As the Malaysian economy is still at early stage of stabilization and uneven state of moderate recovery across different sectors, ACCCIM views the 2021 Budget’s targeted expansionary fiscal stance of RM322.5 billion, an increase of 2.5% from RM314.7 billion in 2020 with an overall deficit of 5.4% of GDP, is a secure fiscal booster dose to support the revitalization phase of economy through stimulating consumer demand and businesses investment. However, we caution that the third wave of COVID-19 and the implementation of targeted CMCO and EMCO pose a threat to temper the anticipated firmer economic recovery in the fourth quarter of 2020 and in 2021.

While development expenditure is budgeted to increase strongly by 38.0% to a record high of RM69.0 billion in 2021 or 21.4% of total expenditure from RM50.0 billion in 2020, to provide multiplier impact on domestic demand and also bodes well for the 140 sub-sectors inter-linking with the construction and real estate sector, the planned public infrastructure projects and programs must be quick to implement effectively and feed through to the economy, households and businesses. Project implementation delay can stifle the economic recovery.

ACCCIM welcomes a set of budgetary measures, initiatives and spending projects that address a broad range of immediate and medium-term challenges that go towards supporting domestic demand, job retention, creation and advancement as well as skill set enhancement, helping businesses’ sustainability, and sowing the seed for businesses investment, adopt digitalization and innovation. Innovation and technology investments to building diversified workforce and economy is key.

Timely and critical steps need to be taken to ensure the measures and initiatives are implemented quickly and effectively in getting businesses and industry back to a normal economic cycle.

It is well recognised that  the continued measures and financial assistance to alleviate some of the financial burden suffered by individuals and businesses as well as to raise disposable income. These include Bantuan Prihatin Rakyat, 1% reduction in personal income tax rate for annual chargeable income between RM50,000 and RM70,000, targeted loan moratorium for B40 households and micro enterprises, the targeted EPF withdrawal from Account I and a 2% pt reduction in EPF employees’ contribution rate, the extension of wage subsidy program to help alleviate the operating cash flow financial pressure on struggling businesses. The Budget also spares no effort in helping ailing sectors like tourism with the provision of sector-specific relief, in particular for hard hit industries is expected to ease their financial burden. The agriculture and food industry as well as commodity sector also receive fiscal support.

On the proposed EPF withdrawal from ACCOUNT 1, we reckon that EPF savings are meant for retirement, but given the COVID-19’s severity of financial impact on the household’s balance sheet and individual wage earner, allowing a temporary withdrawal from ACCOUNT I can be considered if the contributor is heavily impacted financially.

We are pleased that the Budget has proposed measures to rejuvenate investment through the allocation of RM1 billion investment promotion package to encourage high technology and value-added investment, RM500 million High Technology Fund to support companies in high technology and innovation sector. In addition, there are incentives to make Malaysia a competitive high-end services principal hub and global trading house. The application of incentive for special tax treatment for the relocation of oversea investment into Malaysia and new investment will be extended to 31 Dec 2022. ACCCIM hopes that the establishment of Project Acceleration & Coordination Unit (PACU) at MIDA to expedite and coordinate application process across the Federal, state and local authorities.

It is clear that a focus of Budget 2021 is helping individuals, SMEs and corporates developing develop new capabilities in digital technologies and undertake digital transformation through the RM1.0 billion Industry Digital Transformation Scheme and an additional RM150 million SMEs Digitalisation and Automation Grant to increase productivity and enhance competitiveness in a new environment. SMEs should apply for the various funds and grants to adopt and adapt new business approaches.

On ensuring sustainable living, the Budget will focus on mapping the financing needs in achieving the Sustainability Development Goals (SGDs), which is the key component of a sustainable environment. These include the issuance of Sustainable and Responsible Investment (SRI), RM2.0 billion Green Technology Financing Scheme 3.0.

The industry players are looking forward to collaborate with the Government to protect environment and manage biodiversity more sustainably. For example, the Government can drive for a greener and smart living housing community through policy initiatives to help boost supply and demand for green properties such as tax incentives for making buildings greener, reduce the country’s carbon footprint, by adopting green technology such as optimising green design and enhancing a building’s sustainability.

ACCCIM is of the view that the continued emphasis on human capital development, including reskilling and upskilling programs to produce an agile and productive workforce equipping with a good mix of hard and soft skills. In addition, a RM6.0 billion allocation will provide for Technical and Vocational Education and Training (TVET). ACCCIM sees the need to provide a clear and strong incentive for businesses to upgrade their operations, train their local workers and reduce their reliance on lower skilled foreign workers as we prepare for the challenges of the Industrial Revolution 4.0 (IR4.0).

In summary, the Budget balances the short-term priorities and long-term concerns to support the revitalization of economy as it slowly emerges from the pandemic slump. ACCCIM is looking forward to an “effective implementation process” so that the rakyat and businesses can benefit from these measures in a timely manner.

ACCCIM will continue to proactively engage with the Government and relevant Ministries to provide feedback and exchange of views concerning issues and challenging faced by the country and business community.