Malaysia revised budget 2015: cuts RM5.5 bil, deficit target 3.2%, focus on manufactured goods

Prime Minister Datuk Seri Najib Razak delivers his speech on the revision of the Budget 2015 at the Putrajaya International Convention Centre today. He said a slew of cuts amounting to RM5.5 billion will take place as part of Putrajaya’s proactive measures. – The Malaysian Insider pic by Nazir Sufari, January 20, 2015.

Prime Minister Datuk Seri Najib Razak today announced a slew of budget cuts amounting to RM5.5 billion as part of Putrajaya’s “proactive measures” to align itself with plunging global oil prices and revised world economic growth projections.

The cuts would come from the Budget 2015’s operational expenditures that were initially set at RM223.4 billion, while the RM48.5 billion for development would remain untouched, Najib said in his speech today at the Putrajaya International Convention Centre.

Also, the fiscal deficit target of 3% of the Gross Domestic Product (GDP) for the year has been revised to 3.2%.

Najib said this was still lower than 2014’s fiscal deficit of 3.5%. The "proactive measures" to achieve the RM5.5 billion savings are:

“(The government will) optimise outlays on supplies and services, especially overseas travel, events and functions and use of professional services. This will result in savings of RM1.6 billion.

“Second, defer the 2015 Program Latihan Khidmat Negara (National Service) to enable the programme to be reviewed and enhanced, with savings expected at RM400 million.

“Third, review transfers and grants to statutory bodies, GLCs, Government Trust Funds, particularly those with a steady revenue stream and high reserves. This measure will result in savings of RM3.2 billion.

“Fourth, reschedule the purchase of non-critical assets, especially office equipment, software and vehicles, with an expected savings of RM300 million.”

Najib said Putrajaya’s revenue would be enhanced by encouraging companies to register with the Royal Malaysian Customs to enable them to charge and collect the goods and services tax (GST).

He estimated that broadening the tax base would contribute an additional RM1 billion.

Putrajaya would also realise additional dividends from GLCs and GLICs as well as other government entities amounting to RM400 million, said Najib.

He added that the revisions to the budget were necessary as Putrajaya would otherwise face a revenue shortfall of RM8.3 billion due to falling crude oil prices, despite savings of RM10.7 billion after doing away with fuel subsidies.

“Without any fiscal measures, the deficit will increase to 3.9% of GDP against the target of 4% for 2015.

“This requires the government to take measures to reduce the deficit, in line with the government’s commitment towards fiscal consolidation.”

Najib said the GDP growth target between 5% and 6% had been revised to between 4.5% to 5.5%.

To ensure economic growth remained strong, he said Putrajaya would boost exports of goods and services, enhance private consumption, and accelerate private investment.

Among its strategies are postponing the scheduled electricity tariff and gas price hike, and increasing nationwide mega sales.

Meanwhile, Najib announced an initial allocation of RM800 million for the repair and construction of basic infrastructures affected by the recent floods, and another RM893 million for flood mitigation projects.

These included building eight-foot high stilt houses for those who have land and whose homes were damaged by the floods, and handing over 1,000 units of low-cost homes in Gua Musang, Kelantan.

As he concluded his speech, he told Malaysians the country was not in a financial crisis or recession, but simply taking pre-emptive measures.

“We are neither in recession nor a crisis as experienced in 1997, 1998 and 2009, which warranted stimulus packages.

“The strategies announced by the government are proactive initiatives to make the necessary adjustments following the challenging external developments which are beyond our control.

“This is a reality check following, among others, declining global crude oil prices,” he added. – January 20, 2015.

By ANISAH SHUKRY The Malaysian Insider

Focus on Malaysian-manufactured goods

PETALING JAYA: The impact of the reduction in global oil prices from US$100 to US$40 per barrel can be offset by a rise in demand for Malaysian-manufactured goods, said Prime Minister Datuk Seri Najib Tun Razak (pic) on Tuesday.

Najib, who announced revisions to the 2015 Budget which was tabled in October 2014, said that this could be done as crude oil only makes up 4.5% of the nation's total exports.

"The reduction in the price of crude oil will indirectly increase demand in Malaysia-made products. We will actively promote 'import-substitution' to reduce our dependency on external sources to obtain goods and services," said Najib.

He added that the Government initiatives would be created to increase the use of the private sector.

"We will give priority to local Class G1 (Class F), G2 (Class E) and G3 (Class D) contractors registered with the Construction Industry Development Board to carry out recovery works in their local areas affected by the east coast flood," said Najib.

He added that the Government would intensify promotions encouraging the public to buy made-in-Malaysia products.

"We will increase the frequency and duration of mega sales throughout the nation, and intensify domestic tourism promotions by offering competitive airfares," said Najib.

He also said that the Government would encourage the private sector to reap opportunities created by the Asean Economic Community.

"We will also intensify programmes to boost exports of Malaysian goods in 46 nations across Asia, Europe, the Middle East and America," said Najib.

In his speech, Najib said the adjustment to the 2015 Budget was necessary to "ensure our economy continues to attain respectable and reasonable growth, and development for the nation and rakyat continues" as the 2015 Budget was based on the price of crude oil remaining at US$100 per barrel.

"Based on a crude oil price of US$100 per barrel and taking government saving measures and retail price controls into account, the Government was expected to have a fiscal profit of RM3.7bil. However, with the current price of oil at US$55 a barrel, the government will lose RM13.8bil in income," said Najib.

By Tan Ti Liang The Star/Asia News Network

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Crude oil prices fall: subsidy needless, ringgit weaken, fiscal health affected

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DESPITE the geopolitical uncertainties in recent months – Islamic State of Iraq terrorism, Russian-Ukraine tension,Israel-Gaza conflict – Brent crude oil price has fallen to a new four-year low on Nov 13 at US$77.9 per barrel.

This is a significant drop from the average price of US$112 per barrel in June 2014. The floor price support is still not yet in sight and the downward spiral of prices seems likely to persist into 2015.

The key factors contributing to the recent drop in prices are large crude oil supply from American shale oil production, weakening demand from a subdued global economic growth outlook and also a stronger US dollar in the recent months.

Malaysia’s economy is very much dependent on the oil and gas sector. From the federal government budget revenue to the country’s exports of crude oil and petroleum products, the issue of falling crude oil prices warrants a closer inspection.

Government estimates gone awry

The Government’s projection of its fiscal position and overall economy in Budget 2015 is based on the assumption that the average Brent crude oil price would be US$105 per barrel in 2014 and US$100 per barrel in 2015. Given the substantial differences from the current market prices, the Government’s projections may no longer be in sync with the economic reality.

Budget net loss from oil prices downtrend

One notable impact of falling crude oil prices is on the government’s budget finances. On one hand, the oil and gas sector has been contributing a third to the government’s budget revenue since 2005. At the same time, the Government spends a substantial amount of its operating expenditure on fuel subsidies – an estimated of 8.5% of budget operating expenditure in 2014. Therefore, sliding crude oil prices is a double-edge sword to the country’s fiscal health.

To put the issue in perspective, the estimated budget revenue contribution from the oil and gas sector is around 6% of gross domestic product (GDP)in recent years while fuel subsidy costs the government around 1.7% of GDP in 2014. As such, the impact of lower budget revenue will outweigh expenditure savings from lower fuel subsidy cost.

Therefore, if the current blanket fuel subsidy mechanism is left status quo in light of falling crude oil prices, the circumstances would risk our nation’s fiscal deficit targets. Keep in mind that the government has committed to reduce the current fiscal deficit to GDP estimate of 3.5% in 2014 to 3% in 2015 and ultimately achieve a balanced budget by 2020.

Timely goods and services tax

No doubt the heavy dependency on the volatile oil and gas sector for budget revenue is beginning to show signs of cracks. The issue is even more pressing now that budget revenue is squeezed from falling crude oil prices.

Therefore, the broad-based goods and services tax (GST), which will enhance tax revenue collection, is considered timely at this juncture. However, the implementation of GST is only part of the long term solution to fiscal sustainability. The government must also look into the expenditure side of the budget finance to manage its fiscal prudence.

New subsidy mechanism or market prices?

Based on the current crude oil prices, the government is only subsidising RM0.13 per litre for RON95 and RM0.12 per litre for diesel in November, compared to RM0.47 per litre subsidy for RON95 and RM0.59 per litre subsidy for diesel in September – before the October RM0.20 per litre fuel price hike.

According to the Finance Ministry, if global crude oil prices fall to a low of between US$70 and US$75 per barrel, the Government would not be providing any subsidy for fuel at the current fixed price of RM2.30 per litre for RON95 and RM2.20 per litre for diesel.

Since the market pump prices are approaching a level that would require no subsidy at all, there is an urgent concern to review the sustainability of the current blanket fuel subsidy approach.Although the government has proposed to initiate a new targeted fuel subsidy rationalisation programme based on individual income thresholds, the circumstances demand a review of subsidy provisions.

Ultimately, fuel subsidy is not sustainable in the long run. Whether the government initiates a tiered fuel subsidy provision or not, the reality is that fuel subsidy should not be entrenched indefinitely.

To plan ahead for fiscal prudence, the government’s initiative to move towards a managed float pump prices is appropriate at this juncture.

When global crude oil prices are depressed, consumers would certainly rejoice. However, when there is a reversal of crude oil prices, the government could then step in to provide targeted assistance to the low-income households. As the government would be sensitive to the impact of rising cost to the low-income group, savings from fuel subsidy expenditure could be channelled to the targeted needy households.

The Bantuan Rakyat 1Malaysia (BR1M) provisions for eligible households and single individuals amount to around RM4.9bil in 2015, benefitting around 7 million recipients. Therefore, the low-income group has already been identified through the BR1M database. The government can consider to top up on BR1M with a supplementary monetary provisions equivalent to a cost of living allowance to compensate for the upside volatility of market fuel prices.

If the government would consider providing an additional RM250 to its BR1M provision for each eligible households and single individuals as the supplementary allowance, total BR1M payment for eligible recipients in 2015 would amount to around RM6.7bil.

Therefore, from the perspective of fiscal management, doing away with fuel subsidies would greatly assist the government to meet its fiscal objectives. From Budget 2015, the Government has allocated around RM37.7bil for subsidy expenditures. Based on historical trend, around 55% of total subsidy allocated is for fuel subsidies.

If the government considers abolishing subsidies for fuel in 2015, it could save up to RM20.7bil from the operating expenditure. Given that the projected fiscal deficit is around RM35.7bil for 2015, the savings from fuel subsidy will assist the government to meet its fiscal deficit targets. Furthermore, the government can also save billions of ringgit for money not spent on upgrading petrol pumps to accommodate the proposed tiered fuel subsidy mechanism.

As long as the provision for the additional supplementary allowance to BR1M does not exceed the savings from fuel subsidy expenditure, subsidies would be channelled to the targeted group while narrowing the fiscal deficit along the way.The cost of living allowance can be claimed through the BR1M distribution channel. This will assist the government to meet its fiscal deficit to GDP targets.

One way or another, it is still monetary subsidy provisions by the government. However, a more targeted approach to distributing provisions and also doing away with the heavy dependency on subsidies are the right approach moving forward not only for the fiscal health but also to the fundamental competitiveness of the economy.

By Manokaran Mottain, chief economist at Alliance Bank Malaysia Bhd.

Ringgit Falls for Sixth Week in Longest Stretch This Year on Oil

Malaysia’s ringgit fell for a sixth week, the longest losing streak this year, as a slump in crude oil prices threatens to crimp government revenue in a nation that’s a net exporter of the fuel.

The ringgit is Southeast Asia’s worst-performing currency in the second half as Brent crude lost 29 percent since the end of June. Oil-related industries account for 30 percent of government revenue. While a weaker exchange rate helps lower export prices it makes imports more expensive. A report today showed inflation quickened to 2.8 percent in October from a year earlier, compared with 2.6 percent the previous month.

“The drop in commodity prices, especially crude oil, is to be blamed for the ringgit weakness,” said Wong Chee Seng, a foreign-exchange strategist at AmBank Group in Kuala Lumpur. “The fact that the ringgit is a high-beta currency also didn’t help,” he said, referring to a measure of volatility.

The ringgit depreciated 0.3 percent from Nov. 14 to 3.3555 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.3681 yesterday, the weakest level since March 2010, and has lost 4.3 percent since June 30.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options and a gauge of risk, increased 16 basis points, or 0.16 percentage point, to 7.15 percent this week.

Subsidy Announcement

The ringgit led gains among Asian currencies today, rising 0.3 percent, after the government said in a statement that it will remove subsidies for fuel and diesel from Dec. 1 and as Brent rebounded.

“The ringgit strengthened today because of the increase in crude oil prices,” said Saktiandi Supaat, the Singapore-based head of foreign-exchange research at Malayan Banking Bhd. “The announcement on the subsidy removal gave further support.”

Malaysia’s 10-year government notes fell for a second week. The yield on the 4.181 percent securities maturing in July 2024 rose three basis points to 3.9 percent, data compiled by Bloomberg show. The yield dropped three basis points today. - Bloomberg

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Home, sweet home for young couples will lead to housing industry boon in M'sia

A NEW Youth Housing Scheme has been set up by the Government to help young couples, whose household income does not exceed RM10,000, buy their first home.

Prime Minister Datuk Seri Najib Tun Razak said the maximum 35-year loan offered a funding limit not exceeding RM500,000 for married youth, aged between 25 and 40 years old.

“The Government will provide monthly financial assistance of RM200 to borrowers for the first two years to reduce the burden of monthly instalments,” he said.

Najib described the scheme as a smart partnership between the Government, Bank Simpanan Nasional, Employees Provident Fund (EPF) and Cagamas.

The Government will also give a 50% stamp duty exemption on the instrument of transfer and loan agreements, as well as 10% loan guarantee to enable borrowers to obtain full financing, including cost of insurance.

Borrowers can also withdraw from their EPF Account 2 to top up their monthly instalment and other related costs.

“I urge the youth to grab this opportunity which is offered on first-come-first-served basis for 20,000 units only,” he said.

To address the issue of home ow­­nership at affordable prices, RM1.3bil will be allocated to build 80,000 units under the 1Malaysia People’s Housing Programme (PR1MA).

To enable more people to own houses, under the scheme, the cei­ling of household income has been raised from RM8,000 to RM10,000.

“In addition, a Rent-To-Own Scheme will be introduced specifically for individuals who are unable to obtain bank financing,” he said.

RM644mil will be allocated to the National Housing Department (JPN) to build 26,000 units under the People’s Housing Programme (PPR).

He said Syarikat Perumahan Negara Berhad (SPNB) would build 12,000 units of Rumah Mesra Rakyat, 5,000 units of Rumah Idaman Rakyat and 20,000 units of Rumah Aspirasi Rakyat on privately-owned land.

For first-time house buyers, the Government has agreed to extend the 50% stamp duty exemption and increase the purchase limit from RM400,000 to RM500,000.

Exemption will be given until Dec 31, 2016.

The minimum eligibility for hou­sing loans will be increased from RM80,000 to RM120,000 while the maximum eligibility limit will be increased from RM450,000 to RM600,000.

The RM100 application processing fee for housing loan will be abo­lished.

The Government will improve the1Malaysia Civil Servants’ Housing (PPA1M) by reducing the minimum price of houses currently at RM150,000 to RM90,000 per unit.

He added that the qualifying requirement of household income for this would be increased from RM8,000 to RM10,000 per month.

Housing industry boon

PETALING JAYA: Measures under Budget 2015 will positively impact the housing industry, especially in promoting home ownership among the lower and middle income group, said the Real Estate and Housing Developers’ Association Malaysia (Rehda).

The association supported the Government’s effort to raise the ceiling of household income from RM8,000 to RM10,000 for PR1MA homes and the Rent-To-Own scheme to help those unable to obtain financing, said Rehda president Datuk Seri FD Iskandar.

He said Rehda also lauded the new Youth Housing Scheme which would “certainly benefit young couples who wish to own a home.”

He said the 10% loan guarantee to enable borrowers to obtain full financing and the RM200 monthly financial aid would help reduce the burden of borrowers.

HBA secretary-general Chang Kim Loong also said the housing scheme for young married couples was commendable.

However Chang said providing the RM200 subsidy, in the first two-years, may send a wrong message.

He said borrowers may start to spend beyond their means and might end up in financial difficulty after the subsidy ends.

Chang said the Government must also ensure eligible first time house buyers actually stay in these units and not rent it out.

Chang said HBA supported the move to build more affordable housing but wanted these homes to reach the right target market. “These homes must be built at the right place and reasonable prices of between RM150,000 to RM300,000; and not more than RM400,000 in prime locations,” he said.

By Neville Spykerman The Star/Asia News Network

‘First-time house-buyers will spur property market’

GEORGE TOWN: First-time housebuyers are sure to spur the property market following the introduction of the Youth Housing Scheme.

International Real Estate Federation Malaysia vice-president Michael Geh said the scheme announced under Budget 2015 will help them to own property costing less than RM500,000.

He said the property market had been “cool” for the past six months since the developers interest-bearing scheme was abolished, resulting in many first-time buyers unable to obtain bank loans.

“The scheme shows our Government is well aware of the plight faced by this group.

“It will certainly spur the property market,” he said.

The scheme, a smart partnership between the Government, Bank Simpanan Nasional, Employees Provident Fund and Cagamas, is offered on a first-come first-served basis for 20,000 units only.

It offers a funding limit for a first home not exceeding RM500,000 for married couples between 25 and 40 years old with a household income not exceeding RM10,000. The maximum loan period is 35 years.

The Malaysian Association of Hotels Penang Chapter said that the RM89bil from tourism targeted under Budget 2015 was an ambitious figure.

Its chairman Khoo Boo Lim said the RM316mil allocation for various programmes under the Ministry of Tourism and Culture should be used wisely to ensure good returns.

By Tan Sin Chow AND Chong Kah Yuan The Star/Asia News Network

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Najib, who is Finance Minister, had presented his budget speech at 4pm in the Dewan Rakyat on October 10, 2014  Here are highlights: ...

Malaysian Tax Budget 2015 Highlights and Snapshots

Najib, who is Finance Minister, had presented his budget speech at 4pm in the Dewan Rakyat on October 10, 2014  Here are highlights:

While Prime Minister Datuk Seri Najib Razak described Budget 2015 as being a balance between the capital economy and people’s economy, analysts said the budget contained little to move markets either way.

This, according to analysts, should be a relief for a country where around 47% of the government’s bonds are held by foreigners.

“I would say probably largely a non-event from the market perspective,” said Wellian Wiranto, an economist at OCBC Bank in Singapore.

“It’s not highlighting anything new…but in many ways the lack of surprises is actually a good thing.”

Read more: http://www.therakyatpost.com/business/2014/10/11/snapshot-budget-2015/#ixzz3FoHBb9tI

* Najib announces the theme for this year's budget as "Budget 2015: The People's Economy".

* The allocation for Budget 2015 is RM273.9 billion, an increase of RM9.8 billion from the last budget.

* Government aims to lower fiscal deficit to 3.0% in 2015 from an expected 3.5% this year

* Operating expenditure RM223.4 billion, development expenditure RM50.5 billion.

* Payments to civil servants of RM65.6 billion is largest operating expenditure item.

*Federal government revenue collection estimated at RM235.2 billion in 2015, an increase of RM10.2 billion from 2014.

* From an economic perspective, when we achieved independence 57 years ago, we developed the country based on agriculture before progressing to a modern industrialised economy. Next, we moved into the upper-middle income phase. We are now moving towards a services-based economy.

* In brief, the objectives, principles and thrusts of the three Outline Perspective Plans, 10th Malaysia Plan, New Economic Policy, National Development Policy, National Vision Policy and since 2010, the National Transformation Policy, have all focused on poverty eradication, increasing income and restructuring of society. This is with the aim to achieve socio-economic goals; diversify the commodity-based economy; human capital development; enhancing competitiveness of the public and private sectors; higher value chain; inclusive development; as well as transformation of the government, economy, social and politics.

* Clearly, our former leaders in their wisdom have carried out responsibilities to develop Malaysia in their own mould. The struggle started with Tunku Abdul Rahman, followed by Tun Abdul Razak who had implemented development and restructured society, to Tun Hussein Onn who maintained peace and unity. Tun Dr Mahathir Mohamad modernised the country while Tun Abdullah Ahmad Badawi emphasised human capital development.

* Further, the present Government is committed to driving growth with a broader approach to place Malaysia on a strong foundation.

* This is my sixth budget since I assumed leadership of the administration, and the country’s 56th budget. The 2015 Budget completes the 10th Malaysia Plan.

* Further, in May 2015, the 11th Malaysia Plan (11MP) will be launched. At the same time, a new approach known as the Malaysian National Development Strategy (MyNDS) is being formulated.

* MyNDS will be a key basis to planning and preparation of programmes and projects under 11MP. The emphasis is on using limited resources optimally, with focus on high-impact projects and programmes at low cost as well as efficient and rapid implementation. This means Budget 2016 will be the trigger to the final five years of Malaysia’s progress to a high-income advanced economy by 2020.

* Many countries such as Korea, Germany, Japan, Taiwan and China began their economic progress based on agriculture and have since moved to an economy that emphasises high level of knowledge, skills, innovation and expertise.

* To remain resilient and competitive, Malaysia must move to an economy based on knowledge, high skills, expertise, creativity and innovation.

* Indeed, from the economic perspective, a rapidly developing country typically generates wealth through capital economy activities. However, the rakyat voice their grievances and complaints through blogs, letters, meetings, interviews and dialogues over the millions spent, billions allocated and various mega projects questioning the benefits to the people.

* In 2015, with the implementation of the Goods and Services Tax (GST) government revenue is estimated at RM23.2 billion. However, as a caring government, we have exempted several goods from GST amounting to RM3.8 billion.

* With the implementation of GST, the Sales and Services Tax (SST), will be abolished resulting in revenue foregone of RM13.8 billion. This means that after deducting RM13.8 billion and RM3.8 billion from a revenue of RM23.2 billion, the Government will have a balance of RM5.6 billion.

* Of the total, RM4.9 billion is channelled back to the people through assistance programmes such as the increase in Bantuan Rakyat 1Malaysia (BR1M). Finally, net revenue collection from GST will only amount to RM690 million.

* Goods and Services Tax (GST) : RON95 petrol, diesel and liquefied petroleum gas (LPG) exempted from GST.

* Revenue from GST in 2015 estimated at RM23.2 billion.

* Exemption of GST on several goods amounting to RM3.8 billion.

* Abolishment of SST will see RM13.8 billion in revenue forgone.

* Net revenue collection from GST will only amount to RM690 million.

* Establish another 20 KR1M in Peninsular Malaysia.

* Set up price watch team comprising consumer associations.

* Strengthen GST Enforcement Unit with 2,270 personnel, Price Monitoring Unit with 1,300 personnel and Consumer Squads with 202,800 volunteers as well as involve 579 mukim and village heads.

* Electricity consumption not subject to GST increased from the first 200 units to 300 units, move to benefit 70% of households.

* Income Tax: Income tax rates to be cut by one to three percentage points. Families with monthly income of less than RM4,000 will not have to pay tax

* From 2016, the corporate tax rate will be reduced by one percentage point from 25% to 24%, and for small and medium sized enterprises to 19% from 20%.

* Infrastructure: LRT3 linking Bandar Utama, Shah Alam and Klang: RM9 billion

* 45-km second MRT line from Selayang to Putrajaya: RM23 bilionThe subsidies rationalisation will continue, Najib said today. - The Malaysian Insider graphics by Heza Kamaruddin, October 10, 2014.The subsidies rationalisation will continue, Najib said today. - The Malaysian Insider graphics by Heza Kamaruddin, October 10, 2014.

* Upgrade of East Cost railway: RM150 million

* 36-km East Klang Valley Expressway (EKVE): RM1.6 billion

* 47-km Damansara-Shah Alam Elevated Expressway: RM4.2 billion

* Subsidies: Government plans to reduce the overall bill for subsidies and cash assistance by 7% to RM37.7 billion in 2015 from RM40.6 billion in 2014.

* Govenment will reform the petroleum subsidy regime soon, to adopt a system that benefits the lower income group.

* Highspeed Broadband: Total of RM2.7 billion will be spent over the next three years to build 1,000 new telecommunications towers and laying of undersea cables.

* Property: Budget extends 50% stamp duty exemption for first time home buyers and increases the purchase limit from RM400,000 to RM500,000. The exemption will be given until the end of 2016.

* A 10% loan guarantee to enable borrowers to obtain full financing including cost of insurance. Borrowers can also withdraw from EPF Account 2 to top up their monthly installment and other related costs.

* This guarantee is offered on a "first come, first served basis’ for 20,000 units only.

* Ceiling of household income for PR1MA homes increased to RM10,000, RM1.3 billion to be allocated to build 80,000 units PR1MA homes.

* Education: RM325 million to be allocated for the 1Malaysia Book Voucher Programme, benefitting about 1.3 million students.

* RM100 schooling assistance to all 5.4 million primary and secondary students to continue.

* A total of RM1.2 billion will be allocated to increase student intake in vocational colleges and community colleges as well as upgrading colleges.

* RM1.05 billion allocated to develop and maintain education facilities, and for school upgrade programmes.

* RM3 billion allocated for education sponsorship via the Public Service Dept (JPA) , Education Ministry and Health Ministry.

* RM30 millon fund set up for training and technical assistance of youth from low income Indian families.

* Health: Tax relief for medical expenses and treatment for serious illnesses such as cancer, kidney failure and heart attack increased to RM6,000 per year.

* 30 more 1Malaysia clinics and a health clinic in Cyberjaya will be built. The Government will station 30 doctors in these clinics.

 * Sports: An allocation of RM103 million to implement a Sporting Nation Blueprint.

* Identify sports talent starting from primary school through Malaysian Talent Identification programme. The programme involves testing, screening and talent specialisation among students.

* Improve the quality of high-performance sports for six selected fields in the first phase - Football, Cycling, Badminton, Sepak Takraw, Swimming and Athletics.

* Public transportation: Provide intercity bus services to those residing outside Kuala Lumpur (KL) but work in KL. The service will be offered with a discounted monthly fare of 30%. For a start, three bus routes will be operational namely the Rawang-KL, Klang-KL and Seremban-KL.

* Provide Electric Train Service (ETS) for Ipoh-Butterworth route starting April 2015.

* Upgrade stage bus services in several states through a contracting system with existing bus companies. The programme will be implemented in phases in Kuching, Ipoh, Seremban, Kuala Terengganu and Kangar.

* Tourism: RM316 million set aside for various programmes under Tourism and Culture Ministry.

* Entrepreneurship: In 2015, TEKUN to provide additional funds of RM500 million, of which RM350 million allocated for Bumiputera entrepreneurs, Young Indian Entrepreneurs Financing Scheme (RM50 million), Young Professional Women Entrepreneurs Development Programme (RM50 million), and Armed Forces Veteran Entrepreneur Development Programme (RM50 million).

* Soft loans totalling RM50 million for SME entrepreneurs from Chinese community, and RM30 million for hawkers and petty traders.

* To attract more expatriate entrepreneurs establish startups in Malaysia, the paid-up capital for startups is set at RM75,000.

* Eligible expatriate startup entrepreneurs will be given work pass for one year.

* Additional allocation of RM30 million to entrepreneurs under programme Skim Usahawan Permulaan Bumiputera (Superb), with participation to be enlarged to include East Malaysian entrepreneurs.

* RM30 million to be allocated through Amanah Ikhtiar Malaysia, to inculcate the spirit of entrepreneurship among Indian women.

* BR1M for those earning RM3,000 and below will be increased to RM950 from RM650.

* For those earning RM3,000 to RM4,000, BR1M increased to RM750 (from RM450).

* For the above two categories, payment will be made in three instalments - January, May and September.

* For those aged 21 and above, with income not exceeeding RM2,000, BR1M increased to RM350 (from RM300) in one-off payment early next year.

* Civil service: Half-month bonus to all civil servants with a minimum payment of RM500 to be paid in January 2015.

* Pensioners to receive special financial assistance of RM250.

* Women now represent only 38% of the total workforce in the country. To enhance the contribution of women in national development, women's opportunities to return to the workplace via 1Malaysia Support for Housewife.

* The government will help also professional women return to the workplace via Program Women Career Comeback.

* Women, Family and Community Development Ministry will get RM2.26 billion to enhance contribution of women.

* Student loans: For students with an outstanding amount in their PTPTN loans, a 20% discount will be given if they make a total repayment of their loan, on or before March 31, 2015.

* NGOs: A one-off grant of RM50 million to creditable NGOs, including uniformed bodies that are involved in community development programmes, unity, social welfare, consumerism, health and security.

* National security: RM17.7 billion allocated to Angkatan Tentera Malaysia, RM9.1 bil to the PDRM, and RM804 mil to Maritime Enforcement Agency Malaysia to strengthen maritime enforcement.

* RM660 million allocated for Eastern Sabah Security Zone for increased security.

* A sum of RM117 million will be allocated to strengthen the role of RELA under the Ministry of Home Affairs for training and capacity building. – October 10, 2014.

‘Goodies’ not enough to offset rising living costs, say consumer groups

Despite more cash handouts, lower income tax and a multitude of items exempt from the goods and services tax (GST), consumer groups said Budget 2015 was not enough to offset rising living costs for Malaysians.

Federation of Malaysian Consumers Association (Fomca) CEO Datuk Paul Selvaraj said consumers would still had to pay a premium for housing as well as petrol because of the lack of public transport.

He also said the lack of government enforcement would give rise to profiteering once the GST was implemented April next year at a rate of 6%.

“It looks like the government has taken certain measures to minimise the impact of GST, many are zero-rated, while there is no tax on petrol.

“But our concern is profiteering. I am concerned that sellers will take advantage of the GST and increase the actual price, so zero-rated items will be sold at inflated prices,” Selvaraj told The Malaysian Insider.

“We feel that all items should be labelled – what is zero-rated and what is taxed. The government should also set up a hotline for consumers to turn to if they are unhappy with their purchase.”

Prime Minister Datuk Seri Najib Razak announced yesterday when tabling the budget that the GST was expected to raise RM23.2 billion in revenue. But RM3.8 billion in zero-rated goods would be deducted from this amount.

Selvaraj also said that despite petrol prices having gone up from last week’s subsidy cut, the government did not address alternatives for the rakyat to wean them off their fuel dependency.

On October 2, the government reduced the fuel subsidy of the RON95 petrol and diesel by 20 sen. Petrol now costs RM2.30 a litre compared with RM2.10, while diesel costs RM2.20 compared with RM2 previously.

“The bus system is not being addressed, and it’s to the point that there is no choice for the ordinary people except to rely on their cars to commute.”

Another issue for the average consumers, said Selvaraj, was housing, with homes either being beyond their means or located too far from the city centre that they would have to pay a premium on petrol for their daily commute.

“There have been many efforts to create affordable housing,

but the government hasn’t done enough to make it difficult for speculators to enter the market. The market should have stronger regulators.”

Consumers Association of Penang (CAP) president S.M. Mohamed Idris said he was sceptical that prices would go down once the GST was implemented, despite the long list of exempted items, including RON95 petrol, diesel, noodles, coffee and tea.

“Even if those are exempt, input cost will go up. Transport cost, the cost of raw materials… in the end, you will still pay more,” he told The Malaysian Insider.

“CAP has never agreed with the GST because we say it’s a regressive tax. They should have implemented the more progressive inheritance tax.”

Mohamed also shrugged off the government’s decision to lower income tax by one to three percentage points, noting that this would not benefit the lower-income groups who did not make enough to qualify for income tax.

“We’re talking about only rich consumers benefitting from this. Can you imagine how many millionaires will now be taxed even less? They should have introduced different income tax rates instead.”

He added that the government made a mistake in not implementing the sin tax, noting the economic and social costs alcohol and cigarette consumption had on Malaysians.

“The BR1M is not likely to offset extra costs. I don’t think anyone has done any research on how effective it is for the people. It’s just one-off,” he added, referring to the 1Malaysia People’s Aid cash vouchers.

Najib announced yesterday that BR1M for the lower-income group would be raised from RM650 to RM950 next year, while households earning between RM3,000 and RM4,000 a month would now receive RM750.

Single people aged 21 and above and not earning more than RM2,000 a month are entitled to BR1M worth RM350, an increase of RM50, said Najib.

Datuk Nadzim Johan, an activist from the Malaysian Muslim Consumers Association, said BR1M should not be permanent.

“Our people are not able to appreciate it and we are afraid that it may not be used effectively. It is a liability,” he said.

Unlike the other consumer groups, Nadzim said the budget was too consumer-friendly to the point that it was counterproductive.

“For example, about 1,000 products are exempted from the GST, it’s almost like most products are not taxed. I also think the margin between the present tax and the new tax is too small.

“All in all, I feel that the budget is too soft and Malaysians can’t appreciate it. There shouldn’t be anything for consumers to complain about.” – October 11, 2014.


- The Malaysian Insiders

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