Attracting FDIs and growing local firms not mutually exclusive, says MoF rep

The recently unveiled budget earmarked up to RM1b for customised packaged investment incentives annually over 5 years to attract international firms to the country


THE government believes the Budget 2020 will not only attract foreign direct investments (FDIs), but it also promotes the growth of local firms.

According to the Ministry of Finance’s National Budget Office director Johan Merican Mahmood (picture), the government does not view growing local firms and attracting FDIs as something that should be done separately.

“We do not see the issue (between attracting FDIs and growing local champions) as mutually exclusive. In fact, they are potentially complementary. Some successful small and medium enterprises (SMEs) started by supplying to multinational corporates and later on serve customers beyond Malaysian shores. It is a two-pronged approach in building up local companies in the value chain,” Johan Merican said at the Post-Budget 2020 Debate in Kuala Lumpur yesterday.

He said this in response to concerns raised by industry experts and observers, who questioned whether the RM297 billion financial plan has enough initiatives to grow local unicorns.

The recently unveiled budget, among others, earmarked up to RM1 billion for customised packaged investment incentives annually over five years to attract international firms to the country.

Finance Minister Lim Guan Eng had said this allocation is aimed to woo Fortune 500 companies and global unicorns in high technology, manufacturing, creative and new economic sectors.

To qualify, companies must invest at least RM5 billion each in Malaysia to generate additional economic activities that would support SMEs, create 150,000 high-quality jobs over five years, and strengthen the manufacturing and service ecosystems.

Another point raised by observers was the need for an annual government budget to support a “moonshot target” — an ambitious plan for the country, which in Malaysia’s case, an initiative of a similar effect like the Multimedia Super Corridor.

Johan said such a moonshot target is a long-term plan and shall be addressed in the 12th Malaysia Plan.

“Moonshot is a long-term trajectory. Budget 2020 is what we need to do next year. I believe we will see more to come when the government introverts the 12th Malaysia Plan,” Johan Merican said.

Meanwhile, Axcelasia Taxand Sdn Bhd chairman Dr Veerinderjeet Singh, one of the panellists, said the government could potentially match the revenue of the Goods and Services Tax (GST) by doubling up the coverage of taxable items under the Sales and Services Tax (SST).

He said SST covers 38% of items and services, which contributes RM22 billion to the government’s coffers, while GST covered 70% of items and raked in RM47 billion.

Another panellist, the World Bank country economist Shakira Teh Sharifuddin said it is up to the government to provide its narrative on GDP forecast.

In the Budget 2020, Putrajaya has forecasted a GDP growth of 4.8% next year, which is largely on the high optimistic end.

Shakira said Malaysia is projected to grow by 4.6% this year, 2020 and 2021, while taking a cautious view on the external environment.

Generally, she said the World Bank takes the Budget 2020 on a positive light, which includes measures to push the country further into digitalisation.