| 41. |
|
To further encourage
the use of ICT in trade as well as establish Malaysia as an attractive business location
for international trade, I propose that the tax on income derived from offshore trading
through websites in Malaysia be reduced from 28 per cent to 10 per cent for a period
of 5 years. I further propose that the cost incurred in the development of websites
for business be granted an annual deduction of 20 per cent for a period of 5 years. |
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| 42. |
|
Following the announcement
of the establishment of the 500 million ringgit Venture Capital Fund, a Government-owned
company, Malaysia Venture Capital Management Berhad (MAVCAP) was set up. An amount
of 100 million ringgit from the Fund will be outsourced to four local venture capital
companies, while the balance of 400 million ringgit will be direct investments in
venture capital companies. To date, MAVCAP has received 104 business proposals from
10 countries, including the United States, Korea, Hong Kong SAR and China, with financing
requirements of 1 billion ringgit. To further augment the venture capital fund, the
I Government of Japan has agreed in principle to provide a loan to MA VCAP, amounting
to 1.9 billion ringgit, especially for the financing of debt ventures. |
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|
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| 43. |
|
Another Government-owned
company was established, namely Kumpulan Modal Perdana Sdn. Bhd. to manage the Venture
Capital Fund for Technology Acquisition, amounting to 190 million ringgit. Of this,
114 million ringgit will be invested in the American Pacific Venture Capital Fund
in the Silicon Valley and Venture Capital Joint Venture Investment in Malaysia, with
the balance of 76 million ringgit for the implementation of the Advanced Microchip
Design and Training Centre. |
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| Capital Market |
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| 44. |
|
The Kuala Lumpur
Stock Exchange (KLSE) has experienced significant fluctuations arising from developments
in the global stock markets. As part of the efforts to ensure stability in the stock
market, as highlighted in the Capital Market Masterplan, the Government has agreed
to implement the circuit breaker mechanism in the stock exchange, as practised in
the developed countries. This mechanism has the capacity to halt trading activities
temporarily when large declines are experienced during a trading day. These halts
are based on pre-determined trigger levels. The mechanism will provide investors
breathing space before resuming stock market trading activities. It is also aimed
at maintaining investor and market confidence, especially in an uncertain environment. |
| |
|
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| 45. |
|
To facilitate corporate
restructuring, the Securities Commission has relaxed the conditions for restructuring
distressed public listed companies. These measures include enlarging the pool of
assets by allowing quality investment properties with stable income to be injected
into these companies. In addition, the establishment of Real Estate Investment Trusts
will facilitate restructuring efforts. To improve the financial position of distressed
companies, the requirement of share buy-back is further relaxed. Meanvt/hile, listed
companies with unsatisfactory financial position or with issued capital below the
minimum threshold, are given an extension up to December 2002 to comply with the
listing requirements of the KLSE. |
| |
| Second Strategy:
Diversifying Sources of Growth |
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|
|
| 46. |
|
To further strengthen
the nation's economic fundamentals, efforts have been taken to diversify sources
of growth, especially resource-based activities. Given that technology, skills and
innovation are the main catalysts for future growth, we need to accelerate the shift
towards a K-based economy. |
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|
| Manufacturing
Sector |
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| 47. |
|
For the manufacturing
sector, we have to further develop domestic-resource based industries, mainly furniture,
palm oil-based oleochemicals and rubber products as well as household electrical
appliances which have high demand potential, especially from West Asia and Africa.
Meanwhile, the steel and aluminum fabrication industry as well as production of machinery
have to be further accelerated, particularly in meeting the demands of the local
industry, and exports such as cranes, oil refinery plants, boilers and other fractionation
towers for chemical and petrochemical plants. |
| |
|
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| 48. |
|
Intermediate and
capital goods comprise the largest component in the nation's imports. Such dependence
must be reduced. To accelerate import substitution programme, I propose that the
income tax exemption available to companies involved in the production of machine
tools, plastic injection machines, material handling equipment, robotic and factory
automation equipment as well as parts and components be increased, that is, in respect
of Pioneer Status from 70 per cent to 100 per cent and Investment Tax Allowance from
60 per cent to 100 per cent. For companies which manufacture machinery and other
equipment such as fabricated cranes, the value-added criteria for the purpose of
granting the 70 per cent Pioneer Status or 60 per cent Investment Tax Allowance be
reduced from 30 per cent to 20 per cent. |
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|
|
| 49. |
|
Currently, domestic
advertising costs for the promotion of Malaysian brands registered in the country
are given double deduction for purposes of income tax. As a continuous effort to
introduce and promote local brands in international markets, I propose that the advertising
cost for Malaysian brand names registered overseas and professional fees paid to
Malaysian brand management companies be given double deduction for purposes of income
tax. |
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| Agriculture Sector |
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| 50. |
|
The growth of the
agriculture sector is largely dependent on the output of commodities. There are many
new areas that could be developed, especially food and resource-based products such
as rubber and timber. In the food sub-sector, including the production of meat, such
as ostrich and deer, vegetables and fruits, aquaculture, fresh and salt water fish,
prawns and oysters as well as ornamental fish and planting of flowers could be encouraged.
Similarly, traditional herbal products have high demand potential. Efforts to expand
the use of rubber-based products, including vulcanised latex and timber products
should also be increased. Food products will also provide the stimulus to the food
processing industry. We have the expertise and credibility to develop halal food
which has the potential to penetrate international markets. |
| |
| 51. |
|
Various tax incentives
have been provided to promote the agriculture sector. In 2001 Budget, tax deduction
equivalent to total investment or group-relief is given to companies that invest
in subsidiaries involved in food production. In addition, companies undertaking food
production activities are also given 100 per cent income tax exemption on statutory
income for a period of 10 years. However, this incentive is only provided for new
companies. To strengthen the agriculture sector's contribution to growth, I propose
that reinvestment undertaken by existing companies be granted 100 per cent income
tax exemption against the statutory income for a period of 5 years. |
| |
|
|
| 52. |
|
The Government has
provided tax incentives in the form of 100 per cent allowance on capital expenditure
to encourage food production on a large scale for export and import substitution
purposes. This incentive is provided for prawn farming, floriculture and the planting
of approved fruits. I propose that this incentive be extended to other agricultural
projects such as vegetable and herb farming, breeding of fish including ornamental
fish, cockles and oysters. |
| |
| 53. |
|
The poultry industry
will continue to be the main component of the livestock sub-sector. While the nation
has reached self-sufficiency in the supply of poultry, there is scope for further
expansion in the east coast states as well as Sabah and Sarawak. To ensure self-sufficiency
in poultry, I propose that the rearing of , chicken and ducks in the Eastern Corridor
of Peninsular Malaysia, Sabah and Sarawak be granted Pioneer Status with income tax
exemption of 85 per cent or Investment Tax Allowance of 80 per cent for a period
of 5 years. |
| |
|
|
| 54. |
|
The nation is a major
producer of rubber, timber and oil palm. We must further exploit downstream resource-based
activities such as vulcanised rubber and furniture which have the potential to contribute
towards economic growth. Downstream activities based on rubber, rubber wood and oil
palm waste can bring tremendous benefits if fully exploited. To further promote rubber,
oil palm and timber-based industries as well as encourage greater investment in these
areas, I propose that companies which reinvest in the production of such resource-based
products be granted income tax exemption of 70 per cent or Investment Tax Allowance
of 60 per cent for a period of 5 years. |
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|
|
| Services Sector |
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| 55. |
|
In the services sector,
the tourism and education sub-sectors have the potential to be further developed
not only to generate domestic economic activities but also increase foreign exchange
earnings. |
| |
| 56. |
|
The Ministry of Culture,
Arts and Tourism is allocated with a sum of 613.9 million ringgit, including 200
million ringgit for tourism promotion. To attract more tourists, additional facilities
for recreational activities as well as tourism products will be provided. To encourage
yachting tourism, 20 potential locations have been identified for marina development.
For 2002, 5.4 million ringgit is allocated for the construction of marinas in five
locations, in the west and east coasts of the Peninsular. In this context, to encourage
rental services of luxury yachts and motorboats, I propose that rental income received
by the company be exempted from tax for a period of 5 years. In addition, to encourage
recreational activities of luxury motorcycles, I also propose that import duty on
luxury motorcycles be reduced from 120 per cent to 60 per cent. In line with this
reduction, I further propose that the import duty on other motorcycles be reduced
from between 80 per cent and 100 per cent to 60 per cent. |
| |
| 57. |
|
The Government has
already granted income tax exemption for foreign and local tourism business activities
up to assessment year 2001. As a continuous effort to activate the tourism industry,
I propose that this exemption be extended for another 5 years. In addition, to reduce
the cost of car rentals to tourists, I propose that the car rental operators be granted
excise duty exemption on the purchase of national cars. |
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|
|
| 58. |
|
Apart from Government
efforts, the private sector must take the lead in promoting the tourism industry
more aggressively. In this respect, the Government will increase the Tourism Fund
from 200 million ringgit to 400 million ringgit. |
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| 59. |
|
To further promote
Malaysia as a centre of excellence in education, the Government has provided several
incentives to develop private institutions of higher learning. Therefore, in order
to reduce the cost of providing education facilities, I propose that:
| i. |
|
all private institutions
of higher learning and private language institutions be granted exemptions on import,
duty, excise duty and sales tax on educational equipment, including laboratory fittings,
workshops studios and language labs; and |
| ii. |
|
royalty payments
received by non-residents from private institutions of higher learning for franchised
educational schemes be exempted from income tax. |
|
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|
|
| 60. |
|
To encourage industries
to invest in higher value-added manufacturing activities such as logistics services,
integrated market support services and also utility services centres, I propose the
following tax incentives:
| i. |
|
income tax exemption
of 70 per cent against statutory income for a period of 5 years; |
| ii. |
|
income tax exemption
of 85 per cent against statutory income for a period of 5 years for projects located
in
the Eastern Corridor of Peninsular Malaysia, Sabah and Sarawak; and |
| iii. |
|
import duty and sales
tax exemptions on equipment. Enhancing Exports |
|
| |
|
|
| 61. |
|
To ensure that exports
continue to expand, I propose that the tax incentives for exports be further enhanced
as follows:
| i. |
|
Malaysian trading
companies that are approved as international trading companies be granted income
tax exemption equivalent to 10 per cent of the increased export value and the qualifying
criteria such as value of annual sales turnover be liberalised; |
| ii. |
|
income tax exemption
for companies engaged in the export of services be increased from 10 per cent to
50 per cent of the increase in export value; |
| iii. |
|
income tax exemption
be given to organisers of international trade exhibitions which attract at least
500 foreign visitors per year; |
| iv. |
|
double deduction
for purposes of income tax be extended to other expenses incurred in promoting exports
of goods and services, such as participation in virtual trade shows and expenses
incurred on feasibility studies for participation in overseas tenders; and |
| v. |
|
single deduction
for purposes of income tax be allowed on expenses incurred in registering patent
overseas and on hotel accommodation provided for potential importers of Malaysian
goods. |
|
| |
| Third Strategy:
Ensuring the Equitable Distribution of Income between Urban and Rural Areas, between
High and Low Income Earners as well as between the More Developed and Less Developed
States |
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|
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| 62. |
|
Currently, there
exists a wide income gap between the very rich and the very poor. We do not deny
the contribution of the rich towards national development through their expenditure
and investment. They create job opportunities and their consumption generates commercial
activities, thereby providing income to workers and profits to businesses. |
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|
| 63. |
|
For the lower income
group, if their purchasing power is increased, they too can equally contribute to
growth. While their income is low, their consumption is big, given the significant
number of those in the low income group. As such, if their income is increased, their
higher consumption will contribute to the nation's GDP. Thus, efforts must be taken
to increase their income. |
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|
|
| 64. |
|
Towards this end,
the Government will provide funds for training workers in modern agricultural skills.
With higher competence, they can command higher wages. The Government will provide
an amount of 10 million ringgit for such training programmes in relevant training
centres. |
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|
|
| 65. |
|
The income of class
F contractors will be increased through the implementation of more small projects
in rural areas. Project management training will be provided for those who need training,
to increase their efficiency and enable them to be upgraded to higher class contractors.
Payment system and loan facilities for those with good track record will be established. |
| |
| 66. |
|
Retail business opportunities
will be identified in villages and newly developed townships. Training and viable
franchise businesses will be provided for those interested and who have some capital,
such as from their retirement benefits or EPF. For those who are already in business,
assistance will be provided to further expand their businesses. However, it must
be emphasised that commitment and diligence are important values. Those who only
want to get rich quickly must not exploit these opportunities to satisfy their greed. |
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|
|
| 67. |
|
Mixed farming estates
will be promoted. These estates must be managed by professionals in the appropriate
fields. Trained estate workers will be employed and paid wages commensurate with
their productivity and their efficiency in the use of sophisticated agricultural
technology. Modern agricultural development will be encouraged in states with abundant
land and with per capita income lower than the national average. |
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|
|
| Rural Development |
| |
| 68. |
|
The 2002 Budget provides
the biggest ever allocation of 5.34 billion ringgit to further increase the facilities
and amenities in the rural areas. Among others, this includes 1.58 billion ringgit
for agriculture, 378 million ringgit for land and regional development as well as
392 million ringgit for village and community development. The allocation also includes
the implementation of rural and village road projects as well as the provision of
water and electricity supply. |
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|
| 69. |
|
By the end of the
Eighth Malaysia Plan, the Government will increase the coverage of potable water
supply to 99 per cent in Peninsular, 75 per cent in Sabah and Sarawak while achieving
full coverage for electricity supply. For this purpose, a total of 185 million ringgit
is allocated for rural water supply, particularly for interior areas in Sabah and
Sarawak. A sum of 211 million ringgit will be provided for rural electricity, including
installation of street lights along village roads in 16,207 villages. |
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|
|
| 70. |
|
Family health programmes
in rural areas will continue to be provided through the mid-wife, village and health
clinics. The services provided, such as the teleprimary care programme, will encourage
the development of healthy families, including women in the reproductive age group,
child development as well as health programmes for youths, the elderly and the disadvantaged.
In addition, an allocation of 202 million ringgit will be provided for a total of
383 health clinics while 8 million ringgit will be provided for 13 Water Supply and
EnvironmentalSanitation Programme (BAKAS). BAKAS will include the construction of
a water supply and sanitation system as well as waste and sewerage management. |
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|
|
| 71. |
|
Rural education is
also given emphasis. An allocation totalling 900 million ringgit is provided for
primary and secondary schools while 100 million ringgit is allocated for 6 new matriculation
colleges. A sum of 205.5 million ringgit is allocated for the construction of computer
laboratories and facilities in rural schools. In addition, a total of 7,800 houses
will be built with an allocation of 215 million ringgit to ensure comfortable living
conditions for teachers in rural areas, which is part of the targetted 40,000 houses
for teachers. |
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|
| 72. |
|
Education facilities
in the rural areas of Sabah and Sarawak will continue to be improved. For this purpose,
a sum of 180 million ringgit is allocated for the construction and upgrading of teachers'
houses as well as the provision of potable water and electricity supply in schools. |
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|
|
| 73. |
|
Efforts will be focussed
on reducing the poverty level of Orang As/i. This includes efforts to reduce school
dropouts through the Mind Development Programme and strengthening the Pre-School
Education Programme through TASKA and TADIKA. Towards this end, a sum of 114.1 million
ringgit is allocated for the development of Orang As!;, involving 412 villages. |
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| Caring Society |
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|
| 74. |
|
A sum of 136.5 million
ringgit under the Operating Expenditure and 57.3 million ringgit under the Development
Expenditure is provided for community welfare programmes to benefit 52 welfare institutions.
This includes renovation and upgrading works in order to improve their living conditions. |
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|
| 75. |
|
The Government will
continue to focus on the needs of the poor. Program Kesejahteraan Rakyat that was
formerly known as the Program Pembangunan Rakyat Term;sk;n will give priority to
states with the highest number of poor, including Kelantan and Terengganu. For this
purpose, a sum of 204.5 million ringgit is allocated under the Ministry of Rural
Development. These include programmes to motivate poor families, augment their income,
provide supplementary food for the hard-core poor, eradicate urban poverty, improve
agriculture and economic activities as well as for renovation of houses and community
development. |
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|
| 76. |
|
FELDA will also provide
price support assistance for palm oil and rubber settlers faced with declining commodity
prices. Palm oil settlers will be given a sum of 12 ringgit per metric tonne if palm
oil prices are below 900 ringgit. Rubber settlers on the other hand, will be given
a sum of 15 sen per kilogramme if rubber prices are below 2 ringgit and 50 sen. |
| |
|
|
| 77. |
|
RISDA has allocated
a sum of 3 million ringgit annually to improve the income levels of hard-core poor,
provide better living conditions as well as programmes aimed at improving their work
attitude and ethics to enable them to augment their income. In addition, a maximum
assistance of 250 ringgit a month has been provided for each family based on the
number of dependents. A total of 667 families has benefitted from this assistance,
amounting to 2.5 million ringgit for the period July 1999 to December 2000. |
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|
|
| 78. |
|
The Government will
provide assistance for students with hearing disabilities in institutions of higher
learning by providing free education, food and lodging as well as a monthly allowance
of 300 ringgit beginning 1 January 2002. For this purpose, a sum of 403,000 ringgit
has been allocated for 112 students in 2002. This assistance will reduce their financial
burden as well as of their families. |
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|
|
| 79. |
|
The Government is
aware of the impact of the reduction of interest rates by banking and financial institutions
on those who are dependent on returns from savings, especially pensioners. To provide
alternative sources of income, Bank Negara Malaysia will issue the Third Series of
Bon Simpanan Malaysia, especially for citizens above 55 years and welfare organisations
registered with the Registrar of Societies. An amount of 1 billion ringgit will be
issued with a rate of return of 5 per cent, of which half would be issued based on
Islamic principles. |
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|
|
| 80. |
|
Shelter is a basic
need. Therefore, efforts will continue to be made to increase the number of houses,
particularly low-cost housing. A sum of 943 million ringgit has been allocated for
several low-cost housing projects, including 143 million ringgit loans to State Governments
to implement 124 Public Low-Cost Housing projects. An allocation of 793 million ringgit
is also provided for the implementation of the Integrated Rakyat Housing Programme
in Wilayah Persekutuan Kuala Lumpur and in other urban areas. These houses will be
rented out to the lower income group. As a caring Government, we will ensure that
the construction of public low-cost houses will also provide facilities, especially
for the disabled. |
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