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Date [ 2015-02-28, 05:43 ]

Various assumptions have been made on the economic performance for this year, and it will have to be a wait –and-see game.


(Kuala Lumpur=Koreanpress) Lui Lai Keen = The Malaysian economy slowed down from a high of 6.5% in 2Q 2014 to +5.6% in 3Q. It is likely to go down further in the 4Q and into the early months of 2015. The public is already feeling the impact of policies that were introduced in the past two years and which have now began to tighten. Come April 1, 2015 the dreaded Goods and Services Taxes (GST) will come into effect No one is yet sure what will be the impact of the GST but currently the common men is in apprehension of it.

A sudden spanner in the works was thrown when Brent fell as low as USD30. The low crude oil prices will likely act as a damper for in-coming private investment and government spending. While this is a setback, not only for Malaysia but also other Southeast Asian economies, the decline in oil prices in the US will shore up its economy as well as others major importers of oil.

This is backed by the fact that already, the US economy has shown consistent growth, especially in the last four years with a job market that continues to grow. The result is the sustainment of consumer spending, leading on to economic recovery. However, a downward pull by the Eurozone, Chinese and Japanese markets, could affect Malaysia’s export growth.

Despite this, Malaysia’s GDP is expected to grow by at least 5.0% in 2015. For 2014, the real GDP will probably grow at minimum 5.8%. Meanwhile the Government is more hopeful, forecasting a GDP growth of 5.5% - 6.0% for 2014 and a 5.0% - 6.0% growth for 2015.

There is no avoiding lower oil prices and the implementation of GST. It will likely constrict domestic demand, leading to a very moderate increase in consumer spendingand private investment. It is also expected about this time, earlier policies to control rising household debt, cool down property speculation and the Government tight fiscal consolidation drive should limit economic growth.

One of Malaysia’s biggest MNCs, Petronas created shock waves when it announced cutbacks to its capital expenditure by 15%-20% in 2015. This will dampen private investments especially in the oil and gas sector in 2015. However, we can still expect strong investment interest in the oil and gas sector in Pengerang, spurred by the investments already announced in 2014.

Falling crude oil prices will likely cause an impact on the Government’s fiscal position, as oil revenue still accounts for about 1/3 of the total revenue in 2014. Should Petronas decide to pay less dividends (due to its lower profits); Najib will have to resort to using contingency funds and cutting part of development expenditure.

As It Stands

The Budget does its best to alleviate the lives of Malaysians and a start has been made with a reduction in taxes.Individual income tax rates are to be reduced by 1 to 3%, resulting in 300,000 individual taxpayers freed from paying income tax.

The working disabled will have their allowances increased from RM300 to RM350 and financial assistance for non-working disabled persons to be increased from RM150 to RM200. Each disabled child will have an increased tax relief from RM5, 000 to RM6, 000.

Formedical expenses and treatment of serious diseases, the existing tax relief could be increased from RM5, 000 to RM6, 000 per year.

Subsidies

A bugbear for the Government, it plans to reduce the overall bill for subsidies and cash assistance by 7% to RM37.7 billion in 2015, which came up to RM40.6 billion in 2014.

It has lived up to its promise of reducing petrol prices which have come down from a high RM2.30 to the current RM1.70. The reform of the petroleum subsidy is still continuing with the aim of benefitting the lower income group.

Property

There is now a 50% stamp duty exemption for first time home buyers with an increase of the purchase limit from RM400, 000 to RM500, 000. This exemption will be given until the end of 2016.

Next, a 10% loan guarantee will enable borrowers to obtain full financing including cost of insurance. Home buyers canwithdraw from EPF Account 2 to top up their monthly installment and other related costs.  However, this privilege is offered on a "first come, first served basis’ for 20,000 units only.

Education

A sum ofRM325 million to be allocated for the 1Malaysia Book Voucher Programme, benefitting about 1.3 million students.  All 5.4 million primary and secondary students to continue receiving the RM100 allowance.To increase student intake in vocational colleges, community colleges, as well as upgrading them,RM1.2 billion will be allocated to them.Another RM1.05 billion allocated to develop and maintain educational facilities.RM3 billion allocated for education sponsorship via the Public Service Dept (JPA), Education Ministry and Health Ministry. Also a RM30 million fund set up for training and technical assistance of youth from low income Indian families.

Health

Tax relief for medical expenses and treatment of serious illnesses, ranging from cancer, kidney failure to heart attack has been increased to RM6, 000 per year. To set up 30 more 1Malaysia clinics with 30 doctors in these clinics.

Public Transportation

To be improvedby providing intercity bus services to those residing outside Kuala Lumpur (KL) but work in the capital. This will be offered with a discounted monthly fare of 30%. For a start, three bus routes, Rawang-KL, Klang-KL and Seremban-KL will begin services.Several states will upgrade their stage bus services through a contracting system with existing bus companies. These will be implemented in phases in Kuching, Ipoh, Seremban, Kuala Terengganu and Kangar. Also Electric Train Service (ETS) from Ipoh-Butterworth will start this April 2015.

Entrepreneurship

This year,TEKUN will 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 is also available.

Additional allocation of RM30 million to entrepreneurs under Skim Usahawan Permulaan Bumiputera (Superb), with participation to extend to East Malaysia. To stir the spirit of entrepreneurship among Indian women,RM30 million has been allocated through Amanah Ikhtiar Malaysia.

To attract more expatriate entrepreneurs establish startups in Malaysia, the paid-up capital is set at RM75, 000.Eligible expatriates will obtain a work pass for one year.

BR1M

Those earning RM3, 000 and below will have an increased payment of RM950 from RM650.
Those earning RM3, 000 to RM4, 000, the increase is to RM750 from RM450. Payment for them will be made in three installments - January, May and September.Those aged 21 and above, with income not exceeding RM2, 000, BR1M increased to RM350 from RM300 in one-off payment early next year.

National security

To beef up security, RM17.7 billion allocated to Angkatan Tentera Malaysia, RM9.1 bil to the PDRM, and RM804 mil to Maritime Enforcement Agency Malaysia. To combat terrorist kidnappings, RM660 million allocated for Eastern Sabah Security Zone. RELA will get a sum of RM117 million under the Ministry of Home Affairs for training and capacity building.

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% of last year.

abc@koreanpress.net

 
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