligible to claim double tax deduction automatically. This facilitation is provided for the years of assessment 2016 to 2018

This totals up to RM2.17 billion for SMEs, a much more conservative figure compared to the RM5.29 billion last year.

For SMEs in Budget 2015, we saw the Government targeting to commercialise 360 high-impact innovative products within the next five years. In order to achieve this target, they provided research funds amounting to RM290 million to implement various high-impact R&D programmes.

Besides that, they offered services sector guarantee scheme amounting to RM5 billion for SMEs in the services sector. So, the total was RM5.29 billion under the previous budget.

Others

Other generalised entrepreneurship benefits include:

• RM18 million to expand the Small Retailer Transformation Programme (TUKAR) and Automotive Workshop Modernisation (ATOM) projects
• As a catalyst for entrepreneurship in rural areas and for rural communities, RM70 million allocated for continuation of the Rural Business Challenge (RBC) and Sustainable Rural programmes
• Companies that invest in subsidiaries that undertake food production project will be given tax deduction equivalent to the amount invested
• Companies that undertake new food production projects will be given 100% income tax exemption for 10 years
• Existing companies undertaking project expansion will be provided with the same incentive for five years
• To make the nation a competitive technology hub in the region, RM1.5 billion is allocated to the Ministry of Science, Technology and Innovation (MOSTI)
• RM100 million to Malaysian Innovation Agency (AIM)
• RM200 million under the Funding Scheme for Technology and Innovation Acceleration by Malaysia Debt Ventures Berhad
• RM35 million to Malaysian Global Innovation & Creativity Centre (MaGIC) as a Leading Regional Entrepreneurship and Innovation Hub
• RM10 million for the Corporate Entrepreneurs Responsibility Fund
• To accelerate demand-driven innovation activities in 2016, RM50 million allocated for a Public-Private Research Network.

This totals up to RM1.98 billion for the rest and the grand total for entrepreneurship is RM6.26 billion versus the previous budget which was RM6.52 billion – a reduction of RM260 million.

Conclusion

The Malaysian government has always given special attention to entrepreneurship as a way to assist and upgrade the industrial structure and encourage the future generations.

Most of these programs ultimately lead to an increase in productivity for entrepreneurs and indirectly generate entrepreneurs with higher-income.

In Budget 2015, special allocations were given to start-ups and various other segments of entrepreneurs like armed forces veterans, expats who wants to kick-start their business here.

The previous budget also saw various incentives for exports and imports like harness services export fund and SME-Go.

While last year’s budget was moving towards taking our local entrepreneurship global by enabling SMEs to be connected to new clients in the international market.

This year seems to only be focused on boosting domestic entrepreneurship.

Besides that, 2015 saw a special allocation for women entrepreneurs which seem to have disappeared this year.

It seems like 2016 will be a dull year for entrepreneurs with reduced allocations for entrepreneurship and entrepreneur development, as opposed to 2015.

Malaysia need to be on the right track in promoting entrepreneurship as one of its transformation agenda to become a high-income nation by 2020.

As entrepreneurship has a great potential to develop economic growth, various policies and programmes should have been established to encourage more Malaysians who are engaged in this sector.

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This article is contributed by iMoney.my, Malaysia's leading financial comparison website. To compare and apply for the best financial products, such as credit card, home loans and personal loans, visit www.iMoney.my