HIGHLIGHT OF 2ND ECONOMIC STIMULUS PACKAGE

Highlight below the strategy that affect the general worker/businessman

1. Tax

• Double deduction of remuneration
• Increase tax exempted income of retrenchment benefits
• Accelerated Capital Allowance - plant and machinery and renovation
• Carry back of losses
• Levy on foreign worker
• Housing interest deduction

 

2. Cash flow

• Government saving bond
• Exemption/reduction in HDRF contribution

 

3. Finance

• Working capital guarantee scheme
• Industry restructuring loan guarantee scheme

Economic Stimulus Package

(Speech of Second Economics Stimulus Package dated 10th March 2009)

 

Summary of RM60 B (implemented over two year - 2009 and 2010) package are as follow:

This package account for almost 9% of GDP and will result in increased in the Budget deficit from 4.8% to 7.6%.

The Package have four thrust together with the relevant allocation as shown below:

Thrust	RM B
1. Reducing Unemployment and Increasing Employment Opportunities	2
2. Easing the Burden of the Rakyat, in particular, the Vulnerable Groups	10
3. Assisting the Private Sector in Facing the Crisis	29
4. Building Capacity for the Future	19

The package will be implemented over two year in the following form

	Total RM B
Fiscal injection	15
Guarantee funds	25
Equity investments	10
Private finance initiative and off-budget projects	7
Tax incentives	3

fiscal injection

RM10 billion is allocated for 2009 and RM5 billion for 2010.

The RM10 billion for 2009 consists of RM5 billion for operating expenditure and RM5 billion for development expenditure.

 

Summary of various action under the relevant thrust: 

FIRST THRUST: REDUCING UNEMPLOYMENT AND INCREASING EMPLOYMENT OPPORTUNITIES

• Unemployment rate expected to increase to 4.5% (3.7% 2008)
• Since Oct 2008,
  • 25,000 worker retrenched
  • 30,900 temporary laid-off
  • 23900 tpaycuts
  • 100,000 no overtime work

Strategy

1. Providing Training and Creating Employment Opportunities

2. Welfare of Retrenched Workers

3. Creating Job Opportunities in the Public Sector

4. Opportunities for Post-Graduate Education

5. PROSPER Graduate Programme

6. Efforts to Reduce Foreign Workers

 

SECOND THRUST: EASING THE BURDEN OF THE RAKYAT, IN PARTICULAR THE VULNERABLE GROUPS

• Eliminate hardcore poverty by 2010
• assist oil palm and rubber smallholders affected by declining commodity prices
  • through re-planting, integrated farming and livestock breeding schemes
  • in the events income of smallholders falling below poverty line income, assistance under the Social Safety Net Scheme will be extended to them
• ensure prices of necessities and transport cost do not burden the rakyat
  • RM674 M for necessities price subsidies (sugar, bread, wheat flour)
  • RM480 M to curb increase in toll rates
• total subsidies in 2009 RM27.9 M

Strategy

7. Increasing Home Ownership

8. Improving Public Infrastructure

9. Government Savings Bonds

10. Improving School Facilities

11. Basic Amenities in Rural Areas

12. Programmes in Sabah and Sarawak

13. Microcredit Programmes

14. Assisting the Less Fortunate

15. Ensuring Welfare of Retrenched Workers

16. Incentives for Banks to Defer Repayments of Housing Loans

 

THIRD THRUST: ASSISTING THE PRIVATE SECTOR IN FACING THE CRISIS

17. Working Capital Guarantee Scheme

18. Industry Restructuring Loan Guarantee Scheme

19. Facilitating Access to Capital Market

20. Attracting High-Net-Worth and Skilled Individuals

21. Reducing Cost of Doing Business

22. Promoting the Automotive Sector

23. Aviation Industry

24. Accelerated Capital Allowance

25. Carry Back Losses

26. Profit Levy on Oil Palm

27. Promoting Tourism

 

FOURTH THRUST: BUILDING CAPACITY FOR THE FUTURE

28. Investments by Khazanah Nasional Berhad

29. Off-Budget Projects

30. Private Finance Initiative (PFI)

31. Liberalisation of Services Sector

32. Role of Foreign Investment Committee (FIC)

33. Development of Creative Arts Industry

34. Effective Management of Government Financial Resources

Further reading

Appendix 10

Appendix b

Summary of Economics Stimulus Package dated 4th November 2008 (valued at RM7 B)

ESP34. Effective Management of Government Financial Resources

• government procurements will be through open tenders or restricted tenders, except for specific cases
• enhance transparency in management of procurement through e-Perolehan system
• design and build projects will not be allowed except in cases requiring high technical expertise
• project proposal to obtain approval from Standards and Costs Committee
• agencies to implement projects according to cost, cost limits, project scope and plans, as approved
• changes without approval of the Committee will not be allowed
• increase the numbers of professionals (engineers, architects, quantity surveyors) to strengthen the roll and effectiveness of the Committee
• the Committee to submit periodic reports to Cabinet on standards compliance and related issues
• support development of domestic industries through Government procurement
• mandate the use of local materials, products or services and give priority  to local manufacturers
• imported items only if they cannot be sourced locally or cost of local products too high
• encourage private sector to give priority to local products in their procurement.

ESP33. Development of Creative Arts Industry

• RM20M for RTM to implement projects to develop the local music industries

ESP32. Role of Foreign Investment Committee (FIC)

• to formulate new guidelines to reflect its new role of monitoring investments at the makro level
• adopting a more liberal approach to bring positive changes and nurture a more investor-friendly environment to attarct more investment, including FDIs
• at micro level - guidelines focusing only in sectors of national interest
• ports, airports, defence, public transportation, telecommunication

ESP31. Liberalisation of Services Sector

• currently contributes 55% of GDP and hsa potential to contribute more than 70% to GDP as in developed countries
• take steps to bring in more professionals and technology and strengthen competitiveness
• in line with Malaysia's commitments under the ASEAN Framework Agreement on Services, and the World Trade Organisation

ESP30. Private Finance Initiative (PFI)

• RM2B to boost private investment - private companies invited to bid for the funds
• Projects characteristics
• private sector to implement, finance and assume project risks. Revenue generated principally from private sector and not from government sources
• government financial assistance only constitute a small portion of project investment cost.
• must be in strategic sector (education, health and tourism), have high spillover effects, create sustainable job opportunities, enhance nation's competitiveness
• Among projects approved are
• infrastructure for Tanjung Agas industrial park - spur creation of industrial cluster in the Eastern Corridor Economic Region (ECER)
• biotechnology cluster in Iskandar Malaysia - to facilitate FDI inflows
• upgrading traffic infrastructure system around KL Sentral - facilitate new private sector investment valued at RM3B over nest 3 year for development of new offices, hotels and shopping complexes
• Education
• increase the number of scholarships for entry into local private universities
• GLCs committed to establish 10 not-for-profit private schools

ESP29. Off-Budget Projects

• worth RM5B project
• RM2B LCCT at KLIA
• RM250M expansion of Pulau Pinang Airport
• RM2.4B by Malaysia Communication and Multimedia Commission (MCMC) to improve telecommunication structure including
• broadband libraries
• broadband community centres
• basic telephony services in 89 districts in rural areas
• RM100M to construct sky bridge and covered walkways between buildings, especially in the Golden Triangle, Kuala Lumpur

ESP28. Investments by Khazanah Nasional Berhad

• investment fund increased by RM10B
• invested over 2 year
• priority given to domestic investments with high multiplier effects and create job opportunities sector
• telecommunication, technology, tourism, agriculture, life science and Iskandar Malaysia
• 2009
• invest RM3B in telecommunication sector
• facilitate its subsidiary to improve broadband infrastructure
• invest RM1.7B to intensify development of Iskandar Malaysia
• for building of infrastructure, hotels,theme parks and universities
• Agricultural projects include
• 1,000 hectare prawn aquaculture project in Setiu, Terengganu
• 200 hectare modern vegetable-farming project in Cameron Highlands
• By 2011 expected to create 70,000 job opportunity

ESP27. Promoting Tourism

• allocate RM200M to
• upgrade infrastructure in tourist spots
• diversify tourism products
• organise more international conferences and exhibitions in Malaysia
• Strengthen the Malaysia My Second Hone Programme
• Consider issuing work permits to skilled spouses of the programme participants

ESP26. Profit Levy on Oil Palm

• currently windfall levy is imposed when the price of CPO exceeds RM2,000 per tonne
• Increase the threshold to RM2,500 per tonne for Peninsular Malaysia and RM3,000 per tonne for Sabah and Sarawak

ESP25. Carry Back Losses

• to improve business cash flow
• current year losses of up to RM100,000
• carried back to immediate preceding year
• applicable to all businesses including sole proprietors and partnerships
• effective for year of assessment 2009 and 2010

ESP24. Accelerated Capital Allowance

• Expenses on plant and machinery incurred between 10.3.2009 to 31.12.2010 be given Accelerated Capital Allowance - claim within 2 years
• Expenditure on renovation and refurbishment incurred between 10.3.2009 to 31.12.2010 qualified for Accelerated Capital Allowance  claim within 2 years (currently not allowed).
• The allowance is capped at RM100,000 for 8 years of assessment per tax payer.
• the qualifying expenses are
• general electrical installation
• lighting
• gas system
• water system
• litchen fittings
• sanitary fittings
• door, gate, window, grill and roller shutter
• fixed partitions
• flooring
• wall covering
• false ceiling and cornices
• ornamental features or decorations excluding fine art
• canopy or awning
• fitting room or changing room
• children play area
• recreation room for employee
• effective  Year of assessment 2009

ESP23. Aviation Industry

• rebate of 50% on landing charges given for 2 years effective 1.4.2009 to all airlines operate from Malaysia
• This is to encourage more airlines to operate from Malaysia to attract more tourists.

ESP22. Promoting the Automotive Sector

• additional allocation of RM200M to Automotive Development Fund
• establish the Automotive Institute of Malaysia
• assist in auto-scrapping scheme for PROTON and PERODUA
• discount of RM5,000 to car owner trade in their 10 years old (at least) car for new Proton or Perodua
• Government will finance part of the discount

ESP21. Reducing Cost of Doing Business

• exempt levy payments to the Human Resource Development Fund
• for 6 months with effect from 1.2.2009
• for textile, electrical and electronics industries
• reduce levy rate to 0.5% (currently 1%)
• for 2 years effective 1.4.2009
• for all employers

ESP20. Attracting High-Net-Worth and Skilled Individuals

• New programme to offer permanent resident status for
• high-net-worth individual bringing more than USD2M for investments or savings in Malaysia
• highly skilled foreign professionals may also be considered

ESP18. Industry Restructuring Loan Guarantee Scheme

• Objective
• assist viable medium and large enterprises to secure financing to
• mordenise and upgrade business operation ie
• greater automation
• increased productivity
• energy efficiency
• green technology
• Fund size: RM5B
• Guarantee ratio:
• Mid sized company: Government 80: Financial Institution 20
• Large enterprises: Government 50: Financial institution 50
• Guarantee fee: 0.5% on outstanding amount
• Interest rate: determined by Financial institution
• Eligibility: Malaysian owned companies
• Maximum loan tenure: 10 years
• Maximum financing: RM50M per company
• Fund availability: until 31.12.2010 or upon full utilisation
• Participating financial institution
• all commercial banks
• all islamic banks
• Bank Pembangunan Malaysia Berhad
• SME Bank
• Bank Simpanan Naional

ESP17. Working Capital Guarantee Scheme

• SMEs comprise
• 99% of registered business in Malaysia
• 56% of employement
• 32% of GDP
• Currently CGC under Bank Negara provides Skim Jaminan Usahawan Kecil to fund working capital of SMEs with shareholder equity of less than RM3M
• Establish a Working Capital Guarantee Scheme for medium sized (shareholder fund less than RM20M) Companies to gain access to working capital financing
• Fund size - RM5B
• Guarantee Ratio: Government 80: Financial Institution 20
• Guarantee fee: 0.5% on outstanding amount
• Interest rate: determine by financial institution
• Eligibility:mid sized Malaysian owned company (not subsidiary of company with shareholder fund more than RM20M)
• Maximum loan tenure: 5 years
• Availability: Until 31.12.2010 or upon full utilisation
• Participating bank
• all commercial bank
• all islamic bank
• Bank Pembangunan Malaysia Bhd
• SME Bank
• Exim Bank
• Bank Simpanan Nasional

Esp15. Ensuring Welfare of Retrenched Workers

Increase tax exemption to RM10,000 for each completed year of service (existing RM6,000) on retrenchment benefits