Growing pains: Balancing growth and fiscal discipline

Slightly expansionary Budget 2024 continues the momentum set by the Ekonomi Madani framework 

by AUFA MARDHIAH 

WITH unwavering commitment to stimulate the foundation of sustainable economic growth and enhance the wellbeing of the rakyat under a responsible fiscal regime, Prime Minister (PM) Datuk Seri Anwar Ibrahim unveiled a slightly expansionary Budget 2024 last Friday. 

Notwithstanding a prudent approach where the budget deficit is expected to be reduced to 4.3% of GDP (2023: 5%), next year’s budget would still be the largest yet at RM393.8 billion (2023: RM388.1 billion) with RM303.8 billion allocated for operating expenditure and RM90 billion for development. 

Carrying the theme of “Reforming the Economy, Empowering the Rakyat”, Budget 2024 is the second instalment of the Belanjawan Madani, which Anwar said continues the momentum set by the Ekonomi Madani framework. 

Revenue Enhancement 

To bolster the government’s revenue base, several measures will be taken, including increasing the Sales and Service Tax (SST) to 8% from 6%. However, essential sectors like food and beverage and telecommunications industry are exempted from this increase. 

The government will also introduce a Capital Gains Tax (CGT) at a rate of 10% on net profits from the sale of local unlisted company shares, effective March 1, 2024. 

A Luxury Goods Tax will also be established, ranging from 5% to 10%, to affect premium items like jewellery and watches based on their value thresholds. 

Targeted Subsidies 

The government aims to gradually implement a targeted subsidy approach in 2024. As part of this strategy, price cap on consumer items chicken and eggs will be lifted, allowing the local market to function according to supply and demand, ensuring a more stable supply. 

For electricity, a targeted subsidy approach linked to consumption will be implemented. This includes rebates of up to RM40 per month for hardcore poor households and waiving deposit payments on electricity bills. The government’s first plan is to rationalise diesel price to combat leakages and smuggling. 

More for Sabah and Sarawak

Budget 2024 introduces the extension of the Second Chance Policy to individuals aged 40 and below with debts not exceeding RM200,000. This policy seeks to alleviate the financial burden of those struggling with debt. 

For the development of Sabah and Sarawak, the latter’s allocation will rise to RM5.8 billion from RM5.6 billion, while the former’s will grow to RM6.6 billion from RM6.5 billion. 

An agreement has been reached between Putrajaya and the Sabah state government to transfer the regulatory powers of electricity supply, effective Jan 3, 2024. 

Revamping Economic Structure

The New Industrial Master Plan (NIMP) is a pivotal part of Budget 2024, with a goal of attracting investments of up to RM95 billion and creating 3.3 million job opportunities by 2030. The government is allocating up to 10% of the total NIMP investment as a catalyst for this mission, with a startup fund of RM200 million set for 2024. 

To foster high-value activities, the Pengerang Integrated Petroleum Complex (PIPC) is set to become a development hub for the chemical and petrochemical sector, featuring a tax incentive package in the form of special tax rates or investment tax allowances. 

Investing in Innovation and Startups

The budget includes a RM28 million allocation to develop the MYStartup platform, which will act as a central hub for startups, simplifying business activities throughout their lifecycle and optimising the RM200 million fund distributed among various funding agencies and venture capital under one roof. 

To boost local startups’ competitiveness and their entry into regional markets, government-linked companies (GLCs) and government-linked investment companies (GLICs) will provide funds of up to RM1.5 billion. This support extends to Bumiputera entrepreneurs with small and medium enterprises (SMEs), focusing on high-growth and high-value fields such as the digital economy, space technology, electronics and electrical industries. 

Empowering MSMEs and Promoting Financial Inclusion

A total of RM44 billion is allocated to loans and financing guarantees for micro, small and medium enterprises (MSMEs). Additionally, micro-entrepreneurs and small traders will benefit from small loan facilities amounting to RM2.4 billion. 

This includes RM1.4 billion under the BSN microloan programme, which will provide crucial capital for businesses, equipment purchases, premises and marketing for hawkers and small entrepreneurs. 

Additionally, RM330 million under Tekun is allocated to provide financing facilities to small traders, such as batik and craft operators, Orang Asli entrepreneurs and Bumiputeras from Sabah and Sarawak. 

RM30 million is earmarked to support businesses run by the Indian community, while RM720 million is dedicated to encouraging women and youth to venture into business. 

Under the Bank Negara Malaysia (BNM) initiative, RM8 billion in loan funds will go towards supporting SME companies. This includes RM600 million to assist micro-enterprises and low-income entrepreneurs, sustainability practices and sectors related to food security. 

The Syarikat Jaminan Pembiayaan Perniagaan Berhad (SJPP) will guarantee up to 80% of SME entrepreneurs’ loans, with a focus on green economy, technology and halal industries. 

To alleviate poverty, the government has allocated RM100 million in funding to support Amanah Ikhtiar Malaysia (AIM). 

Promoting Cooperatives and Digitalisation

In 2024, RM100 million in financing funds will be provided to cooperative movements through the Revolving Capital Fund under the Malaysian Cooperative Commission. This fund is intended to assist more cooperatives, fostering growth of this vital sector. 

To enhance the competitiveness of MSMEs, RM100 million is allocated for digitalisation grants of up to RM5,000 for over 20,000 MSME entrepreneurs. This funding will be used to upgrade sales, inventory management and digital accounting systems. 

RM900 million in loan funds, under the purview of BNM, is set to encourage SME companies to boost business productivity through automation and digitisation. An additional RM40 million is earmarked to implement the Shop Malaysia Online Programme, aiming to strengthen the e-commerce ecosystem. 

Boosting Tourism and Entertainment

In a bid to support the nation’s primary sectors, the government has reinstated the Visit Malaysia Year (VMY), which will now extend to 2026. RM350 million will be allocated to boost promotion and tourism activities to position Malaysia as the world’s preferred tourist destination. 

The government also intends to lower the entertainment duty rate in the Federal Territory, including full exemption of entertainment duty for stage performances by local artists. 

Theme parks, family recreation centres, indoor play centres and simulators will see a reduced entertainment duty rate of 5%. International artists and other entertainment events, including film screenings and sports and games events, will have a 10% entertainment duty. 

Strengthening Commodities, Food Security

The government will provide RM2.4 billion to Felda, Felcra and Risda to strengthen agri-commodity activities and improve the socio-economic status of smallholders. 

The budget also allocates RM2.6 billion for subsidies and incentives to farmers and fishermen. 

The Paddy Price Subsidy Scheme sees an increase from RM360 to RM500 per metric tonne, and the floor price of 80 paddy is raised to RM1,300 per metric tonne. 

An additional RM400 million is designated for the Food Security Strengthening Programme. 

Sustainable Energy Transition and EVs

The Fund to Facilitate National Energy Transition will receive an accumulated value of RM2 billion, ensuring that Malaysia continues its journey towards sustainable energy. 

To promote growth in the electric vehicle (EV) industry, the government welcomes investments of over RM170 million by leading companies, including Teenage Nasional Bhd, Gentari and Tesla Malaysia. 

This investment will support the installation of 180 EV charging stations, encouraging the use of electric motorcycles with the Electric Motorcycle Usage Incentive Scheme. This scheme will provide up to RM2,400 in rebates to eligible buyers. 

Mitigating Flood Risks 

As part of disaster preparedness, the budget outlines the implementation of 33 High Priority Flood Mitigation Projects at a cost of RM11.8 billion. 

The National Disaster Management Agency (Nadma) is set to receive RM300 million, with RM100 million allocated to ensure smooth flood preparations later this year. 

The National Disaster Relief Fund will see an increased allocation next year, reaching RM200 million, compared to RM100 million this year. 

Supporting Rakyat’s Welfare

The budget allocates RM200 million to continue the implementation of the Payung Rahmah Programme, which is aimed at enhancing the welfare of the people. 

The Rahmah Cash Assistance (STR) sees an increase from RM8 billion to RM10 billion, benefitting nine million recipients or 60% of Malaysia’s adult population. 

The maximum STR will increase from RM3,100 to RM3,700, and the minimum STR rate for singles will rise from RM350 to RM500. The first payout will be in February 2024. 

In 2023, the government introduced the Basic Rahmah Contributions (SARA), providing RM100 per month for six months to 200,000 STR recipients through their MyKad. This successful initiative is extended to benefit an additional 700,000 STR recipients for 12 months. 

Education and Healthcare

The Ministry of Education (MoE) receives an allocation of RM58.7 billion, up from RM55.2 billion in 2023, to remain the biggest receiver of the federal budget. 

It includes RM1.9 billion for school upgrades and maintenance across the country, as well as the construction of 26 new schools with a total cost of RM2.5 billion. 

The Ministr y of Higher Education (MOHE) will receive RM16.3 billion, an increase from RM15.3 billion previously. Budget 2024 also offers incentives for PTPTN loan holders, including a 10% discount on the loan balance for full settlement and a 15% discount for payments by salary deduction or scheduled direct debit. 

Registration fees for admission to public universities will be capped at RM1,500 starting January 2024. Existing students who struggle to pay their tuition fees will not be blocked from registering for subjects each semester. 

Meanwhile, the Ministry of Health (MoH) receives RM41.2 billion, which marks the highest increase from RM36.3 billion in Budget 2023. Out of this allocation, RM5.5 billion will be used for procuring medicines, consumables, reagents and vaccines. 

Several healthcare projects will commence in 2024, including the Universiti Sains Islam Malaysia Teaching Hospital Complex (USIM), Phase 1 in Kota Tinggi, Johor, the construction of Hospital Sultanah Aminah 2, Johor Baru and additional infrastructure projects to enhance healthcare services. 

RM150 million is allocated for Clinic Management System Subscription (CCMS) in 100 government health clinics. 

The government will also impose an excise duty on chewed tobacco products and increase the excise duty on sugary drinks to mitigate health risks. 

Transportation and Housing

The Sarawak Pan Borneo Highway is expected to be fully completed in 2024. Additionally, 19 packages of work for Phase 1b of the Pan Borneo Sabah project are under tender, covering 366km and cost- ing RM15.7 billion. 

The Sarawak-Sabah Link Road (SSLR) Phase 2 project, spanning 320km with a cost of RM7.4 billion, will commence by year-end. 

Public transportation will receive RM96 million in the Stage Bus Support Fund. The budget also reinstates the construction of five LRT3 stations previously cancelled, benefitting around two million residents. 

To support housing projects, RM2.47 billion is allocated in 2024. The government will also provide guarantees of up to RM10 billion for the Housing Credit Guarantee Scheme to benefit 40,000 borrowers. 

What the Experts Say 

Economist Dr Nungsari Ahmad Radhi highlighted the significance of the recently passed Fiscal Responsibility Act, setting limits for future budgets. 

However, he called for additional laws, such as the Government Procurement Act, and the need to regulate GLCs and GLICs to enhance fiscal policy conduct. 

“The budget is just one policy instrument of fiscal policy,” he said. Nungsari also suggested more comprehensive revenue enhancement measures and a broader value-added tax implementation. Thannees Tax Consulting Services MD, SM Thanneermalai, applauded Budget 2024 for addressing Malaysia’s economic needs effectively.

“The key priorities targeted in the budget include eliminating subsidies from the rich and realigning it to the needy, attacking corruption whilst improving governance, improving people’s welfare, attracting foreign investments, allocating expenditure to the areas of priority in the economy, encouraging ESG expenditure and green initiatives, and managing our budget deficit,” he said. 

However, he noted that the taxation of high-net-worth individuals remains unchanged and advocates for further tax incentive reform. 

Thanneermalai also lamented the missed opportunity to reintroduce the Goods and Services Tax (GST) and to enhance the focus on climate change. 

Financial Planning Association of Malaysia (FPAM) president Alvin Tan lauded the extension of the Second Chance Policy for bankruptcies, calling it a positive step toward financial rehabilitation and inclusion. 

“It offers individuals an opportunity to rebuild their financial futures and it reflects a great humanitarian approach,” he said. 

Tan also welcomed the efforts to combat scam-related crimes and enhance investor protection through the National Fraud Portal. 

In summary, Budget 2024 signals a bold and comprehensive approach to steering Malaysia’s economy towards greater resilience, growth and inclusivity. 

As Malaysia looks ahead to 2024, the budget serves as a roadmap to navigate an evolving and dynamic global economic landscape. 


  • This article first appeared in The Malaysian Reserve weekly print edition