PM Najib tables 2015 Budget

Noteworthy among the proposals highlighted for businesses are the promotion of high quality investments, encouraging the establishment of principle hub by multinational companies, spurring creative industry, increasing capacity of high speed broadband and developing small and medium enterprises, as well as, developing innovation and commercialisation.

Taking the opportunity to speak directly to the rakyat, via live-telecast through mainstream television channels, Najib, who is also the Finance Minister also proposed many measures to ease the concern over rising cost of living.

These include increasing the amount of 1Malaysia People's Aid (BRIM), education aid, accelerating the private and public investments, widening the scope of items that would not be subjected to the Goods and Services Tax (GST) and other tax incentives.

Themed, "People Economy”, it outlined seven main strategies namely strengthening economic growth; enhancing fiscal governance; developing human capital and entrepreneurship; advancing the Bumiputera agenda; upholding the role of women; developing national youth transformation programme and prioritising the well being of the rakyat.

The premier said the main challenge in preparing the RM273.9 billion budget, which was an increase of RM9.8 billion compared to the previous budget, was to balance between policies that are populist and policies based on economic and financial imperatives.

Budget 2015 is the last budget in the 10th Malaysia Plan period (2011-2015). Najib, clad in a bright tangerine baju Melayu, presented the 2015 Budget at the Dewan Rakyat -- his sixth national budget since assuming leadership of the administration.

The prime minister was confident the country would achieve a strong economic growth of between 5.5 per cent and 6.0 per cent this year and 5.0 per cent to 6.0 per cent in 2015.

Fiscal deficit would continue to improve to 3.5 per cent this year and reduce further to 3.0 per cent by end 2015, he said.

Touching on the GST, Najib said its implementation was estimated to generate RM23.2 billion in revenue next year.

"However, as a caring government we have exempted several goods from GST amounting to RM3.8 billion," he said, adding that with the implementation of GST, the Sales and Services Tax (SST) would be abolished.

"This will result in revenue foregone of RM13.8 billion. This means that after deducting RM13.8 billion and RM3.8 billion from a revenue RM23.2 billion, the government will have a balance of RM5.6 billion," Najib said.

Out of this, he said RM4.9 billion would be channelled back to the rakyat through assistance programmes such as the increase in BR1M.

"Finally, net revenue collection from GST would only amount to RM690 million," he said.

Proving that the government was listening to the rakyat, Najib said consumers and targeted groups would not have to pay GST on the purchase of RON95 petrol, diesel and LPG.

Najib said in improving public finance position, the government was committed to implement subsidy rationalisation, particularly for petroleum.

This rationalisation was aimed at ensuring a more targeted subsidy, reduce leakages and smuggling.

Najib said in 1994, the government allocated RM588 million for various subsidies but the amount had swelled to RM40.5 billion in 2014.

To ensure a more targeted subsidy and taking into account the rakyat's awareness and readiness to subsidy rationalisation, the government would develop a new mechanism to provide petroleum subsidy.

"I will announce the new mechanism soon," he said.

Meanwhile, though faced with various obstacles and challenges, he said the Malaysian economy prevailed to be strong and resilient, registering a 6.3 per cent GDP growth in the first half of 2014, the highest among Asean countries.

The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI) has risen 114 per cent from 884.45 points in January 2009 to 1,892.65 points in July 2014, while market capitalisation rose 162 per cent from RM667.87 billion to RM1,749.49 billion on Oct 7,2014.

Najib also said foreign direct investment, totalling RM38.7 billion, in 2013 was the highest realised to date.

On banking, the prime minister said the government would introduce a new shariah-compliant investment product next year, called the Investment Account Platform (IAP), with an initial start-up fund of RM150 million.

The IAP, which provide opportunities to investors in financing entrepreneurial activities, would also be a platform to attract investors and strengthen the Islamic financial market.

Najib also proposed deductions for expenses incurred in the issuance of sukuk based on Ijarah and Wakalah principles to be extended for another three years until 2018.

To promote the domestic shipping industry, the government would establish the Malaysia Protection and Indemnity Club under the Exim Bank to assist owners of cargo ships with gross tonnage not exceeding 300 tonnes.

The government would also enhance the special incentives packages provided under the economic corridors to include more areas that are less developed.

In promoting high-quality and focused investment, Najib announced that a more specialised incentive package would be offered for investment projects based on technology, innovation and knowledge, involving highly qualified and knowledgeable employees with high salaries.

He said the government would also provide incentives in the form of capital allowance on automation expenditure to encourage automation in the manufacturing sector.

For the commodity sector, Najib said the export duty exemption for crude palm oil would be extended until December 2014.

He said the government would also allocate RM41 million to provide incentives for new planting and replanting for oil palm smallholders.

Meanwhile, the Malaysian Rubber Board would allocate RM100 million to implement a regulatory price mechanism at the farm level to protect smallholders from losses incurred, particularly when the world market price falls below a minimum fixed price.

"MRB will also provide soft loans of RM6.4 million as working capital to 64 smallholder cooperatives to purchase rubber directly from 442,000 rubber smallholders nationwide," he said.

In his more than two-hour speech, Najib stressed that various strategies were carefully and systematically planned to develop the economy to reach the present level of success.

"Many people are not aware that the process to develop and prosper the nation has not been easy. It takes hard work, comprehensive plans, as well as, painful and unpopular decisions.