KUALA LUMPUR: Malaysia’s Prime Minister Najib Razak will present the government’s annual budget for 2016 on Oct 23. Below are some items expected by analysts, compiled from research notes and media reports.
PROGRESS ON 1MDB’S INVESTIGATION
Maybank Investment Bank Research among the items that may be raised by the government is its commitment to resolve issues related to 1Malaysia Development Berhad (1MDB) by year-end, resuming a parliamentary inquiry and monetisation of 1MDB’s power assets and landbanks to pare down debts.
BR1M, a programme to hand out cash assistance to households earning less than 4,000 ringgit ($951.25) a month and individuals earning less than 2,000 ringgit, would see an increase of 100 to 200 ringgit, said AmResearch. The expansion in BR1M will likely cost the government 5.6 billion ringgit in 2015, up from 4.9 billion ringgit last year.
GOVERNMENT COMMITMENT TO FISCAL CONSOLIDATION
Moody’s said Malaysia’s rating is dependent on the government’s will to sustain its fiscal consolidation plan. The ratings agency said that given pressures on revenue would continue onto next year due to lower oil prices, it depends on the government if it would cut spending enough to keep with the trend. Malaysia has said that it intends to achieve a balanced budget by 2020, but its initial plan this year to hit a fiscal deficit target of 3 percent of gross domestic growth (GDP) was derailed by the fall in commodity prices. The government revised its growth and fiscal deficit target early this year to reflect global commodity prices. Its fiscal deficit target for 2015 is 3.2 percent of GDP and economic growth between 4.5 to 5.5 percent.
HIGHER MINIMUM WAGE
The minimum wage, first introduced in 2013, may be raised, with the possibility of a single national minimum wage as opposed to current different levels for peninsula Malaysia and East Malaysia, said Maybank.
The Malaysian Trades Union Congress (MTUC) wants the government to raise the minimum wage to 1,200 ringgit nationwide, and reviewed every two years, according to state news agency Bernama.
Revenue collected from Goods and Services Tax (GST) expected to be higher than official estimate, helping to offset stubbornly high operating expenditure, said Kenanga, a Malaysian investment bank.
CORPORATE TAX CUT
If the increase in tax collections from GST allows it, a corporate tax cut of one percentage point to a standard rate of 23 percent could be announced for 2017, Kenanga said.
PERSONAL INCOME TAX
Oversea-Chinese Banking Corp (OCBC) said the government could hike income tax, but notes the country’s tax base is narrow and such a move might hurt the middle income wage group.
DISPOSABLE INCOME BOOST
Measures to increase private consumption possible via income tax relief or a temporary reduction in employee EPF contributions, Kenanga said.
HIGHER VICE TAXES
The government may consider raising taxes for tobacco and alcoholic beverages, said OCBC. However, AmResearch said a hike in taxes for these items is unlikely since there is already an increase in excise duties for tobacco while Malaysia has the second highest duty on beer in the world.
Infrastructure spending would likely focus on rural areas, with plans for highway and railway construction, expansion of fibre optic cables and development of electricity and clean water supply, said MIDF Research.
The government would continue its commitment to high-impact public sector infrastructure and investment projects involving the federal government, government-linked companies and investment funds, said Maybank. The bank highlighted several key projects in the transport sector, the oil and gas project in Pengerang, Johor and development of government land for projects such as the Tun Razak Exchange in Kuala Lumpur.
In transportation, the government is likely to reinterate its commitment to the development of city rail projects and more bus rapid transit projects, said RHB Bank.
RELIANCE ON GLCs
Government may rely heavily on government-linked companies to spearhead the economy via investments and new projects that are financed off-budget, said RHB Bank.
AGRICULTURAL SECTOR BOOST
To improve self sufficiency, the government is expected to introduce measures for the agricultural sector, with investment incentives to focus on agro-business to increase domestic food production, said Maybank and MIDF Research.
SMALL MEDIUM ENTERPRISES(SMEs) TO GET MORE HELP
Funding for the Domestic Investment Strategic Fund, a fund to help some Malaysia-owned companies compete in high value-added industries, said AffinHwang Capital.
REDUCTIONS IN OPERATIONAL EXPENDITURE
Cost cuts likely for public services, Kenanga said.
PROGRAMMES TO RAISE PRODUCTIVITY
Government spending likely to focus on human capital development via education and training, said RHB Bank, AffinHwang and MIDF Research.
Incentives for the private sector to invest in productivity are expected, along with measures to address unemployment, RHB Bank said.
SUPPORT FOR INDUSTRY
The Federation of Malaysian Manufacturers is asking the government to extend the reinvestment allowance, strictly enforce the “buy made-in-Malaysia” policy for government procurements and implement trade facilitation measures to help promote export competitiveness and expansion, local media reports.
Subsidies may be introduced for low and middle income earners using public transport, said MIDF Research.
Government is expected to speed up affordable housing projects for low and middle income groups, said RHB Bank. The bank also expects requirements for affordable housing be loosened by increasing the household income ceiling and reducing minimum holding period from 10 years to 5 years.
The Real Estate and Housing Developers’ Association Malaysia (REHDA) said GST relief should be provided for affordable housing and controlled properties, according to Bernama. ($1 = 4.2800 ringgit) – Reuters
News source: (The Star)