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Monday, October 24, 2016

Najib chases ‘ultimate’ win as supporters get budget goodies

Malaysian Prime Minister Najib Razak has targeted budget spending at his coalition’s most loyal voters, seeking to limit any damage from more than a year of political turmoil as talk turns to a potential early election.

Najib Razak chases 'ultimate' win as supporters get budget goodies

The premier allocated more funds for his cash handout program to the poorest 40 percent of Malaysians, promised civil servants a bonus and introduced extra assistance for farmers. He pledged more roads, bridges and better electricity and water supply for rural regions, and sought to woo younger voters with discounts on outstanding student loans and access to cheap housing in urban areas.

After weathering funding scandals and attempts to topple him for a good part of his second term as premier, Najib must balance a slowing economy with keeping voters happy ahead of an election that could come as soon as March. While the opposition is fractured, it has sought to lure ethnic Malays from Najib’s coalition amid discontent at rising living costs and disillusionment over allegations of graft surrounding the premier.

Najib’s United Malays National Organisation leads the Barisan Nasional coalition, which has ruled since independence in 1957 with the support of ethnic Malays in the predominantly Islamic nation.

"As we approach the next general election, it is really difficult to say whether it will be smooth sailing for Najib," said Ahmad Martadha Mohamed, dean of the college of law, government and international studies at Universiti Utara Malaysia. "The budget aims at specific target groups that have been the main supporters of UMNO for a long time. Giving a lot of incentives to these people is crucial to ensure stable and continued support for UMNO and BN."

Tax Relief

While Najib’s term runs until mid-2018, some senior UMNO officials told Bloomberg News last month a vote could come as soon as March. Najib has been quick to deny media reports that cited him as ruling out an early election.

Speaking for more than two hours on Friday in a speech that took shots at his foes and praised allies for standing by him, Najib announced giveaways from tablets for 430,000 teachers to money for muezzins -- those who call Muslims to prayer -- and mosque caretakers. There was tax relief for working parents who enrolled preschoolers in early education classes and higher allowances for village heads. 

About 440,000 rubber tappers and smallholders will get so-called rainy season assistance for three months to supplement wages affected by bad weather between November and January. Many farmers are ethnic Malays.

"Najib is making sure every constituency gets their -- albeit tiny -- share of the pie, so that cumulative effect of all those albeit small amounts of vote switch will favor the incumbent government," said Oh Ei Sun, an analyst at the S. Rajaratnam School of International Studies in Singapore and Najib’s political secretary from 2009 to 2011.

At the last election in May 2013, BN lost the popular vote for the first time for its worst result yet. Najib on Friday made more overtures to ethnic Chinese and Indian voters who deserted the coalition then, providing funds for vernacular schools and loans to hawkers and small business owners from the minority groups. 

Still, he was unambiguous on who needed to be kept happy. UMNO has for decades propagated policies that provide favorable access to education, jobs and housing for Malays and indigenous people, known collectively as Bumiputeras.

"In a nutshell, the agenda of empowering Malays and Bumiputera will continuously be upheld," Najib said.

The premier needs a strong election win to dispel doubts on his ability to lead given scandals surrounding political donations and the finances of state fund 1Malaysia Development Bhd. Even as senior party figures publicly pledge support, some have privately expressed concern he will become a liability.

Some of the biggest initiatives were reserved for the civil service, which employs 1.6 million people, or about 11 percent of the labor force. Around 79 percent of the civil service was made up of Malays as of the end of 2014, and over 11 percent from indigenous Bumiputera groups.

To avoid "sleepless nights" for civil servants, Najib said they will get a special cash payment in early January, plus bigger loans for homes, motorcycles, computers and smartphones.

Opposition Walkout

Cabinet members denied it was an election budget, with Minister in the Prime Minister’s Department Abdul Rahman Dahlan saying it was an inclusive approach and "we do this every year." Sports Minister Khairy Jamaluddin added "we don’t know when the election is going to be."
Opposition lawmakers walked out during Najib’s budget speech after holding up placards referencing Malaysian Official 1, or MO1, a U.S. Department of Justice description of a politician who it said controlled accounts that got hundreds of millions of dollars in diverted funds from a state company. Najib has acknowledged funds went into his accounts before the 2013 election but said the money was a donation from the Saudi royal family and most was later returned.
"Who is MO1, that was not answered," said Lim Kit Siang, a leader of the opposition Democratic Action Party. "Corruption problems were not mentioned. The prime minister paints a pretty picture" but questions remain, he told reporters.
While Najib avoided mentioning election timing in the budget speech, he urged his coalition to stay united and "close ranks."
Malaysians "will continue to be safeguarded," he said. The Barisan Nasional government will have the "ultimate victory in the 14th General Election."

Source: Bloomberg

Malaysia's Budget 2017 [Overall view]

Malaysia's budget 2017 has been successfully tabled by Prime Minister Datuk Seri Najib Razak on last Friday. In the midst of a low oil price and weak external environment, economists have said that the Budget 2017 was one that hits the right note while maintaining fiscal discipline. 

The theme of the budget 2017: Accelerating growth, ensuring fiscal prudence, enhancing well-being of the Rakyat.

Prime Minister Najib presenting Budget 2017 last Friday

Here's a quick look on what Budget 2017 has to offer:
Operating Expenditure: RM214.8bil, Development Expenditure: RM46 bil
RM260.8 billion has been allocated for expenditure, representing an increase of 3.4% from previous year. According to some economists, the higher allocation for expenditure will help to drive the economy in 2017.

From the breakdown, we could see that RM214.8 billion is for operating expenditure (82%) as compared to only RM46 billion for development expenditure (18%).

This continues to be the weakness according to reports, as the leakages from budget allocation could be reduced further.  

Here are some of the forecasts for the economic growth in 2017, with a fiscal deficit target of 3.0% and 4 to 5% of GDP growth, assuming that the revenue is RM219.7 billion.

Forecast of Malaysia economy in 2017 


Here's a quick look on the operating expenditure of RM214.8 billion.
  • Fixed charges & Grants - RM103.9 billion
  • Emoluments - RM77.4 billion
  • Supplies & Services - RM32 billion
  • Others - RM816.6 million
  • Purchase of assets - RM691 million


Here's a quick look on the development expenditure of RM46 billion.
  • Economic sector - RM25.9 billion
  • Social sector - RM12.2 billion
  • Security sector - RM5.3 billion
  • General admin - RM2.5 billion
  • Contingencies - RM2 billion

Accelerating economic growth
  • Lower corporate tax rate. Reduce tax rate between 1 and 4 percentage points for companies with significant increase in taxable income for year of assessment 2017 and 2018.
  • Lower tax rates for SMEs. Reduce tax rate from 19% to 18% for SMEs with taxable income up to first RM500,000. 
  • Extend double taxation promotion on operating expenditure borne by anchor companies for the Vendor Development Programme until 31 December 2020.
  • Promote tourism with allocation of RM400 million for initiatives.
  • E-Visa to be extended to Balkan region and South Asia to help achieve target of 32 million tourist arrivals in 2017.
  • Allocation of RM1.2 billion for building village roads and RM4.5 billion allocated to maintain state roads. 
  • RM5k grant to taxi drivers to buy new vehicles.
  • Promote tourism with allocation of RM400 million for initiatives such as ecotourism measures and extension of investment tax allowance for new 4 & 5 start hotels.
  • Broadband prices to decline by up to 50% within the next 2 years.
  • Malaysian Communications and Multimedia Commission (MCMC) will provide RM1 billion to ensure the coverage and quality of broadband nationwide reaches up to 20 megabytes per second.
  • New East Coast Rail Line project costing RM55 billion to be implemented. Pan Borneo Highway project to be accelerated.
  • Allocation of RM100 million to restore East Coast railway line along Gua Musang – Tumpat that was destroyed during flood. 
  • Increase trip frequency of ETS for JB-Padang Besar route, RM1.1 billion allocation to buy more train sets up to 2019.
  • For ride-sharing drivers who don't own car, down payment can be made using BR1M, rebate RM4k to buy Proton Iriz.
  • Export promotion programmes to local SMEs by MATRADE, MIDA and SME Corp with allocation of RM130 million.
  • Allocation RM400 million will be allocated, among others for clean air and ecotourism initiatives.
  • Allocation RM800 million for upgrading community projects, bridges, drainages, markets - with priority for local G1 and G2 contractors.
  • Allocation RM495 million for flood mitigation projects.
  • Allocation RM732 million for supply clean water targeting 5,200 houses.
  • Introduction of Digital Free Zone, and MDEC allocated RM162 million to implement e-commerce digital programs.
  • Reconstruciton of Sandakan Power Station Project.
  • Allocation of RM200 million from Working Capital Guarantee Scheme fund for startups.
  • Boost export-oriented SMEs, provision 2% rebate on interest rates charged to SME borrowers under SJPP scheme. Rebate limited to accumulated funding of RM1 billion.
  • Allocation RM522 million for MIDA to promote investments in chemicals, electrical and electronics, and R&D activities.
  • Launch of new series discourse branded 2050 National Transformation (TN50) to span three decades to form calibre nation state. Aimed to kick-start yound diverse geenration of all races through national discourse.
Invigorating Capital Markets
  • Government Linked Companies to allocate RM3 billion fund to invest in Small-Mid cap stocks.
  • Capital Market Research Institute will set up Capital Market Development Fund with initial funding of RM75 million.
  • Income tax exemption for entities carrying out Islamic Banking and Takaful Business through the International Currency Business Unit (ICBU) in foreign currencies  and stamp duty exemption on instruments of such activities extended to YA 2020.
Measures to ease cost of living and enhance people's well being
  • Higher BR1M cash aid of 12.5%-20% with allocation of RM6.8 billion to benefit 7 million recipients.
  • Lifestyle tax relief up to RM2.5k yearly effective in 2017. Tax relief to be provided for purchase of reading materials, computers, sports equipment, smartphones, tablets, internet subscription and gym memberships.
  • Broadband prices to decline by up to 50% within the next 2 years.
  • No GST rate hike for 2017.
  • Public servants to receive a special assistance payment of RM500 and special RM250 payment for retirees in early 2017.
  • Allocation RM1.3vbillion for food production at competitive price. Encouraging development of dairy industry to reduce dependence on imported animal feed.
  • Introduce Social Security Organisation (SOCSO) for taxi drivers with income up to RM3k with grant of RM60 million.
  • School assistance totalling RM3.1 billion for meals, books, funds for improvement and maintenance of schools. Allocated RM7.4 billion for 20 public universities.
  • Discounts and incentives to encourage payment of PTPTN loans between Oct 2016 to Dec 2017.
  • Allocation RM424 million to assist senior citizens with RM300 monthly living allowance and pocket money. To benefit 120,000 senior citizens. Eight senior citizen centres to be established.
  • Book vouchers replaced with student debt cards worth RM250 for purchase of books, computer accessories and internet access to benefit 1.3 million students.
  • Allocation RM4.3 billion for scholarships in 2017 through various ministries.
  • Allocation RM40 million to reintroduce grant to registered Residence Association for improving security and maintenance.
  • Allocation RM12 billion building of police headquarters, procurement of vehicles and equipment. Create Sea Basing in East Coast Sabah and deployment of helicopter squadrons.
  • One-off increase of the existing RM500 incentive to RM1k to PRS contributors to encourage youth savings Minimum accumulated investment of RM1,000 during the two years.  Allocation of RM165 million will be provided.
  • Civil servant housing loans limit to increase to RM750k.
  • Build more units of 1Malaysia Civil Servans Housing (PPA1M) with selling price 20% below market prices.
  • Allocation of government land to build 30k homes worth RM150k-300k.
  • Build 10,000 houses in urban areas for rental to eligible youths with permanent job, rental up to 5yrs, below market rate.
  • Easy financing scheme to provide 90-100% financing for affordable housing (PR1MA) with lower loan rejection rate in collaboration with Maybank, CIMB, Ambank, RHB, EPF and BNM to be implemented on Jan 2017. Scheme will be limited to first time housebuyers for house purchase below RM300k.
  • Stamp duty exemption of 100% from 50% for first time home buyers for home purchases valued up to RM300k from Jan-17 to Dec-18
  • People Centric projects continued through Private Finance Initiative with allocation of RM 10 billion.