13-10-2023

Senator Tan Sri Dato’ Low Kian Chuan, President of the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) said that the chamber welcomes the Government’s continued firm commitment towards fiscal consolidation while sustaining economic growth through the provision of investment enabling measures, facilitation funds and grants as well as outcome-driven fiscal incentives to catalyse business investment.

The passing of Public Finance and Fiscal Responsibility Act will ensure sound fiscal rules to fortify fiscal discipline and contain fiscal risks.

It is commendable to note the 2024 Budget’s measures and initiatives focus on strengthening macroeconomic resilience, driving DDI and FDI investments in emerging sectors such as E&E, aerospace, and chemicals, advancing technology and digitalization, talent development programmes, food security, clean energy transition, improving public infrastructure, and SMEs development as well as tourism sector. In particular, the chamber welcomes the initiatives to enhance the visa-on-arrival and multiple entry visa to attract tourists and investors from India and China. In addition, the Government has agreed to ease the application requirements of MALAYSIA MY SECOND HOME (MM2H).

An National Energy Transition Facilitation Fund of RM2.0 billion is proposed to facilitate clean energy transition. There are allocations for New Industrial Master Plan (NIMP) Industrial Development Fund and NIMP Strategic Co-investment Fund to support the manufacturing industry transformation; and funding towards embracing ESG practices and low-carbon emission.

The empowerment of MSMEs will be supported through financing, competitiveness, human capital upskilling and export-orientation. We are pleased that the Budget will allocate a sum of RM44 billion for providing financing and guaranteed. Syarikat Jaminan Pembiayaan Perniagaan Berhad (SJPP) will provide an 80% loan guarantee for SMEs in green economy, technology and halal industries.

We are pleased to see that the Budget has adopted our proposals to increase the amount of taxable income under Reinvestment Allowance on a tiering basis, to 70% or 100% from 60%, to incentivize companies to reinvest and grow their businesses. However, we hope the Government would consider to extend the RA eligibility to 20-25 years from 15 years currently. It is also encouraging to see the renewable energy incentives being announced for both companies and individuals.

Subsidies may be popular, but they have drawbacks (such as encourage over-consumption, strain public finances and encourage smuggling and black-market dealings). Hence, we support better targeted and better alternatives for protecting the low-income households.

While the proposed implementation of targeted subsidy rationalization is a welcome move to help reduce the fiscal deficit, however, the details of how this will work are not clear, pending the finalization of PADU (centralized data hub) in January 2024. As the removal of subsidies will have inflationary effects in the short-term, well-targeted and adequately social safety nets will be needed to cushion the impact of price increases on the vulnerable group.

The Chamber would like to see Government doing more to address the fundamental issues related to building back sustainable revenue base via a reintroduction of the Goods and Services Tax (SST) when the time is considered appropriate; ensuring better governance and efficiency of public spending; shifting to a defined contribution of public pension given the bloated pension bill averaging RM30.5 billion per year in 2019-2024 Budget.

Tan Sri Dato’ Low also commented that the implementation of a Luxury tax and Capital Gains Tax (CGT) on non-listed corporates, saying that we need to be careful not to automatically copy measures taken elsewhere because what applies elsewhere does not automatically apply to Malaysia’s current economic and capital market development in the same way. We are concerned that the Luxury tax would create a black market and dampen domestic high end products retail market while CGT would stifle entrepreneurship, private equity and corporate M&A activities.

Beyond the policy measures contained in the 2024 Federal Government Budget, the Chamber wishes to highlight some issues and recommendations for implementation:
1) Private sector is feeling the pressure with multiple cost challenges, including the impending implementation of subsidy rationalization, a wider scope of services tax; as well as the prolonged impact of weakening ringgit. The government can help to reduce the costs of financing for SMEs; to introduce policies which encourage financial institutions to lend
more to qualified SMEs; and provide incentives and assistance to financial institutions that are willing to provide finance for SMEs.
2) Additional supports for SMEs through scaling digitization funding and training programs and improving access to private capital and credit facilities.
3) On the approved foreign workers quota, which is valid for 18 months until September 2024, the chamber would like the Government to consider providing a six-month extension of permit holding period after the expiry of 18 months as it allows them to avoid the hassle to resubmit the application of foreign workers; and (2) Allow the refund of levy paid for employers/businesses expecting the recovery to take a longer while.
4) Government and agencies at all levels must put actionable policies in place to address the high costs of living and food security. Particular attention on stock piling, planning and distribution as well as resolving the logistic challenges that have impacted the cross-border movements of goods.
5) We welcome the Budget’s allocation of RM6.8 billion for TVET in addressing the most significant components of human development. ACCCIM urges the relevant Ministries and agencies to remain consistent in funding training and reskilling, including TVET.

Overall, ACCCIM urges the Government to maintain a business-friendly environment so that our economy and domestic SMEs can continue to grow and thrive. If this is hindered either by an erosion of competitiveness, a multi-layer of bureaucracy or business pain points, the risk is that businesses and investors might move elsewhere.

The Government needs to ensure that the money it raises in taxes is spent or invested in the best possible way to achieve the maximum benefit where it is needed most. Businesses need certainty and stability. It is imperative the government continue to focus on facilitating inclusive growth and expansion of our economy by ensuring equitable opportunities for everyone. Continued collaboration between all levels of government and streamlining the regulatory process to ensure Malaysia is competitive for investment is paramount.