Budget 2019 — gainers, losers and everything in between

The RM314.5b budget is the biggest budget in the country’s history so far, outdoing BN’s budget of RM280.3b in 2017

By SHAZNI ONG / Pic By TMR

The Pakatan Harapan government tabled its first budget last Friday, which saw first-time home buyers and those from the B40 (bottom 40%) income group being the main beneficiaries.

At the same time, there were also not-so-pleasant news for certain industry players, such as toll and casino concessionaires.

Themed “Malaysia Wibawa, Ekonomi Dinamik, Rakyat Sejahtera” (A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society), Finance Minister Lim Guan Eng announced a RM314.5 billion financial agenda for the country to spend next year, in his 130-minute speech.

A total of RM259.8 billion will be allocated for operating expenditure, while RM54.7 billion will go to development expenditure. This, however, does not take into consideration the contingency fund of RM2 billion.

This is the biggest budget in the country’s history so far, outdoing Barisan Nasional’s (BN) budget of RM280.25 billion last year. In the previous budget, RM234.25 billion went to operating expenditure, while RM46 billion was allocated for development expenditure.

The Malaysian Reserve takes a look at the winners, losers and stalemates from the budget announced.

Winners

All stamp duty charges for 1st-time purchases of homes valued between RM300,001 and RM1m will be waived for a limited time of only 6 months beginning Jan 1, 2019 (Pic by Afif Abd Halim/TMR)

First-time homebuyers: The government will waive stamp duty up to RM300,000 on sale and purchase agreements, as well as loan agreements for a period of two years until December 2020, for those purchasing residential properties priced up to RM500,000 for the first time.

The government will allocate RM25 million to Cagamas Bhd to provide mortgage guarantees to enable borrowers to obtain higher financing from financial institutions, inclusive of down payment support, for the first-time homebuyers with household income of RM5,000 or less.

All stamp duty charges for first- time purchases of homes valued between RM300,001 and RM1 million will be waived for a limited time of only six months beginning Jan 1, 2019.

The government would also allow property crowdfunding, the first of such in the world, as an alternative funding source, to be regulated by the Securities Commission Malaysia.

B40: The government will continue to support the B40 group via the “Bantuan Sara Hidup” cash grants.

Effective January 2019, every household with a monthly income of RM2,000 and below will receive RM1,000; between RM2,001 and RM3,000 (RM750); and between RM3,001 to RM4,000 (RM500).

Meanwhile, Bank Negara Malaysia will set up a fund amounting to RM1 billion to help the low-income bracket earning not more than RM2,300 per month to own homes, priced up to RM150,000, for the first-time.

The fund will be made available from Jan 1, 2019, at participating financial institutions through a concessionary financing rate as low as 3.5% per annum.

In addition, the Health Ministry will pilot a nationwide health screening programme, dubbed PEKA (Health Protection Scheme), for 800,000 individuals aged 50 and above in the B40 segment at a cost of RM100 million.

The government will also pilot a national B40 Health Protection Fund, through partnership with the private insurance industry, to provide free protection against the top four critical illnesses with a coverage of up to RM8,000, as well as 14 days daily income replacement during treatments at a rate of RM50 per day beginning Jan 1, 2019.

Airport industry: The government intends to set up the world’s first airport real estate investment trust (REIT) in its bid to privatise infrastructure assets.

The investors of the airport REIT will receive income arising from user fees collected from Malaysia Airports Holdings Bhd which has the concession to operate these airports. The government hopes to raise RM4 billion from selling a 30% stake of the REIT to private investing institutions, while these investors will gain an invaluable opportunity to invest in top quality infrastructure assets.

This REIT exercise will only be carried out after the new regulated asset base and user fees structure has been negotiated and finalised.

Small and medium enterprises (SMEs): A RM4.5 billion SME Loan Fund will be made available via commercial financial institutions with a 60% guarantee from the Business Loan Guarantee Scheme, including RM1 billion for Bumiputera SMEs.

In addition, the corporate tax rate for taxable income of up to RM500,000 and SMEs with less than RM2.5 million in paid up capital, will be reduced from 18% to 17%.

Besides that, the government will allocate RM100 million to upgrade the capability of the SMEs in the halal industry via various programmes in order to increase exports and to make Malaysia a global halal hub by 2020.

It will also allocate RM20 million to initiate the “Buy Malaysian First” campaign to support local products and services.

Telecommunication companies (telcos): To support the growth of the digital economy, the government will launch the National Fibre Connectivity Plan in 2019 with an allocation of RM1 billion.

The plan will develop the country’s broadband infrastructure to ensure a more efficient spectrum allocation to achieve the targeted 30Mbps speed at rural and remote areas in the country within five years, as part of the overall plan to achieve world-class infrastructure at affordable prices.

The government has also enforced the Mandatory Standards on Access Pricing, which will result in fixed broadband prices to be reduced by at least 25% by the end of 2018.

Telco end users are also expected to benefit from these initiatives.

Rubber industry: The government is committed to increasing the utilisation of local rubber as a new raw material for various industrial products.

It will increase the use of local rubber as a composite material for the construction of roads in Malaysia to increase durability and at the same time, reduce maintenance cost.

To assist smallholders, the government targets the use of cup-lump modified bitumen to build roads at ports and industrial areas in stages. The government will allocate RM100 million for this purpose.

In addition, the government will continue to provide the Rubber Production Incentive with an allocation of RM50 million to protect the effects of the fall in rubber prices for small- holders. The smallholders would receive supplement income when rubber prices fall below RM2.20 per kg.

Palm oil industry: In order to raise the demand for palm oil and increase the sustainability of the country’s energy resources, the government will implement the biodiesel B10 programme (comprising a mix of 10% palm oil) for the transportation sector and B7 for the industrial sector in 2019.

In addition, the government will allocate RM30 million to assist small- holders to obtain the Malaysian Sustainable Palm Oil certification in its efforts to raise the sustainability and export competitiveness of the industry.

Environment and energy sectors: The government is offering a pioneer status incentive of 70%, or investment tax allowance of 60% for five years for companies that manufacture plastics that are bio-resin and bio-polymer based, to attract environmentally- friendly investments and to reduce the usage of conventional plastic.

To incentivise investments in green technology, a RM2 billion Green Technology Financing Scheme will be made available at selected commercial banks where the government will subsidise the interest cost by 2% for the first five years.

Bank Pembangunan Malaysia Bhd (BPMB) will also provide a Sustainable Development Financing Fund of RM1 billion to support the Agenda 2030 for Sustainable Development, as well as the 17 Sustainable Development Goals under the United Nations Development Programme.

Transportation sector: The government will allocate RM240 million to introduce a RM100 unlimited monthly travel pass on the RapidKL rail and bus network to encourage more people to use public transport.

There will be a RM50 monthly pass available just for RapidKL bus services only. The government will also provide RM500 million for a Public Transport Loan Fund with 2% interest subsidy via BPMB. This is available to taxi and bus companies, as well as other public transport operators.

Industry 4.0 players: The government will, among others, allocate RM210 million from 2019 to 2021 to support the transition and migration to Industry 4.0.

It will also assist the first 500 SMEs to carry out the “readiness assessment” to migrate to Industry 4.0 platforms via the Malaysia Productivity Corp.

In addition, the government will provide RM2 million in the Knowledge Resource for Science and Technology Excellence to enable greater collaboration between the public and private sectors based on existing resources.

It will also set up 250 facilities and 1,200 scientific equipment and research data for the private sector to access and share.

A RM3 billion Industry Digitalisation Transformation Fund will be created with a subsidised interest rate of 2% under BPMB to accelerate the adoption of smart technology consisting of driving automation, robotics and artificial intelligence in the industry.

The Malaysian Investment Development Authority will continue to provide matching grants through its High Impact Fund with a specific emphasis of Industry 4.0 initiatives.

Meanwhile, Khazanah Nasional Bhd will provide RM100 million in allocation for films in Malaysia as an incentive, specifically applicable to film production at Pinewood Iskandar Malaysia Studios in Johor.

Khazanah will also lead and develop an 80-acre (32.37ha) development in Subang, Selangor, as a world-class aerospace industry hub.

Losers

Casinos/gambling operators: The government will increase the taxes, fees and levy on the gaming industry which have not been increased since 2005.

The Casino licence will be increased from RM120 million to RM150 million per annum; casino duties (up to 35% on gross collection); machine dealers’ licence (from RM10,000 to RM50,000 per annum); and gaming machine duties (from 20% to 30% on gross collection). However, the number of special draws will be reduced by half.

The govt will freeze toll hikes on all intra-city tolls around the country for 2019 which costs approximately RM700m (Pic by Afif Abd Halim/TMR)

Toll concessionaires: The government will freeze toll hikes on all intracity tolls around the country for 2019 which costs approximately RM700 million.

It will also abolish the toll for motorcycles for the First and Second Penang Bridge, as well as the Second Link in Johor, costing approximately RM20 million per annum effective Jan 1.

Sugar/beverage companies: The government has decided to add “sugar- sweetened beverages” to the list of manufactured goods subject to excise duty for the first time. The proposed duty, to be implemented on April 1 next year, will be at RM0.40 per litre for non-alcoholic beverages containing added sugars of more than 5g per 100ml drink; and or fruit or vegetable juice containing added sugars of more than 12g per 100ml.