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Some initiatives you may look forward to include a matching grant of RM50mn to encourage the automation of the plantation sector and the creation of 35,000 job opportunities.
Malaysia's Prime Minister and Minister of Finance Datuk Seri Anwar Ibrahim delivered his 2023 Budget speech in Parliament on 24 February 2023, for a Budget amounting to RM388.1bn this year.
Providing more context as to the challengers shaping Malaysia’s economy, PM Anwar opened his speech by sharing that the Government has currently inherited debts and liabilities of RM1.5tn, or 81% of the country’s GDP. In fact, the national debt is further projected to reach RM1.2tn, or more than 60% of GDP for the year 2023.
He also touched on Malaysia’s decline in governance and the need to navigate the global economic uncertainty. Economic challengers also include the inflation rate, which stood at 3.3% in 2022 with a high food inflation rate of 5.8%, and an unemployment rate of 3.6% in 2022 compared to 3.3% pre-pandemic.
Against this backdrop, the Minister introduced 12 main measures as part of the 2023 Budget, under Malaysia MADANI.
Amongst the measures to provide jobs with meaningful income, the Government will continue to encourage the private sector to pay higher wages. As part of this, Malaysia's Social Security Organisation (PERKESO, also known as SOCSO) will provide an incentive of RM600 monthly for three months as an addition to the salary offered to employers who hire TVET graduates. This is estimated to help 17,000 graduates, with RM45 provided for this purpose.
SOCSO will also provide incentives for employers to employ vulnerable groups such as persons with disabilities, ex-convicts, the homeless, and chronically unemployed for up to RM600 monthly for up to three months.
The Government will cover up to RM4,000 in training fees for gig workers to undergo micro-credentials upskilling programme. SOCSO also provides an allowance of RM300 for three months as a replacement income for active gig workers undergoing training programmes. Overall, RM40mn is allocated to benefit 30,000 gig workers.
At the same time, RM1bn will be allocated to fundings by HRDCorp, in implementing skills training programmes for employees and HRDCorp-registered employers, along with accumulated levies.
The Government will also provide an RM50mn matching grant to encourage the automation of the plantation sector through the use of robotics and Artificial Intelligence. This effort seeks to employ skilled local workers.
Next, the Government is looking to create 35,000 job opportunities through jobs placements in Government-related companies, especially for youth, TVET graduates, vulnerable groups, and veterans.
Further measures, such as efforts to minimise the cost of living and to provide excess disposable income to the M40 group, are shared below.
Full the complete list of measures, refer to the Budget speech here.
Fiscal sustainability
As PM Anwar mentioned, the Government is cognisant that there are still businesses that have been affected by the pandemic, especially micro, small and medium enterprises (MSMEs). As part of its efforts, Belanjawan MADANI will ensure local MSMEs are again competitive and able to increase their business capacity. Various facilities including tax reduction and financing are made available to support these businesses.
As such, there will be a reduction of the tax rate for micro-SMEs (Perusahaan Mikro, Kecil dan Sederhana, or PMKS), from 17% to 15% on taxable income for the first RM150,000 from assessment year 2023. This reduction in tax rate is expected to provide savings of up to RM3,000 to 150,000 MSME taxpayers.
The Government will also be allocating RM40bn to the provision for loan facilities and financing guarantees for PMKS.
The Government will provide RM50mn to build and upgrade 3,000 stalls and kiosks as facilities for small hawkers at key locations across the country. This is in line with the intention to support small business facilities.
Further, micro-entrepreneurs and small businesses will be provided with access to financing through agencies such as Bank Negara Malaysia (BNM), BSN, and TEKUN with available fund totalling RM1.7bn:
- Of this, RM300mn is specified to support micro businesses owned by women and youth entrepreneurs.
- BSN is providing more than RM1bn with a focus on MSMEs and hawkers
- TEKUN also provides RM330mn, including RM10mn to support youth from underprivileged background to generate income through business. They will be given capital to venture into delivery services using motorcycles.
- The Government will also fund the driving test fee for B40 youth for class B2 motorcycle licences as well as taxi, buses, and e-hailing licences.
For SMEs, almost RM10bn is provided by BNM, among others to reduce SMEs’ financial burden and to encourage their business development.
Syarikat Jaminan Pembiayaan Perniagaan (SJPP) will guarantee up to RM20bn in SME loans where key sectors such as high technology, agriculture, and manufacturing are provided with Government guarantee of up to 90%. Guarantees will also be expanded to financing by non-banking financial institutions such as credit leasing companies and cooperatives to specifically benefit small businesses
Disaster preparation and management
In preparation for disasters, RM15mn has been provided to Agensi Pengurusan Bencana Negara (National Disaster Management Agency, or NADMA) for asset needs, warning systems, and assistance.
In the same vein, RM50mn has also been provided to Angkatan Tentera Malaysia (Malaysian Armed Forces, or ATM), the Fire and Rescue Department, and Jabatan Sukarelawan Malaysia (RELA) for the provision of equipment and assets.
In an effort to preserve the country's natural treasures, the number of rangers guarding the forest area will be increased to 1,500 people. Aboriginal service, military & police veterans are a priority. A total of RM50mn will be allocated to this.
Dealing with the rakyat’s Issues
In view of recent online fraud or scams, a "kill switch" policy will be implemented to all banking institutions, to enable each user to take immediate action to freeze their accounts, including preventing the use of ATM cards.
Those who have been declared bankrupt will also be entitled to a second chance. As PM Anwar, more than 260,000 bankruptcy cases have been recorded January involving majority of Malay youths, as of January. As part of this measure:
- The Government will amend the Insolvency Act 1967 in order for bankruptcy cases to be automatically discharged quickly.
- While waiting for the amendment of the Act, minor cases involving debts of less than RM50,000 that fulfil the criteria will be immediately discharged beginning 1 March 2023.
- The Government expects 130,000 rakyats to be released from their bankruptcy status with the passing of this amendment.
Facilitating investments
To stimulate investment in high-impact and high-technology sectors, in line with the New Investment Policy, Invest Malaysia Council, along with the National Committee on Investment, will lead efforts in speeding up the approval of high potential investment projects.
The Government plans to extend the tax incentive given to manufacturing companies that relocate to Malaysia and the tax rate of 15% for C-Suite until 2024 to attract companies that were affected by COVID-19 to operate in Malaysia. The aerospace sector will also see an extension of income tax incentives and investment tax allowances until 31 December 2025. This is to further encourage the expansion of existing company capacity and attract more investment.
Bank Pembangunan Malaysia will allocate up to RM6bn for strategic financing specifically to encourage the sustainable agenda and automation, aside from equity support and revolving working capital for high-potential companies that are still affected by COVID-19.
Accelerating infrastructure projects
The Government aims to urgently repair 400 dilapidated clinics and 380 schools with an allocation of RM1.2bn. To expedite the project implementation, the quotation threshold for the procurement of repair works for dilapidated schools and clinics will be increased to RM1mn compared to RM500,000 previously, while the procurement ballot will be increased to RM200,000 from RM100,000 previously.
The Government will accelerate the implementation of the JENDELA project as a national effort to provide access to the Internet. For the year 2023, the Government will allocate RM725mn towards the implementation of digital connectivity in 47 industrial areas and close to 3,700 schools.
To support business automation and digitalisation activities, a total of RM100mn is being allocated under the SME Digitalisation Grant Scheme, which includes small hawkers. A matching grant of up to RM5,000 will be paid to SMEs that subscribe to business digitalisation applications such as POS sales systems, accounting, or inventory management.
In driving this, government-linked companies (GLCs) such as Khazanah and the Employee Provident Fund (Kumpulan Wang Simpanan Pekerja, or KWSP) will invest up to RM1.5bn in innovative and high-growth local startup companies.
Minimising the cost of living & eradicating hardcore poverty
In efforts to mitigate cost-of-living pressures in the country, this year, the Government will provide up to RM64bn through subsidies, assistance, and incentives, with a large amount dedicated to price control of essential goods, financial assistance, and providing services to the rakyat.
First, the Government has introduced the Payung Rahmah Concept as the overarching pillar for its efforts to help the poor and vulnerable. Coming under this is the Menu Rahmah initiative, which offers lunch and dinner sets for this group at RM5.
The Government also implemented the Jualan Rahmah, which offers essential goods that are up to 30% cheaper than the market. A total of RM100mn will be dedicated to making this programme a success in each of the Parliamentary constituencies.
Apart from the above, there will also be an increased allocation of RM225mn, up from RM200mn, to expand the essential goods distribution programme to 25 new zones including Paloh and Passin, Sarawak, Pasir Raja, Terengganu, and Kuala Krai, Kelantan.
Next, the Government has channelled cash assistance to the B40 group under the Sumbangan Tunai Rahmah (STR) Phase 1 programme. Several reforms have been considered so that affected households benefit more from STR.
This will be given out to households with a total income of below RM2,500 (depending on the number of children). At the same time, an additional contribution of RM600 will be made to the poorest STR recipient households, based on e-Kasih data. Costing a total of RM8bn, the STR is expected to help ease cost-of-living pressures for 8.7mn recipients.
Third, the Government will increase the M40’s disposable income by reducing individual income tax rates which will benefit them more. With this, there will be a 2% reduction in the individual resident income tax rate for those earning above RM35,000 and up to RM100,000 a year, starting this year. These reductions are expected to provide approximately 2.4mn taxpayers with excess disposable income of up to RM1,300, yearly.
In a move to eradicate hardcore poverty, about 130,000 individuals will be provided immediate help through more holistic measures. To drive this, the Government will implement the People’s Income Initiative (IPR), which will focus on empowering the poor to increase their income potential. A total of RM750mn is allocated to the Ministry of Economy in 2023 for this initiative.
Several new approaches will also be taken:
- Assistance and facilities to participants are no longer given in a single tranche, but on a monthly basis and will be monitored for sale and lease-back of equipment or employment subsidies for employers who employ hardcore poor participants.
- Participants involved in economic activities must meet the needs of the local community, especially the agricultural and food sectors, to ensure consistent market demand.
- This programme's aim is for participants to earn between RM2,000 to RM2,500 within a 24-month monitoring period and, after that, enable them to generate their own income through the revenue obtained.
Cultural arts, creative works, and language
As part of the Government’s measures to support the efforts of creative artists in promoting arts and culture, a total of RM102mn will be allocated to the Digital Content Fund. This will help to intensify the marketing of local art products and encourage the production of more creative works
In relation to National Higher Education Fund Corporation (PTPTN) loans, the Government will implement a refund discount of up to 20% starting 1 March, and for a period of three months. At the same time, the postponement of repayment to borrowers who earn less than RM1,800 will also be implemented for a period of six months.
Read the full Budget 2023 statement here.
With inputs by Priya Sunil.
Lead image / Screenshot of Budget reading on Ministry of Finance website
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