#Stocks to watch:* GW Plastics, PLUS, MMC, Gamuda, O&G

KUALA LUMPUR:'' Key Asian markets are expected to start off the new week on Monday, Oct 18 on a stronger note after tech stocks pushed Wall Street to a higher close.

The announcement and firm commitment by the Malaysian Government to push ahead with several infrastructure projects would provide the impetus to infrastructure companies after the cautious trading session last Friday.

At Wall Street, stocks closed higher on Friday, after stronger earnings from Google sent the Nasdaq up over 1%. However, uncertainty surrounding major banks' exposure to foreclosure losses dragged the Dow lower.

The Dow Jones industrial average dropped 31.79 points, or 0.29%, to 11,062.78. The Standard & Poor's 500 gained 2.38 points, or 0.20%, to 1,176.19. The Nasdaq Composite Index rose 33.39 points, or 1.37%, to 2,468.77.

The S&P 500 hit a session high around 1,180 for a third straight day, a level that could become technical resistance moving forward, according to Reuters.

Stocks to watch on Monday include GW Plastics Holdings Bhd, PLUS EXPRESSWAYS BHD [], MMC Corp Bhd, GAMUDA BHD [] and oil and gas-related companies.

GW Plastics is one of the largest manufacturers of flexible plastic packaging in Malaysia, its public tranche was oversubscribed by 3.7 times. Its offer price was 76 sen and RHB Research accorded it a fair value of 90 sen.

PLUS resumes trading on Monday after it received an offer from UEM Group Bhd and the Employees Provident Fund (EPF) as joint offerors to acquire all its business and undertakings , including assets and liabilities for RM23 billion or RM4.60 per share cash.

UEM and EPF said in a joint statement on Friday, Oct 15'' they would set up a co-investment vehicle to make the offer to PLUS. The co-investment vehicle will be 51% owned by UEM Group, with the remaining 49% owned by EPF.

MMC Corp and Gamuda will be in focus after the firm commitment by the government to go ahead with the Mass Rapid Transit in Greater KL which will be implemented beginning 2011. This project will entail an estimated private investment of RM40 billion.

Oil and gas counters will see trading interest as the government stays focused on the sector. The government will allocate RM146 million to support the sector.

Among the projects to be carried out include the establishment of the oil field services and equipment sector in Johor with private investment of RM6 billion over 10 hyears.

Petronas will implement a regasification project with an investment of RM3 billion in Melaka which will be operational in 2012.

Nasdaq rises with Google, but Dow tripped by banks

NEW YORK: A blowout quarter from Google sent the Nasdaq up over 1 percent on Friday, Oct 15, while uncertainty surrounding major banks' exposure to foreclosure losses dragged the Dow lower.

Google Inc's 11.2 percent surge -- on the largest volume in two years - made the Nasdaq the best performer among the three major U.S. stock indexes.

General Electric's poor quarterly revenues underscored the economy's soft spots, and it was the Dow's biggest percentage loser with a 5.1 percent drop.

With several major banks due to report earnings next week, investors are keen to see how deeply the foreclosure crisis has affected their stability.

"To the extent the banks have less capital because they intended to foreclose on these homes, they'll be less able to lend and help the economy move forward," said Manny Weintraub, managing director at Integre Advisors in New York.

"It also makes people nervous about financial products in general. It's just another headache in times when we don't need headaches."

Among the banks that saw the biggest reductions in earnings estimates for the quarter in the latest week are Goldman Sachs, PNC Financial Services Group and Citigroup, according to John Butters, director of U.S. earnings at Thomson Reuters.

Citi, which reports earnings on Monday, lost 2.7 percent to $3.95, while Bank of America fell 4.9 percent to $11.98.

The Dow Jones industrial average dropped 31.79 points, or 0.29 percent, to 11,062.78. The Standard & Poor's 500 gained 2.38 points, or 0.20 percent, to 1,176.19. The Nasdaq Composite Index rose 33.39 points, or 1.37 percent, to 2,468.77.

The S&P 500 hit a session high around 1,180 for a third straight day, a level that could become technical resistance moving forward.

Also weakening technically, the KBW bank index fell 5.9 percent in the past three days and slipped below its 50-day moving average.

For the week, the Dow rose 0.5 percent, the S&P 500 added 0.9 percent and the Nasdaq Composite gained 2.8 percent.

FLYING APPLE, FALLING GE

Apple Inc led gains in the Nasdaq 100 and shot up 4.4 percent to a new record high intraday at $315. At the close, Apple was up 4.1 percent at $314.74.

TECHNOLOGY [] companies "have great balance sheets, they don't need financing, and have global customers," Weintraub said.

"Tech has a lot more opportunity to benefit from global growth, which is stronger than U.S. growth."

General Electric Co closed at $16.30, down 5.1 percent, after revenues came in below estimates, even as profits from continuing operations increased for the second straight quarter and its GE Capital unit recorded a stronger performance.

Earlier on Friday, Federal Reserve Chairman Ben Bernanke helped put a bid on equities after he said high unemployment and low inflation pointed to a need for further monetary easing.

A flood of data, including a smaller-than-expected rise in consumer prices in September and a weaker-than-forecast reading of consumer sentiment in October, supported investors' hopes that the Fed will print more money.

The S&P 500 is up 12.1 percent since Sept. 1, partly on the expectation of further accommodative policies from the U.S. central bank.

About 9.9 billion shares traded on the New York Stock Exchange, the American Stock Exchange and the Nasdaq, the highest since July 1, and above the year's volume average at near 8.78 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 3 to 2. On the Nasdaq, the balance was just slightly tilted to the negative side despite the index's 1 percent gain for the day, with 1,340 issues falling and 1,253 shares rising. - Reuters

U.S. fiscal 2010 deficit narrows to $1.29 trillion

WASHINGTON: The U.S. budget deficit for fiscal 2010 narrowed to $1.294 trillion from last year's record $1.416 trillion as tax collections started to recover and bailout spending fell sharply.

The U.S. Treasury Department said on Friday, Oct 15 the deficit came to 8.94 percent of gross domestic product for the year ended Sept. 30, versus 10 percent in fiscal 2009.

The government called the deficit-to-GDP improvement the biggest since fiscal 1987.

Nonetheless, the budget gap was still the second-highest in U.S. history and too big to ease market demands and congressional calls for budget restraint in Washington.

"It's still abnormally large in terms of GDP, and doesn't change the need for fiscal consolidation," said Alan Ruskin, global head of foreign exchange market strategy at Deutsche Bank in New York. "You would have to see figures in the 6 percent range before you start to change perceptions that there's been a genuine improvement."

High deficits have become a hot-button campaign issue in November's congressional elections, with many Republicans branding President Barack Obama's spending policies as "reckless." Democrats counter that bailout and stimulus spending was necessary to prevent the economy from collapse and an even worse fiscal picture.

"Congress created this problem, and Congress needs to fix it by cutting spending to balance the budget. Washington's addiction to spending is no excuse to raise taxes," said Rep. Tom Price of Georgia, who heads a group of conservative House Republicans:

DEFICIT SMALLER THAN FORECAST

The budget gap was $177 billion less than the Obama administration had estimated in July, with much of the reduction due to lower-than-forecast spending on financial bailout programs and higher-than-expected tax collections.

"By carefully managing the emergency initiatives to stop the financial panic and by accelerating our exit from those investments, we have significantly lowered the cost to taxpayers, bringing the costs of the financial rescue down by more than $240 billion this year," U.S. Treasury Secretary Timothy Geithner said in a statement.

"However, we still have a long way to go to repair the damage to the economy and address the long-term deficits caused by the crisis," he added.

The Congressional Budget Office in August forecast a deficit of $1.07 trillion for fiscal 2011, which started Oct. 1. An Obama administration budget commission is scheduled to make recommendations for deeper cuts when it convenes in December.

Total federal outlays for fiscal 2010 were $3.456 trillion, down $64 billion from a year earlier, while receipts were $2.162 billion, up $58 billion.

Spending on financial bailouts fell to $30 billion from $272 billion in fiscal 2009. The decline mainly reflects lower outlays from the Troubled Asset Relief Program, lower support to housing finance giants Fannie Mae and Freddie Mac, and lower costs for bank takeovers by the Federal Deposit Insurance Corp.

Meanwhile, the Federal Reserve's efforts to support the economy more than doubled its profits, to $75.8 billion. The increase reflects income from its purchases of more than $1.75 trillion in Treasury debt and mortgage-backed securities in an effort to push down borrowing rates.

In September, the U.S. budget gap totaled $34.49 billion, compared with a $45.21 billion gap in September 2009. It was the 24th straight monthly deficit, the Treasury said. - Reuters

Bank stocks fall again on U.S. foreclosure mess

CHARLOTTE, N.C.: Investors pummeled the biggest U.S. banks for a second straight day on Friday, Oct 15 on fears the fallout from a growing foreclosure crisis could lead to big costs for banks.

There was also concern that delays in sales of foreclosed PROPERTIES [] could depress the fragile housing market and damage the broader economy, still struggling to emerge from the worst recession since the 1930s.

The KBW Banks index closed down 2.4 percent on Friday, after falling 2.6 percent on Thursday. In another sign of investor nervousness, the cost to insure the debt of major banks also rose.

At issue are allegations that banks failed to review foreclosure documents properly or submitted false statements when they foreclosed on properties.

In addition to inquiries by attorneys general in all 50 U.S. states, the U.S. Justice Department and banking regulators, the U.S. Securities and Exchange Commission has begun a preliminary investigation.

SEC staff are looking at whether securities laws may have been broken, but have not targeted any particular institution, according to a person with knowledge of the matter.

Banks could face fines and lawsuits and may be forced to repurchase faulty loans. Some lenders have temporarily halted evictions or foreclosures because of the allegations.

But Barbara Desoer, loans chief at Bank of America, said in an interview with Bloomberg News that the potential costs from foreclosure problems have been "grossly overstated."

Analysts tended to agree. "On the foreclosure front, while there will likely be some legal costs stemming from documentation issues, we don't think ultimate losses will be impacted by foreclosure moratoriums," said Glenn Schorr of Nomura Securities.

Analysts at Credit Suisse said in a note to investors that they expected Washington to step in to resolve the documentation issues.

The White House, which despite congressional election pressures has refrained from joining calls for a nationwide moratorium on foreclosures, said President Barack Obama "wants to make sure that these servicers live up to their obligations."

Shares of Bank of America, down as much as 6.5 percent earlier on Friday, their lowest price since July 2009, closed at $11.98, down 4.9 percent.

The cost to insure $10 million of Bank of America's debt for five years rose 3 basis points on Friday to $195,000 per year, according to Markit Intraday. The cost has jumped 40 basis points this week.

JPMorgan Chase shares ended down 4.1 percent, Citigroup Inc fell 2.7 percent, while Wells Fargo & Co shed 4.6 percent.

Bank of America, the biggest U.S. mortgage servicer, has temporarily halted evictions nationwide. JPMorgan Chase and others have halted some foreclosures pending reviews. Citi and Wells Fargo have not halted foreclosures.

The foreclosure fiasco, in which banks are accused of using "robo-signers" to sign hundreds of foreclosure documents a day, has reignited public anger with banks, blamed for helping cause the 2008 financial crisis and recession.

Angelo Mozilo, the former chief of Countrywide Financial, agreed on Friday to pay $67.5 million to settle charges that he hid risks about the firm's mortgage loan portfolio.

Countrywide, once a titan in the mortgage industry, is now part of Bank of America.

Nearly one-third of all homes sold in September were in the foreclosure process, according to real estate data company RealtyTrac.

The number of homes taken over by banks topped 100,000 in a month for the first time in September but foreclosures are likely to slow as lenders review their paperwork, RealtyTrac said. - Reuters

Budget 2010/2011: Comments by banks, Bursa Malaysia

Comments on the Budget 2010/2011 by the banks, Bursa Malaysia

Tan Sri Megat Zaharuddin Megat Mohd Nor, Maybank Chairman:

It is a Budget set to springboard the initiatives of change by the Government and puts Malaysia well on the path towards a stronger nation and a high income economy.

The Government's bold moves to assure investments in new growth areas and creating many jobs are exciting for us all. Malaysians usually rise to such challenges with strong leadership.

What is commendable is that it has been crafted with the people's feedback and ideas. I would call it a participative Budget as it shows a common vision by all for Malaysia's economic success.

We at Maybank take this in stride in our next steps of our own transformation to secure greater regional leadership. We will continue to play our role in nation building, as we have done over the last half century

Dato' Sri Abdul Wahid Omar, President & CEO of Maybank and Chairman, Association of Banks in Malaysia:

Budget 2011 is a prudent and practical budget in that it continues with the gradual fiscal consolidation while at the same time ensures that the growth momentum from this year's robust recovery can be sustained into 2011.

Malaysia does not have to aggressively slash its deficit and engage in painful austerity measures like the European countries considering that the Federal Government debt is manageable at just over 50% of GDP currently and our sovereign credit rating is stable.'' Moreover, the global economic outlook remains cautious, hence the need to support domestic demand.

In this regard, Budget 2011 is obviously earmarked for the implementation and execution of the Government and the economic transformation programmes (GTP, ETP) to deliver the National Key Result Areas (NKRAs) and boost investments in the National Key Economic Areas (NKEAs) that will lift GDP through public sector efficiency gains and stimulate private sector spending.

I must say that I like the clarity provided on some of the key infrastructure projects to be implemented from 2011 onwards.

Although there is no specific incentive for the banking sector, we at Maybank ' as the leading financial services group in Malaysia ' welcome Budget 2011's initiatives to further develop financial services as a key driver of services sector and overall economic growth.'' These initiatives include the measures to improve the stock market's liquidity, product and service offerings as well as participation, the tax incentives for the Islamic capital markets and the setting up of the Private Pension Fund.

Moreover, the banking industry will participate in ' and stand to benefit from ' the Budget 2011's allocations and measures to sustain domestic demand and economic growth, particularly in terms of financing consumer spending, business working capital and investments, as well as funding for the various infrastructure and development projects.

One interesting aspect of the Budget 2011 is the increase in Service Tax from 5% to 6%.'' Perhaps this will later create a stronger case for the implementation of GST that will be beneficial in broadening the Government's revenue base and plug tax leakages in the future.

Overall, the Budget 2011's strategic thrusts of Reinvigorating Private Investment, Intensifying Human Capital Development, Strengthening Public Service Delivery and Enhancing Quality of Life of the Rakyat lay the foundations for the economy to RISE to the challenges of becoming a high-income, developed economy over the next 10 years.

Tan Sri Dato' Sri Dr. Teh Hong Piow, Chairman of Public Bank:

First of all, we would like to congratulate the Honorable Prime Minister and Minister of Finance for the growth-friendly budget, in particular for the significant efforts to increase private investment in Malaysia.

The budget is pragmatic in that it strikes a delicate balance between the need to boost the domestic economy and ensure economic prosperity in this challenging external environment and the need to reduce the Government's fiscal deficit.

Based on the expected public sector's deficit of 5.4% of GDP for 2011 compared to 5.6% for 2010, the Government is committed to gradually consolidate and improve its financial position.

Although the global economy will remain challenging in which advanced economies will experience anemic growth with high unemployment and high sovereign debt, the Malaysian economy is expected to remain healthy.

The 6% growth target for 2011 - as also envisaged in the Tenth Malaysia Plan - is achievable. Malaysia has strong economic fundamentals - such as high savings, modest inflation, healthy labour market, strong external position and strong banking sector -'' which can be further leveraged to support economic activity.

Coupled with strong household and corporate balance sheets, we expect low interest rates and steady credit flows will continue to support our domestic growth. At the same time, Malaysia has a strong competitive advantage which can be leveraged, particularly to increase intra-regional trade. The banking sector in Malaysia will continue to remain strong and supportive of our economic growth, given its strong capitalisation and strong asset quality.

The series of measures in Budget 2011 will continue to support the domestic economy by attracting more private investment.

The proposed measures to intensify public-private partnership will further enhance private sector involvement in economic activity'' and help the Government hasten the process of economic transformation towards a high-income economy by 2020.

Also, the proposed infrastructure projects such as new highways, power plants,'' and medical institutions will boost aggregate domestic demand and productive capacity of the economy in future.

The high-impact strategic development projects such as the Development of Kuala Lumpur International Financial District and the implementation of the Mass Rapid Transit in Greater KL will raise the level of economic activity in Malaysia.

The proposed measures to further enhance high-value added activities in the electrical and electronics industry; propel oil, gas and energy industry; invigorate the agricultural sector; energise the tourism industry; revitalise palm oil and related industries and enhance the information and communication TECHNOLOGY [] will not only benefit small- and medium-sized businesses (SMEs) in Malaysia but will also increase high-valued activities in the country.

These efforts will support growth of SMEs in Malaysia, in line with the Government's objective of transforming SMEs to be more innovative and vibrant in the future. In the Tenth Malaysia Plan and also in the New Economic Model, SME segments form an important component to drive future growth of the Malaysian economy.

The budget is also caring in that it is aiming at increasing home ownership, particularly among'' young adults such as graduates who have just joined the workforce with income less than RM3,000.

The Skim Rumah Pertamaku will allow house buyers to obtain a 100% loan without having to pay the 10% down payment to purchase houses below certain price. The stamp duty exemption of 50% on instruments of transfer on a house price not exceeding RM350,000 will help first-time house buyers.

Dato' Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia Berhad:

The 2011 National Budget announcement made by the Prime Minister today demonstrates the Government's commitment towards elevating the country to a high income, high value nation.

With regards to the capital market, the measures and initiatives announced are predominantly targeted towards enhancing liquidity, velocity and vibrancy.

The Government Linked Investment Companies' (GLIC's) impending further selldown of its stakes and the establishment of a private pension fund alongside the Employees Provident Fund will see diverse positions being taken on the capital market, and we see this as a positive move which will promote vibrancy in the market.

Increasing the number of day traders in our market will help to balance out the long term holdings in our market.'' The day traders will manage this imbalance, thereby creating liquidity.

With the issuance of the three new licenses to eligible local and foreign brokers, we hope to see an increase in retail investor participation in our market.

On the establishment of an International Board under Bursa Malaysia, we welcome this announcement as it is a move to further internationalise our market and provide diversity of products to our investors, as well as build liquidity.

In encouraging further retail participation in the market, making sukuk and conventional bonds accessible to the retail market will increase the diversity of products and investment options.'' We are also pleased to note efforts to ease issuance of Exchange Traded Funds (ETFs) and we hope to see more issuers come onboard to list ETFs.

Increasing the public shareholding for the much awaited listings of Petronas Chemicals and Malaysian Marine & Heavy Engineering will see greater participation from the retail market, and allow the rakyat to participate in the growth of one of the nation's most successful enterprises.

We are pleased that the Government will give tax deductions for the issuance of Islamic securities based on Murabahah and Tawarruq contracts using commodities traded on our Bursa Suq Al-Sila' trading platform as it will further increase participation by issuers and financiers.

This commodity trading platform is already receiving international acclaim from users, local and foreign Islamic banks, and incentives such as this will help us to drive the MIFC agenda to position Malaysia as a key destination for Islamic finance and investments.

Datuk Mohd. Najib Abdullah, Group Managing Director of MIDF:

Malaysian Industrial Development Finance Berhad ('MIDF') said today that it is optimistic that Budget 2011 will help reinforce the sustainability of the economic growth.

The economies of western advanced countries are encountering headwinds that may stunt their recovery thus the elevated risk of a 'double dip' recession. The Government appears to not taking any chances but without abandoning its commitment towards fiscal rationalization.

As it is also the maiden budget under the Tenth Malaysia Plan, proposals contained in the budget are seen to be directed towards realizing the five strategic thrusts of the nation's latest five-year plan.

The Federal Government deficit, as a percentage of GDP, is projected to decline further to 5.4% from 5.6%. The decline may not be as steep as one may want it to be, but at times when the risk of a global 'double dip' recession has heightened, the Government appears to not taking any chances.

After all, Malaysia does not really stick out like a sore thumb in deficit spending when countries all around the world are still pump priming their economies.

Forecast GDP growth for 2011 of between 5-6% is 'normalised' growth as far as Malaysia is concerned.

It is to be private sector driven, with the Government assuming a facilitative role while keeping the financial option to lift the economy should the need arises. The MIDF Group is confident that the private sector will increase its investment and consumption by 10.2% and 6.3% respectively, as projected in the Budget.

In addition, total government's subsidies budgeted next year is down by a marginal 4.9% to RM23.7 billion, from the RM24.9 billion spent in 2010 and RM20.3 billion in 2009.

The apparent message is that while the Government is for a lesser dependence on subsidies, the phased withdrawals will be done in judicious manner so as not to exert too much burden on the Rakyat.

As we had expected, the incentives for green technology were forthcoming, reaffirming the Government's commitments towards cleaner environment. These incentives are necessary to enable the country to leapfrog other nations in this high potential sector.

The MIDF Group is a strong proponent of sustainable development, which is a critical growth strategy in the 21st century.

The Budget mentioned several big-scale projects with high multiplier and spillover effects. These are expected to rejuvenate the private sector and catalyze activities in the CONSTRUCTION [] and building material sectors.

These strategic high impact projects will assist in meeting the targeted GDP growth of our economy. As a wholly-owned entity under'' PNB, the MIDF Group is particularly excited with the proposed 100-storey tower to be developed as a new landmark icon for Kuala Lumpur.

The Budget also contains good news for the Rakyat. Assistance for education from pre-school to university level, improving the teaching of English in schools with teachers from United Kingdom & Australia, skills training under the 1Malaysia Training Programme are just a few examples of how the Government is working towards strengthening the quality of education.

Education will be key to prepare the Rakyat in facing the many new challenges as we move towards a high income economy which requires innovation and productivity improvements.

In conclusion, the 2011 Budget has painted a broadly realistic but cautious macro picture for next year, with GDP growth projected to return to normalised levels.

It reflects consensus expectation with regard to the economic performance in the U.S. and major European countries. Nevertheless should there be a further easing in the western economies, MIDF expects Malaysia as well as countries in the region to ready able to withstand the knock-on-effect, shaken but still moving ahead.

Budget 2010/2011: Reactions from the industry

Industry's reaction to Budget 2010/2011

Ho Hon Sang, Managing Director, Property Development Division, Malaysia, Sunway City Berhad:

Overall, it is a very rakyat-friendly budget and we are supportive of the Government's actions to transform the nation in a developed and high-income economy for sustainable development.'' The higher budget of RM212 billion reflects the Government's commitment to implement its economic initiatives as well.

We also believe that the stamp duty exemption of 50% on instruments of transfer on a house price not exceeding RM350,000 for 1st-time house buyers will help spur the property sector and enable lower-income groups to enjoy more affordable homes.

The development of the Malaysian Rubber Board land in Sungai Buloh will also translate to more opportunities within the property sector. We are also heartened that the Government is committed to develop green TECHNOLOGY [] to ensure sustainable development.

As a property developer that is focused on building green buildings, we will continue with our initiatives to develop environmentally-friendly and energy-efficient homes.

The Greater KL MRT project when completed will help to improve connectivity which will also have a positive impact for the property sector.

All in all, we're optimistic that this budget will generate a feel-good factor among house buyers and investors, and this will certainly augur well for the industry.

Gan Eng Peng, Head of Equities of HwangDBS Investment Management Bhd (HwangDBS IM).

A Market Neutral Budget

This is a market neutral budget as the bulk of the market moving announcements have already been factored in, with the evidence in the recent strength in CONSTRUCTION [] and building material stocks.

The 2011 Budget is focused on achieving the recently announced Economic Transformation Plan (ETP), which essentially benefits key stock market sectors like construction, building materials and property.

Our Market Outlook --'' Malaysia & ASEAN region

Our medium-term outlook remains bullish on Malaysia.'' The economic forecast and government stance of loose monetary policy, controlled inflation outlook, falling deficit, continued economic growth and finally, reasonable valuations, is the backbone needed for continued KLCI ascension into 2011.

In particular, market activity will be pique by the detailed economic roadmap in ETP and likely surge of news flow on the numerous entry point projects (EPP).

The recent strength of the Ringgit, if sustained, will translate into lower input costs for most listed corporations.'' Corporate earnings growth is therefore, going to be stronger than what the market has expected in the beginning of 2010.

The Malaysia market has been rallying hard, together with the developing markets of Asean such as Thailand, Philippines and Indonesia.'' This is on the back of coordinated currency moves in these markets.

Going forward, our sense is that Asean markets, including Malaysia, will remain firm but it may start to underperform the lagging markets of China/Hong Kong and possibly Singapore.

Malaysian Stock Market

As mentioned above, the KLCI will continue its ascension into 2011. So far, the bulk of the index rally has been based around a narrow focus of foreign favorite stocks like CIMB, MRCB, UEM Land, Air Asia and the likes.

We think as the bull market goes into the second phase, second liner blue chips-like will gather more activity as investors look for value and laggards.

Risk to our View

The risks are that the market remains skeptical of the Government execution ability.'' Signs of such and deviation from the roadmap will hold back more enthusiastic buying activity.'' Some of the funding for the mega projects remains unclear.

The private companies would not be able to fund it without explicit government guarantees involved.'' The market is weary of too many government guaranteed semi-government entities coming to the market to raise money.

This is in effect government 'off balance sheet' fund-raising and if added back to the budget, is in fact increasing the deficit. So while there is a reduction of budget deficit and direct government bond issuance, the market might not like the indirect fund raising route.

Bobbi Dangerfield, Managing Director, Dell Global Business Center Sdn Bhd:

On Human Capital development

The catalyst for a developed nation is a rich pool of highly qualified, skilled and knowledgeable workers.

However, Malaysia is in dire need of nurturing more knowledge workers and strengthening the talent pool in the country to propel the country's economy to greater heights.

It is evident that there is a shortage of skilled workers who are innovative and capable enough to meet the growing demands of the market, especially in the ICT industry. For this reason, I believe initiatives such as the Talent Corporation to be established in 2011 and aimed at attracting human capital including Malaysians working overseas, will certainly help catapult the country to become a developed nation by 2020.

Thus, we welcome the allocation of RM29.3 billion, RM10.2 billion and RM627 million to the Ministry of Education, Ministry of Higher Education and Ministry of Human Resources respectively, to optimise the nation's human capital base.

The allocation of RM200 million from the Human Resource Development Fund to be used by companies to fund specific training programmes for employees, is another positive step.

We also welcome the allocations and programme for education and training institutions that are aimed at up-skilling and re-skilling of workers with technical skills.

With these initiatives and allocations in place, we believe there is great potential to source local talent in the future, with the necessary soft skills and technical talent.

Dell is committed to continue working with the government and the education sector to ensure the nation's talent pool grows, and that our knowledge workers contribute positively towards the development of the country.

Vlasta Berka, General Manager, Nokia Singapore/Malaysia & Brunei

Nokia applauds the Prime Minister and Minister of Finance, Datuk Seri ''Najib Razak, for tabling a very forward-looking Budget 2011, which focuses on several critical growth factors shared by other major economies globally.

We are in full agreement that to achieve this, enhancing ICT is critical.

Nokia is particularly encouraged'' by the Government's proposal to make all types of mobile phones, not just phones with various applications such as internet and personal digital assistants (PDAs), exempt from the existing 10% sales tax.

As more mobile devices are able to access the internet, including the more affordable models, the divide between 'ordinary' phones and feature phones is increasingly closing in.

Furthermore, in today's era of connectivity and with the continued rise in social media, we have always viewed mobile technology as a staple and a must-own, rather than a luxury.

Beyond this, Nokia echoes the Prime Minister's view that an innovative digital economy is key in achieving the target of becoming a high-income nation.

We believe that mobile content development is a significant engine and growth catalyst within the digital economy.

We are supportive of the Government's investment of RM119 million in the MY Creative Content Programme to encourage the development and creation of local content.

Nokia is fully aligned with the Government in our initiatives to invest in local content development through partnerships with local higher learning institutions, mobile operators and content developers.

We already know that content is king in today's market but there can be no substitute for good quality local content in further driving the adoption of the internet, mobile and otherwise.

Geoffrey Briscoe, Managing Director, BMW Group Malaysia

While BMW Group Malaysia is pleased to hear of the government's continued focus on the development of Green Technology and commitment to reducing carbon emission intensity, we hope that the government will provide the full details regarding its plans to introduce the B5, Blending of Biofuels with Petroleum Diesel Programme prior to making it mandatory by June 2011.

Biodiesel in the form of esterified Palm Methyl Ester (PME) can and have been used as a cleaner fuel alternative in some parts of the world when blended in small amounts with natural petroleum Diesel.

However, the most pressing issue that needs to be addressed locally is to ensure that fuel standards in Malaysia are collectively improved to Euro IV standards as a minimum, as this would be the most effective and wide spread method of reducing carbon emission intensity throughout the Malaysian passenger and commercial vehicle segments.

Furthermore, it is vital that the government also introduce incentives to encourage the ownership of Advanced Diesel vehicles in Malaysia, such as was done with the extension of import and excise duty exemption on hybrid vehicles. The fact of the matter is that while Hybrids are designed to be environmentally friendly, they are not the one all and be all solution to promoting sustainability or reducing carbon emissions.

As a matter of fact, under current standards established by the United Nations, the definition of hybrid cars requires that their engine specifications are of at least Euro 3 specification technology and have achieved not less than a 25% increase in combined city-highway fuel economy, relative to a comparable non-hybrid vehicle with a maximum carbon monoxide (CO) emission rating of 2.3 grams per kilometre.

Advanced Diesel engines such as those developed by BMW are already available with Euro 3 technology and specifications.

Additionally, the fuel economy comparison between a BMW 320d and the BMW 320i will provide consumers with a 40% reduction in fuel consumption, not to mention a CO2 emission rating of only 0.326 grams per kilometre.

Based on these points alone, Advanced Diesel vehicles should be viewed as far exceeding the 'Green' requirements and would significantly boost the government's efforts to reduce carbon emissions, particularly, in light of Malaysia's ongoing commitment to reduce carbon emission intensity per Gross Domestic Product (GDP) by 40% in the year 2020 to 2005 emission levels.

Budget 2010/2011: Reactions from CIMB Economic Research, RAM, MDeC

CIMB Investment Bank Bhd chief economist Lee Heng Guie:

The Malaysian 2011 Budget lives up to its transformational theme. It provides the roadmap to catalyse and transform the economy so as to ensure the gains in 2010-11 are sustained over the medium-term amid still-unsettled external unwinds.

It maps out strategies and measures that are targeted specifically at economic restructuring, revitalising private investment, and enhancing productivity as well as intensifying human capital development. Attracting and retaining talent is a prerequisite for an innovation cum knowledge-driven economy.

Malaysia needs to embrace foreign talent rather than keep them out. The pivotal need is a radical revamp of the education system, ranging from primary to tertiary levels.

Private sector will be harnessed back in the driver's seat as there are fiscal limits to pushing growth through higher public expenditure. What matters most is the timely and effective implementation of the NKEA initiatives so as to produce a significant tangible growth dividend in the medium term. These projects will not take off successfully if structural and systemic barriers to create an optimal investment environment as well as impede growth are still in place. The private sector needs certainty and clarity in policy actions to build confidence and strong commitment on long-term investment and growth strategies.

Faced with rising headwinds in major mature economies, a gradual rollback of fiscal support is appropriate in order to avoid choking off the recovery. Thus, the projected overall deficit of RM45.5 billion or 5.4% of GDP for 2011 (-5.6% of GDP in 2010) and a 2.8% rise in total expenditure to RM212 billion represents a modest stimulus for 2011.

It is a good risk management to keep in place some targeted fiscal measures and expenditure to support growth. That said, it remains important for policymakers to look beyond the short term, putting in place credible fiscal reforms towards a sound fiscal management over the medium term. This is to safeguard fiscal space to deal with unexpected shocks and to enhance policy credibility and effectiveness.

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RAM Rating Services Bhd: A foundation-setting budget

Budget 2011 ' themed Transformation Towards a Developed and High-Income Nation ' aims to promote a more facilitative investment environment to spur the country's transformation into a high-income economy, as envisioned under the 10th Malaysia Plan and the Economic Transformation Programme.

The Government has estimated that the domestic economy will grow at a pre-crisis rate of 5%-6% in 2011, following the 7% expansion this year. Much of next year's growth is expected to be driven by the private sector, particularly private investments that are projected to increase at an accelerated rate of 10.2% in 2011, after having advanced 15.2% this year; this roughly corresponds to our growth projections of 7.4% for GDP and 11.5% for private investments in 2010.

Addressing the fiscal burden ' sustaining growth momentum and rationalising spending activities

Malaysia's fiscal deficit, which reached a 12-year high of 7.0% of GDP (which also represents a regional high) in 2009, is expected to be reduced to 5.6% this year, followed by a marginally smaller 5.4% in 2011. This rather unflattering comparison is, however, mitigated by our current-account surplus which, at 16% of GDP, dwarfs those of many other countries.

The anticipated slight reduction in the country's fiscal-deficit ratio in 2011 is seen to be achieveable via a moderately strong growth next year and revenue from firm oil and gas prices. Furthermore, efforts through the Government Transformation Programme ' which is likewise allocated a certain proportion of the Budget ' will ensure greater spending efficiency and budgetary control.

Meanwhile, petroleum tax receipts are expected to remain healthy and continue being a significant contributor to overall tax revenue, although there are still risks in terms of price movements next year. In line with the more upbeat economic sentiments, the collection of sales and services taxes is envisaged to be boosted by more enthusiastic consumer spending.

Despite no full-scale announcement of the implementation of the GST, the increase in services tax - from 5% to 6% - is also seen to boost revenue collection. We opine that the public will be able to absorb this slight increase on the back of rising incomes and the ongoing economic recovery. At the same time, the proposed divestment of government-linked investment companies ('GLICs') and the increase in public-private partnerships will somewhat alleviate the public sector's operational expenditure and also stimulate liquidity in the capital markets.

Budget to revitalise private investment

A significant proportion of the development expenditure is committed to facilitating a favourable environment for private investment. Notably, the allocation for 'trade and industry' and 'transport' development - which accounts for 19.6% each of next year's total development expenditure and sums up to RM19.3 billion - shows a hefty annual increase of 53% from the current RM12.6 billion.

Prominent among the list of expenditure items are projects revolve around the Greater Kuala Lumpur National Key Economic Activity. These developments are anticipated to generate a significant multiplier effect to domestic production through better connectivity (urban infrastructure projects such as the Mass Rapid Transport system) and increased financial flows (incentives to accelerate the development of Kuala Lumpur International Financial District).

Accelerating the evolution of the domestic capital market

In tandem with reinvigorating the private sector's interest, Budget 2011 has lent more 'bite' to promoting a more vibrant capital market. The planned divestment of GLICs, together with additional foreign stockbroking licences, will stimulate liquidity and trading on the local bourse.

Moreover, the establishment of a private pension fund can also increase liquidity in the domestic capital markets while providing another avenue of investment for employees and the self-employed.

No less important is the Government's continued initiatives to strengthen Malaysia's position as a global Islamic capital market, specifically through the development of a trading platform that enables foreign securities, including Shariah-compliant investment products, to be listed.

Taken as a whole, the domestic capital markets are expected to experience considerable improvement in liquidity and overall trading activity in 2011, more so after the further liberalisation of capital controls.

High-income structural initiatives

Budget 2011 has made special mention of initiatives to accelerate Malaysia's growth momentum in the coming decade. In particular, the abolishment of a broad range of import tariffs will provide more competitive pressure for domestic industries, thus driving them to improve while offering consumers a greater array of products.

Elsewhere, important measures have been taken to enhance human capital and the efficiency of the domestic labour market, over and above the annual allocation for education.

The Budget has unveiled many initiatives to encourage the increased participation of women in the workforce, the lack of which has been revealed as a significant weakness in the domestic economy compared to many advanced countries. Last but not least, the Government has announced the establishment of a National Wage Consultation Council as a means of promoting more efficient wage determination in the future.

Sundra Rajoo, Director of Kuala Lumpur Regional Centre for Arbitration (KLRCA):

Creating A Business-friendly Environment - Protecting commercial interests

With the government's announcement of the Economic Transformation Programme (ETP), the private sector will be in the driving seat in moving the national economy forward and transforming Malaysia into a high-income economy by 2020. As private investment both locally and from foreign investors is expected to increase to RM 86 billion in 2011, commercial disputes will inevitably arise. Bearing in mind the phenomenal increase in economic and commercial transactions in which Malaysian commodities and services are being widely exported and industrial products imported, disputes between companies are already on an uptrend.

While the Government has established 2 Commercial Division Courts to expedite the hearing of commercial cases and resolve them within 9 months, compared with a longer time frame previously, we feel that the Government can do more to protect commercial interests of both local and foreign companies.

As the country seeks to attract more Foreign Direct Investment and also stimulate domestic spending, the importance of arbitration as an alternative to the courts system should be highlighted to investors and the legal profession as a whole. Arbitration plays a vital role in:

1)'' providing an option that is speedier, flexible, more cost effective and ensures the confidentiality of the parties in dispute. With arbitration, the disputes can be resolved within 6 to 12 months.

2)'' reducing the backlog of cases in the commercial courts.

The Malaysian courts have in fact acknowledged the importance of arbitration and also highlighted its vital role in reducing the number of business disputes in the commercial courts.

We are proposing that all investment contracts should include an arbitration clause, as it would benefit all parties involved if there is a dispute. This provides a greater sense of confidence and assurance to investors as arbitration awards are legally binding and are enforceable in 145 countries (subject to certain conditions). We are committed to supporting the Government's efforts to create a business-friendly environment by protecting the commercial interests of all investors.

Datuk Badlisham Ghazali,'' Chief Executive Officer of Multimedia Development Corporation Berhad (MDeC)

This budget is a clear signal of the governments' seriousness about transforming the country's economic framework to meet the challenges of an Innovative Digital Economy. It is a very good budget for the ICT sector because of the focused and strategic nature of the proposed measures which are aimed at strengthening the eco-system, nurturing talent and creating a culture of innovation and entrepreneurship.'' This dovetails with Phase 3 of MSC Malaysia's development plans.

The four key strategies on which the Budget is built are critical components that address Malaysia's journey towards developed nation status.'' The key initiatives under the Budget will bring Malaysia closer to an innovation-led high-income economy that is competitive globally.

The country needs to leverage on the transformative use of ICT and embrace the opportunities that lie in an Innovative Digital Economy, where knowledge, TECHNOLOGY [], entrepreneurship and innovation are central to economic growth and smart public-private partnerships are essential to spur higher productivity and greater innovation.

With the focus on human capital development in this budget, it is clear that the government understands that much of this transformation sits squarely on our ability to deliver the right quality and quantity of talent.

There is an urgent need to increase efforts to attract, motivate, enhance and retain talented human capital from within the country and abroad.'' Specifically for the ICT sector, where technology is fast-changing, the measures offered will help address the shortage and quality issues on a short-, medium- and long-term basis.

The RM50 million allocated to MDeC to train graduates in ICT to enhance their employability under the 'Finishing School' initiative will support efforts to upskill an additional 25,000 graduates to meet demand in the ICT industry.

The measures announced under the MY Creative Content Programme are significant for the multimedia creative content industry. The RM119 million allocated will further spur the creation and hosting of local multimedia content.

Today, the creative industry is still a relatively untapped but potentially lucrative trillion dollar industry and development of this sector must be further accelerated as a source of national growth and income.

We also laud the initiatives around technopreneur development. The venture capital industry is a cornerstone for innovation, development and growth particularly in high technology sectors such as ICT and the creative industry.

The proposed funding and other incentives will help to create an eco-system which is conducive for entrepreneurs to flourish and thrive. The proposed changes in insolvency laws will also go a long way in encouraging businesses to take risks and stretch their horizons. We also see a lot of opportunities for ICT under the electrical & electronics industry offerings.

The RM857 million allocated will help drive the local ICT sector further, particularly in the MSC Malaysia Cybercity and Cybercentre locations in Penang and Kulim Hi-Tech Park.

The governments' allocation for business outsourcing services is another area that bodes well for ICT. Services like these offer a unique opportunity from both a domestic and foreign investment perspective as well as act as a driver for knowledge and skills development. ICT also gets a great leg-up via the incentives around 'green technology'. Most if not all of the new technologies are ICT-intensive and this will prove to be a great boost to the sector.

In summary, this has been a 'bumper' budget for ICT, from the perspective of ICT as an industry as well as an enabler. It is a clarion call for industry players and reiterates the government's clear drive towards an Innovative Digital Economy.

MDeC is very pleased with the measures provided by the government in this budget as it will help us transform the landscape of business via ICT and push Malaysia closer to becoming an innovation-led high-income economy.

Chartered Tax Institute of Malaysia (CTIM)

Chartered Tax Institute of Malaysia (CTIM) welcomes the Prime Minister's Budget Speech. This is the first budget under the 10th Malaysia Plan, and the strategies are well formulated towards achieving a high income economy by the year 2020.

In line with the Economic Transformation Programme and the New Economic Model, the Budget focuses on boosting private investment, developing the human capital, improving the quality of life of the Rakyat and improving the public service delivery.

There is special emphasis on projects identified under the National Key Economic Areas. The budget deficit for 2011, targeted to be reduced to 5.4% of the GDP from 5.6% in 2010, is a move in the right direction. To achieve this, various tax measures have been introduced in the Budget such as increasing the rate of service tax by 1% to 6% This is expected to compensate for the projected revenue from the implementation of GST.

The scope of service tax has been extended to include subscribers of paid broadcasting services (such as Astro). The Government also hopes to boost revenue from tourism by exempting import duty on approximately 300 items aimed at turning Malaysia into a 'shopping haven'.

To encourage home ownership and ease the burden of first-time purchasers of residential property, there is a 50% exemption of stamp duty for PROPERTIES [] costing not more than RM350,000, with a corresponding 50% exemption of stamp duty on the related loan agreements.

The scope for tax relief of RM5,000 in relation to medical expenses for parents has been widened to include among other things treatment and care at home, day care centres or home care centres. These measures are welcome and reflect the Government's initiative to counter the rising cost of living.

The extension of the Green Technology incentive period should encourage more investments in environment=friendly projects and this move is lauded. Generally, Budget 2011 does not have major changes in direct taxes, and appears to reflect the Government's objective of consolidating the economic recovery and future growth by introducing various fiscal measures to create wealth and employment, with a minor tweaking from the indirect tax perspective.

Budget 2010/2011: Comments from Guinness Anchor, Carlsberg

Impact of the Budget 2010/2011 on the beer and stout industry

Charles Ireland, managing director of GUINNESS ANCHOR BHD []:

Guinness Anchor Berhad (GAB) today issued a statement in response to the Government's move to not impose an increase in excise duty.

GAB welcomes the news that the Government has decided not to raise the excise duty on beer and stout for the coming year, particularly in this economic downturn which has had a significant impact on both businesses and the man-on-the-street.

At the current duty levels, Malaysia already has the second highest duty on beer and stout in the world after Norway.

As such we believe the Government was prudent to not impose another round of excise duty increase as this would have exerted tremendous pressure on the industry that is already operating in an extremely difficult and challenging environment.

It would have also put further pressure on the F&B industry and tourism, who continue to face serious challenges with consumers still cautionary on spending.

GAB hopes that the Government will consider a review of excise duty structure to bring it in line with global best practises. We would like to work with Government to set up a working committee for this purpose.

Soren Ravn, managing director of CARLSBERG BREWERY MALAYSIA BHD []:

It was positive that the government had decided not to raise the excise duty on beer and stout for the coming year.

A duty increase would have had adverse impact on all the stakeholders connected to the industry.

The decision was in line with the government's Economic Transformation Programme (ETP) where the key focus areas, Tourism and the Wholesale and Retail sectors have been identified as National Key Economic Areas (NKEAs) of key importance to the Government for driving economic activity, development and growth to transform Malaysia to a higher income nation.

Carlsberg Malaysia will continue to be part of the catalyst to drive the economic growth in the areas of FDIs, Tourism, and Retail sectors while at the same time continuing to reinvest in the local economy through production and capacity expansion; our workforce and Corporate Social Responsibility initiatives.

Carlsberg Malaysia is fully committed to Malaysia and will continue to support the government in its economic reform to boost growth and attain developed-nation status.

#Flash* PLUS gets RM23b takeover offer from UEM, EPF

KUALA LUMPUR: PLUS EXPRESSWAYS BHD [] has received an offer from UEM Group Bhd and the Employees Provident Fund (EPF) as joint offerors to acquire all its business and undertakings , including assets and liabilities for RM23 billion or RM4.60 per share cash.

UEM and EPF said in a joint statement on Friday, Oct 15'' they would set up a co-investment vehicle to make the offer to PLUS. The co-investment vehicle will be 51% owned by UEM Group, with the remaining 49% owned by EPF.

They said the offer was subject to the successful restructuring of the Concession Agreement on acceptable terms for all parties.

In a related development, Prime Minister Datuk Seri Najib Razak announced during the tabling of the Budget 2010/2011 that the government will not raise toll rates for PLUS-owned highways for next five years with immediate effect.

The offer confirms a report by The Edge FinancialDaily on Oct 15 that the EPF and Khazanah Nasional Bhd will undertake to buy all the assets and liabilities of PLUS.

Khazanah already owns a 16.7% stake in PLUS. UEM Group Bhd, which is also owned by Khazanah, holds another 38.5%, making a total of 55.24% or 2.76 billion shares.

EPF has a 12.27% stake or 613.47 million shares in PLUS. Together, EPF and Khazanah own a 67.5% stake in the toll road operator.

PLUS owns and operates Projek Lebuhraya Utara-Selatan Bhd; Expressway Lingkaran Tengah Sdn Bhd; Linkedua (Malaysia) Bhd; and Konsortium Lebuhraya Butterworth-Kulim (KLBK) Sdn Bhd in Malaysia.

Its overseas interests include PLUS Kalyan (Mauritius) Pte Ltd; PLUS BKSP Toll Ltd; PT Lintas Marga Sedaya; PT Cimanggis Cibitung Tollways; Indu Navayuga Infra Project Pte Ltd; and PLUS Plaza (Mauritius) Pte Ltd, as well as a company to be incorporated to enter into a concession agreement in Gujarat, India.

PLUS said it would appoint the relevant advisers in due course and deliberate on the terms of the offer and decide on the next course of action.'' 'An announcement will be made once the board has made a decision on the offer,' it said.

EPF deputy chief executive officer Shahril Ridza Ridzuan the EPF viewed the proposed acquisition of the PLUS business as an opportunity to acquire a mature, cashflow generating asset with an attractive risk-return profile, which would provide stable returns for our contributors' retirement savings.

'We believe that ownership by EPF and UEM will allow PLUS to improve its financial performance further,' he said.

UEM group managing director and chief executive officer Datuk'' Izzaddin Idris said PLUS, which was the fifth largest expressway operator in the world, was a key national asset.

'Expressways development and management remains one of UEM Group's core focus areas and UEM Group will continue to leverage PLUS' track record for its international growth plans.'

'If successful, our intention is for PLUS to continue to be run by the same group of professionals who have been responsible for making PLUS a globally respected tolled highway operator,' he said.

Budget 2010/2011: Major infrastructure boost

KUALA LUMPUR: The government made good its commitment to forge ahead with major infrastructure, CONSTRUCTION [], and oil and gas-related projects under the Tenth Malaysia Plan when the Budget 2011 proposals were unveiled on Friday, Oct 15.

Among them are the Mass Rapid Transit (MRT) in Greater KL; a 100-storey skyscraper in the heart of Kuala Lumpur and a regasification project in Malacca.

These projects would be a boon to infrastructure and construction players, as well as those providing oil and gas support services, fabricators and those specialising in pipe-coating services.

For the MRT project to be implemented next year, the estimated private sector investment is to the tune of RM40 billion. The project is envisaged to be completed by the year 2020 and is expected to increase utilisation of public transportation by at least 40%.

Permodalan Nasional Bhd will undertake development of the integrated Warisan Merdeka, including a 100-storey skyscraper that would be the tallest building in the country, at a cost of RM5 billion. The tower will be completed in 2015, and the project would retain the Merdeka Stadium and Stadium Negara as national heritage sites.

Another mammoth project is the RM10 billion Sungai Buloh project at the current Malaysian Rubber Board land covering an area of 2,680 acres. The Employees Provident Fund will develop this project.

As the oil and gas, and energy sectors remain among the major contributors towards the national economy, the government has pledged RM146 million to support the sector and expand downstream activities.

Towards this, the government proposed an oilfield services and equipment centre in Johor that will be built at a cost of RM6 billion via private investment.

Also, Petroliam Nasional Bhd would undertake a proposed RM3 billion regasification project in Malacca, to be operational by 2012.

Budget 2010/2011: PM's speech

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By

YAB DATO' SRI MOHD. NAJIB TUN ABDUL RAZAK PRIME MINISTER AND MINISTER OF FINANCE



INTRODUCING THE SUPPLY BILL (2011)

IN THE DEWAN RAKYAT



15 OCTOBER 2010



TRANSFORMATION TOWARDS A DEVELOPED AND HIGH-INCOME NATION ''

Mr. Speaker Sir, I beg to move the Bill intituled 'An Act to apply a sum from the Consolidated Fund for the service of the year 2011 and to appropriate that sum for the service of that year' be read a second time. ''

INTRODUCTION ''

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1.'' Praise be to Allah, for enabling me to table the 2011 National Budget. Indeed, this is a significant budget. This Budget is a precursor in our final efforts towards achieving Vision 2020, which is 3,365 days or 9 years, 2 months and 17 days away.

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2.'''''' On this auspicious Friday, I present a budget that lays the foundation for Malaysia to become an advanced nation. Over the last 18 months, the Government has taken measures to propel the country towards becoming a developed and high-income economy.

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3.'''''' The 2011 Budget is formulated with firm determination to bring significant changes to the nation's development and the well-being of the rakyat. This transformation process is holistic, encompassing economic, social and political aspects.

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4.'''''' The Government upholds the concept of 1Malaysia as the fundamental philosophy in driving the nation's development path. The Government Transformation Programme or GTP and Economic Transformation Programme or ETP will be a guiding force in this journey. The six National Key Result Areas (NKRA) and the New Economic Model with its eight Strategic Reform Initiatives will be the framework for the nation's economic transformation. The implementation of the development programmes will be realised through the 10th and 11th Malaysia Plans (10MP and 11MP).

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5.'''''' The era of 'the Government knows best' is over. Therefore, in formulating this Budget, the Government consulted and took into considerations views from various parties comprising the public and private sectors, focus groups, media, 1Malaysia blog as well as lab sessions.

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6.'''''' I appreciate the contributions of all those involved. This is the strength of 1Malaysia. With these ideas coupled with unrelentless efforts, I am confident that we shall overcome challenges and obstacles. More so, we can free ourselves from the middle-income trap and leap to a higher level of development.

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ECONOMIC PERFORMANCE AND CHALLENGES

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7.'''''' Malaysia has recovered from the global economic recession resulting from proactive measures undertaken by the Government and the successful implementation of two Economic Stimulus Packages amounting to RM67 billion. The effectiveness of these measures is reflected by the 9.5% expansion in gross domestic product (GDP) in the first half of 2010 compared with -5% during the same period last year. The global economy is also expected to recover 4.8% compared with -0.6% in 2009. Likewise, international trade is expected to expand 11.4% compared with -11% in 2009.

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8.'''''' On the domestic front, key indicators also reflected strong economic growth. The FTSE Bursa Malaysia KLCI surged to 1,496 points on 14 October 2010, the highest since February 2008. Trade performance was encouraging in the first eight months of 2010, with exports increasing 22% and imports 28%, particularly imports of capital goods which rose 18%.

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9.'''''' The ringgit is among the best performing currencies in the region, strengthening 11% against the US dollar since 31 December 2009 to RM3.0833 on 14 October 2010. Malaysia's international reserves remained strong at RM310.8 billion or USD100.7 billion on 30 September 2010, sufficient to finance 8.5 months of retained imports and 4.3 times the nation's short term external debt.



10.'''' In line with these positive developments, the Government revised growth for 2010 to 7% compared with 6% previously. It is significantly higher than -1.7% in 2009. The sterling performance is contributed by the expansion of the manufacturing sector at 10.8%, services 6.5% and CONSTRUCTION [] 4.9%. Private investment expenditure is expected to increase 15.2%, private consumption 6.7% and exports 11.6%.

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11.'''' In 2011, the global economy and trade are expected to grow moderately by 4.2% and 7%, respectively. In line with this, the Malaysian economy is expected to expand between 5% and 6%. However, the Government will strive to achieve growth of 6%. Growth will be supported by private investment, expanding 10.2%, private consumption 6.3% and exports 6.7%. The manufacturing sector will continue to spearhead growth, expanding 6.7% and the services sector 5.3%.

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12.'''' Income per capita will increase 6.1% to RM28,000 while income in terms of purchasing power parity to USD16,000. These estimates are based on moderate inflation of 2% to 3% and low unemployment rate of 3.5%.

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2011 BUDGET STRATEGIES

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13.'''' To attain developed nation status, we cannot remain complacent. We must change our mindset. Business is not as usual. Success demands drastic changes, not incremental. It requires a quantum leap. The choice before us is clear. Change is not an option but an imperative. We must change or risk being left behind.

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14.'''' We succeeded in transforming Malaysia from an agricultural economy to become among the largest exporters in the world. Therefore, the challenge now is to make a quantum leap to the next stage of development. This is possible with careful planning and clear strategies. Indeed, we shall succeed.

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15.'''' The trend of external trade is increasingly challenging, while there is heightened competition to attract foreign investment. The global economic environment is rapidly changing. To rise to these challenges, the private sector must be dynamic, creative and innovative to drive economic growth. They must be bold to undertake risks and seize opportunities. The Government will, in turn, provide a conducive ecosystem to facilitate the private sector activities.

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16.'''' The 2011 Budget will emphasise efforts to transform the nation into a developed and high-income economy with inclusive and sustainable development, spearheaded by the private sector as well as focus on the well-being of the rakyat. With the theme "Transformation Towards a Developed and High-Income Nation", the 2011 Budget will centre on the following four key strategies:

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First:'''''''''' Reinvigorating Private Investment;



Second:'''''' Intensifying Human Capital Development;



Third: '''''''' Enhancing Quality of Life of the Rakyat; and



Fourth:'''''' Strengthening Public Service Delivery.

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FIRST STRATEGY: REINVIGORATING PRIVATE INVESTMENT

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17.'''' The Government has been assuming a significant role in driving economic growth since the financial crisis in 1997/98. The time has come for the private sector to resume its role as the engine of growth. In this context, the Government announced and strategised that the 10MP commencing in 2011 will emphasise the role of private sector. In 2011, private investment is estimated to expand 12.5% to RM86 billion. The implementation of the 12 National Key Economic Areas (NKEA) is expected to generate investment exceeding RM1.3 trillion or USD444 billion and create 3.3 million job opportunities. The private sector will finance 92% of the NKEA and the remaining by the Government.



Public-Private Partnership Initiatives

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18.'''' The Government will further intensify the Public-Private Partnership (PPP) initiative to enhance private sector involvement in economic activities. The Government will provide allocation as a tipping point for infrastructure support to ensure viability of private sector-led projects. Several PPP projects identified under the 10MP will be implemented in 2011 through private investment of RM12.5 billion. The Government will allocate RM1 billion from the Facilitation Fund. Among the PPP projects are:



First:'''''''''' Construction of highways such as the Ampang-Cheras-Pandan Elevated Highway, Guthrie-Damansara Expressway, Damansara-Petaling Jaya Highway, Pantai Barat-Banting-Taiping Highway, Sungai Dua-Juru Highway and Paroi-Senawang-KLIA Highway;

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Second: '''''' Construction of a 300-megawatt Combined-Cycle Gas Power Plant in Kimanis, Sabah to increase electricity generation capacity to meet rising demand; and

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Third:'''''''''' Development of projects such as the International Islamic University Malaysia Teaching Hospital in Kuantan, Pahang, the Women and Children's Hospital as well as the Integrated Health Research Institute Complex in Kuala Lumpur.

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19.'''' Another PPP project identified is the Academic Medical Centre. This project is a joint venture between Academic Medical Centre Sdn. Bhd. and Johns Hopkins Medicine International as well as Royal College of Surgeons Ireland. This project involves private investment of RM2 billion.

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High-Impact Strategic Development

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20.'''' Private investment has increased through various strategic high-impact projects. Recently, the 1Malaysia Development Berhad (1MDB) in collaboration with Mubadala Development Company, an investment arm of the Government of Abu Dhabi, agreed to develop the Kuala Lumpur International Financial District (KLIFD) valued at RM26 billion, commencing in 2011. Major international banks and professional financial services firms, including syariah experts will be located in the KLIFD. More importantly, such strategic development will further strengthen Malaysia's position as the premier international Islamic financial hub. The Government is prepared to consider special incentive packages to attract investors to the KLIFD.

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21. '''' The Mass Rapid Transit (MRT) in Greater KL (Klang Valley) will be implemented beginning 2011. This project, with an estimated private investment of RM40 billion, is expected to be fully completed by 2020. Upon completion, the utilisation rate of public transport is expected to increase to at least 40%. This project will provide an efficient and comfortable transport system, reduce travelling time as well as strengthen connectivity in Klang Valley and be integrated with other modes of transportation, including buses and taxis.

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22. '''' Another major project is the development of the Malaysian Rubber Board land in Sungai Buloh covering an area of 2,680 acres. The Employees Provident Fund (EPF) will undertake mixed development comprising affordable houses as well as commercial, industrial and infrastructure facilities. The entire development is estimated at RM10 billion and is expected to be completed by 2025.

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23.'''' We take pride in our national icon, the Petronas Twin Towers. It signifies the spirit of Malaysia Boleh. Another landmark to be developed by Permodalan Nasional Berhad is Warisan Merdeka, expected to be completed by 2020. This is an integrated development project comprising a 100-storey tower, the tallest in Malaysia. The project will retain Stadium Merdeka and Stadium Negara as national heritage. The total project cost is RM5 billion, with the tower expected to be completed by 2015.



Revitalising Capital Market

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24.'''' To support the financial liberalisation policy, the Government will implement bold measures to revitalise the domestic capital market, particularly diversifying investment products, liberalising equity holding requirements and investment limits, providing attractive incentives as well as enhancing cooperation with foreign bourses. Therefore, the following measures will be implemented:

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First:'' '''''''' Government-Linked Investment Companies (GLICs) will divest their shareholdings in major companies listed on Bursa Malaysia to increase liquidity and trading velocity in the market;

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Second:'''''' GLICs will be allowed to increase investment in overseas markets to explore opportunities for better returns. For example, the Employees Provident Fund's (EPF) investment overseas is currently at 7% and will be raised up to 20% of the total assets managed;

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Third:'' '''''' Listing of Petronas Chemicals Sdn. Bhd. and Malaysia Marine & Heavy Engineering Sdn. Bhd., subsidiaries of Petronas and MISC, respectively, to offer higher public shareholding this year;

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Fourth:'''''''' Bursa Malaysia will launch sukuk and conventional bonds to meet retail investors' demand for fixed income instruments in order to boost the bond market;

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Fifth:'''' '''''' The Securities Commission (SC) will offer three new stock broking licences to eligible local, foreign or joint venture companies to increase retail market participation;

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Sixth:'''''''''' The SC will increase the number of Proprietary Day Traders operating in the market; and

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Seventh: '''' The SC will facilitate process and procedures for the listing of companies and products, particularly Exchange Traded Funds.

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Islamic Capital Market

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25.'''' Efforts will be taken to strengthen Malaysia's position as a premier Islamic capital market. Bursa Malaysia will develop an international board to enable foreign securities to be listed including syariah-compliant products.

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26. '''' To further promote innovation in Islamic securities products, the Government proposes that expenses for the issuance of Islamic securities which adopt the principles of Murabahah and Bai' Bithaman Ajil based on tawarru' be given tax deduction. This will strengthen Malaysia's position as the leading sukuk market and promote transactions in Bursa Suq al-Sila, the world's first syariah-compliant commodity trading platform. The Government proposes that takaful contributions for export credit be given double tax deduction.



Intensifying Venture Capital Industry



27.'''' The venture capital industry plays an important role in contributing towards economic growth, particularly in high TECHNOLOGY [] sectors such as information and communication technology (ICT), biotechnology and the creative industry. For this, the Government will provide Entrepreneurship Enhancement Training Programme to train 500 new technopreneurs and attract more angel investors. Both programmes will be managed by Cradle Fund Sdn. Bhd, an MOF Inc. company. Malaysian Technology Development Corporation (MTDC) will be provided a start-up fund amounting to RM100 million to provide soft loans which allow loan repayments only after the companies generate income. MTDC will also host an International Venture Capital Symposium in 2011 to enable networking and partnering of foreign and local venture capitalists to boost high technology industries.

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Bumiputera Property Trust Scheme

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28.'''' To ensure meaningful and sustainable participation of Bumiputera, the Bumiputera Property Trust Foundation (BPTF) will provide opportunities for Bumiputera ownership of prime commercial PROPERTIES [] in major towns. The BPTF will establish a fund to enable ownership of prime commercial properties in the Klang Valley, through a group ownership scheme. For this, the BPTF will launch a syariah-compliant Bumiputera Property Trust Scheme this year with a size of RM1 billion.

''

Private Pension Fund

''

29.'''' To revitalise capital market activities, I wish to announce that the Government will launch a Private Pension Fund in 2011. This Fund will benefit private sector employees and the self-employed. The existing income tax relief of up to RM6,000 for employee's contributions to the EPF will be extended to the contributions made to the Private Pension Fund, including the self-employed. Employers will also be given tax deduction on contributions made on behalf of their employees. This will provide an option for the rakyat to invest for their old age.



Enhancing Electrical and Electronics Industry

''

30.'''' The electrical and electronics (E&E) industry remained the largest contributor to exports with 41% or RM228 billion in 2009. However, the E&E industry is still focused on assembling activities. We should leverage on our strengths to develop local E&E companies to compete at the international level. A sum of RM857 million is allocated for local companies to invest in high value-added activities, particularly in Penang and the Kulim High-Tech Park in Kedah.







Propelling Oil, Gas and Energy Industry

''

31. '''' The oil, gas and energy industry is one of the main contributors to the economy. In 2009, the industry contributed 10.2% to GDP with export revenue amounting to RM56 billion. This industry has the potential to expand, particularly in downstream activities. To achieve this objective, the Government will allocate RM146 million to support the sector. Among the projects to be implemented include the establishment of the Oil Field Services and Equipment Centre in Johor with private investment of RM6 billion over a period of 10 years. To meet the increase in gas demand by industries, Petronas will implement a regasification project with an investment of RM3 billion in Melaka, which will be operational in 2012.



Advancing Green Technology

''

32. '''' The Government is committed to develop green technology to ensure sustainable development. In this regard, the Government will continue to provide several incentives:

''

First:'''''''''' Pioneer Status and Investment Tax Allowance for the generation of energy from renewable sources and energy efficiency activities be extended until 31 December 2015;

''

Second:'''''' Import duty and sales tax exemption on equipment for the generation of energy from renewable sources and energy efficiency be extended until 31 December 2012;

''

Third:'''''''''' Tax exemption on the income derived from trading of Certified Emission Reductions certificate be extended until year of assessment 2012; and

''

''

Fourth: '''''' Full import duty and 50% excise duty exemption was granted to franchise holders of hybrid cars as well as hybrid an electric motorcycles up to 31 December 2010. To further encourage ownership of hybrid cars, import duty and excise duty exemption will be extended until 31 December 2011 with excise duty to be given full exemption.

''

33.'''' Malaysia is committed to reducing carbon emission intensity to preserve the environment. For this purpose, the Government will implement among others, the Programme on Blending of Biofuels with Petroleum Diesel (B5 Programme) on a mandatory basis beginning in Putrajaya, Kuala Lumpur, Selangor, Negeri Sembilan and Melaka in June 2011.

''

34. '''' The Government will also implement the Feed in Tariff (FiT) mechanism under the Renewable Energy (RE) Act, to allow electricity generated from RE by individuals and independent providers to be sold to electricity utility companies.



Invigorating Agriculture Sector

''

35.'''' The Government allocates RM3.8 billion in 2011 to increase productivity and generate higher returns in the agriculture sector. For this, the following measures will be taken:

''

First:'''' '''''''''''' Develop large-scale integrated Aquaculture Zones in Pitas, Sungai Telaga and Sungai Padas in Sabah as well as Batang Ai and Tanjung Manis in Sarawak that meet standards as well as produce high quality products, with an allocation of RM252 million;

''

Second: '''''''''' Upgrade the drainage and irrigation system as well as use high quality paddy seeds to enhance productivity in Muda Agricultural Development Area (MADA), Kedah and other areas. For this, RM235 million is allocated;

''

Third: '''''''''''' Encourage farmers participation in high value agriculture activities, including swiftlet nests, aquaculture, seaweeds, ornamental fish as well as herbs and spices with an allocation of RM135 million for basic infrastructure;

''

Fourth:'' '''''''''' Foster partnership between small-scale fruit and vegetable farmers with anchor companies through an allocation of RM80 million;

''

Fifth: '''''''''''''' Improve the Agriculture College in Kubang Pasu, Kedah by constructing a diagnostic lab involving an allocation of RM70 million;

''

Sixth: '''''''''''' Build an International Centre for Crops of the Future in Semenyih, Selangor with an allocation of RM15.7 million; and

''

Seventh:'''''''''' Extend income tax deduction incentive for investors and income tax exemption for companies undertaking food production activities for another 5 years until 2015.

''

Energising Tourism Industry



36. '''' The tourism industry, which generated revenue of RM53 billion in 2009, has the potential to provide more business and employment opportunities as well as further increase the nation's income. In the 2009 United Nations World Tourism Organisation Report, Malaysia was ranked ninth in the world in terms of tourist arrivals. Efforts will be intensified to attract more foreign tourists by offering innovative tourism packages and products. For this, the Government will implement the following initiatives:

''

First:'''''''''' Provide infrastructure facilities with an allocation of RM85 million to facilitate construction of hotels and resorts in remote areas with the potential to attract tourists;

''

Second:'''''' Construct several shaded walkways in the KLCC-Bukit Bintang vicinity with an allocation of RM50 million;

''

Third: '''''''' Restructure the Department of Civil Aviation to Civil Aviation Authority; and

''

Fourth:'''''''' Nexus Karambunai, a renowned resort in Sabah is committed to develop an integrated eco-nature resort, the first in the world, by leveraging on the natural beauty and uniqueness of Karambunai. The RM3 billion project will commence next year. To support the tourism industry, the Government will allocate RM100 million.



37.'''' To promote Malaysia as a shopping haven in Asia by providing branded goods at competitive prices, the Government proposes that import duty on approximately 300 goods preferred by tourists and locals, at 5% to 30% be abolished. Such goods are apparel, handbags, shoes, shampoo, suits, children's apparel, wallets, hair colourants, golf balls, imitation jewellery, talcum powder, curtains, table cloth, blankets, bed sheets, shirt, undergarments, lingerie, nightwear, perfumes and mosquito netting.

''

Revitalising Palm Oil and Related Industries



38.'''' Currently, the export revenue from crude palm oil totalled RM37 billion, while that of palm oil related products reached RM13 billion in 2009. The industry has the potential to be developed further in downstream activities to generate higher income for estate owners and smallholders. In efforts to propel the palm oil and related products industry, several measures will be implemented:

''

First: '''''''''' Enhance productivity by encouraging replanting activity to replace aged trees with high quality new clones, through a fund of ''''RM297 million; and

''

Second: '''''' A sum of RM127 million is allocated to support domestic oleo derivatives companies as well as a sum of RM23.3 million to expand downstream palm oil industries including production of vitamins.

''

Enhancing Information and Communication Technology

''

39.'''' The Multimedia Development Corridor enters its third phase in 2011. The focus is on creation of an innovative digital economy to achieve the target of a high-income nation. To enhance the potential of the ICT industry, MY Creative Content Programme will be implemented to encourage the development of local content creation, hosting local content and unlocking new channels for content. This programme involves an allocation of RM119 million.

''

40.'''' The Government will extend the investment allowance period for the last mile broadband service providers. In addition, import duty and sales tax exemption on broadband equipment are also extended for two years until 2012.

''

41.'''' Currently, ordinary mobile phones are subject to 10% sales tax but mobile phones with various applications such as internet and personal digital assistant (PDA) are exempted from sales tax. For the purpose of streamlining tax treatment, the Government proposes that sales tax be exempted on all types of mobile phones.

Business Services Industry



42.'''' In line with the increasing demand for repair and maintenance of aircraft and helicopters, the Government will promote the development of the business services industry. The Sultan Abdul Aziz Shah Airport, Subang will be developed as a centre for maintenance and overhaul of aircrafts as well as provide specific training to develop experts in this field. The Government will allocate a sum of RM91 million for capacity building in the maintenance, repair and overhaul (MRO) services industry, aerospace and aeronautical engineering training programmes as well as promotion of business outsourcing services.



Corridor and Regional Development

''

43. '''' Corridor and regional development will be accelerated, focusing on several clusters with specialisation and geographical advantages. Efforts to develop the corridors will focus on joint venture projects between local and foreign investors as well as high-impact industries with competitive edge. For this purpose, the Government allocates RM850 million for infrastructure support.

''

44.'''' For Iskandar Malaysia, a sum of RM339 million is allocated, including for the construction of highways, development of housing areas as well as providing and improving public transportation services. The amount of investment committed by the private sector as at June 2010 was RM62 billion, surpassing the targeted RM47 billion. Total actual investment up to June 2010 was ''''''RM25 billion. The Newcastle University Medicine Malaysia and Chelsea Factory Outlet are expected to be completed in 2011 while Legoland and Marlborough College in 2012.

''

45. The Northern Corridor Economic Region (NCER) is allocated ''''''''RM133 million, which includes the development of an Agricultural Products Processing Centre, Tourism Infrastructure and a Biotechnology Incubator Centre. The East Coast Economic Region (ECER) is allocated RM178 million for projects, including Industrial Parks, Water Treatment Plants, development of tourist areas as well as redevelopment of former Pahang Tenggara Development Authority and'' Jengka Region Development Authority areas.



46.'''' For Sarawak Corridor of Renewable Energy (SCORE), a total of ''''''RM93 million is allocated for facilities, including telecommunication, water supplies, airport and roads as well as halal food industrial parks. For the Sabah Development Corridor, a sum of RM110 million is allocated, among others, for palm oil industry cluster projects, agro-industrial precinct and integrated farming centre.



Promoting R&D&C Activity

''

47.'''' To accelerate the economy towards a high-income nation, research, development and commercialisation (R&D&C) activity will be the platform for enhancing value-added activities across economic sectors. For this, a sum of RM411 million is allocated in 2011 for the R&D&C activities.

''

48. '''' The Government has established a Special Innovation Unit (UNIK) under the Prime Minister's Department as a one-stop centre to formulate policies and strategies for a conducive ecosystem to drive innovation. An Act will be formulated to enable UNIK to commercialise R&D findings by universities and research institutions. Several programmes and activities will be designed to enhance innovation, creation and commercialisation of new products. For 2011, a sum of RM71 million is allocated for UNIK.



Reforming Insolvency Law

''

49.'''' During the recent economic crisis, there were entrepreneurs and individuals who faced financial problems with a number of them declared bankrupt. They were blacklisted and unable to conduct businesses or apply for loans. To assist these individuals, the new Insolvency Act will consolidate the Bankruptcy Act 1967 and Part 10 of the Companies Act 1965, including introduction of provision relating to relief mechanism for companies and individuals with financial problems. The review will also involve amending the current minimum bankruptcy limit of RM30,000.



Advancing Creative Industry

''

50.'''' The creative industry has great potential for further development to generate national income. This industry encompasses animation, advertising, films, fashion design, crafts and cultural heritage. To fully tap the potential of this industry, the Government will develop a creative industry policy in an integrated manner. A sum of RM200 million is allocated to purchase creative products such as high quality locally-produced films, dramas and documentaries.

''

51.'''' A strong financial position is crucial to ensure the well-being of the nation. To achieve this objective, the Government proposes that the rate of service tax be increased from 5% to 6%. The Government is confident that this measure will not unduly burden the rakyat as the increase in the tax rate is minimal. Moreover, the services tax is not imposed on all services. In fact, the sales value thresholds for such services are still retained.'' In tandem with this aspiration, the Government also proposes that service tax be imposed on paid television broadcasting services.



Strengthening Nation's Financial Position



52.'''' The Government is committed to strengthen the nation's financial position by increasing revenue collection and ensuring prudent spending. This includes emphasis on value-for-money and value management. For example, measures undertaken include open tender, restricted tender and competition for best design of Government hospitals. The Government will strengthen the revenue collection system by increasing enforcement and audit as well as expanding coverage on all parties that should be paying taxes.



SECOND STRATEGY: INTENSIFYING HUMAN CAPITAL DEVELOPMENT

''

53. The most important asset of a nation is its human capital. It is proven that a nation without natural resources but which effectively manages its human capital will achieve greater success than a nation that relies on natural resources. Malaysia cannot afford to be too dependent on its depleting natural resources. Although we have successfully managed our natural resources, we have a responsibility to plan human capital development in a sustainable manner, failing which we will not be able to optimise the nation's potential.



54.'''' A quality, skilled, knowledgeable, creative and innovative human capital is a prerequisite towards achieving a developed and high-income nation. As such, education and training will be restructured and strengthened. For this, a sum of RM29.3 billion is allocated for Ministry of Education, RM10.2 billion for Ministry of Higher Education and RM627 million for Ministry of Human Resource.

''

Intensifying Efforts to Attract Talent

''

55.'''' Education is always close to my heart. The Government will not compromise on quality of education. Our children must be equipped with all the prerequisites to compete in the challenging environment.

''

56.'''' To increase the number of talented and quality workforce in the domestic market, the Government will undertake efforts to attract, motivate and retain talented human capital from within the country and abroad. For this, the Government will establish a Talent Corporation (Talent Corp) under the Prime Minister's Office in early 2011. Talent Corp will formulate a National Talent Blueprint and develop an expert workforce database as well as collaborate closely with talent networks globally.



Expanding Access to Quality Education


57. '''' The national education system will be revamped to focus on thinking skills, character building, creativity, innovation and competitiveness. For the Ministry of Education, a sum of RM6.4 billion is allocated for development expenditure to build and upgrade schools, hostels, facilities and equipment, as well as uphold the status of the teaching profession. A total of RM213 million is allocated to reward high-performance schools as well as for the remuneration of Principals, Head Teachers and Excellent Teachers.

''

Strengthening Early Education



58.'''' To nurture children with good values and knowledge, human capital development must begin from childhood. To achieve this, the Government will increase pre-school enrolment rate to a targeted 72% by end-2011 through an additional 1,700 classes, strengthen the curriculum as well as appoint 800 ''''pre-school graduate teachers.''



59.'''' The Government also allocates RM111 million for PERMATA programme, including the construction of the second phase of Sekolah PERMATA Pintar School Complex, 32 PERMATA Children Centres (PAPN) and financing operations of 52 completed PAPNs as well as continuing PERMATA Pintar, Seni, Insan and Remaja Programmes.



Strengthening Primary and Secondary Education

''

60.'''' Every child regardless of race is a national asset and a future leader. Education must be apolitical. Towards this, the Government allocates ''''''RM250 million for development expenditure to religious schools, Chinese-type schools, Tamil national schools, missionary schools and Government-assisted schools nationwide.

''

61.'''' Recognising the importance of Islamic education, the Government will provide assistance per capita for primary and secondary rakyat religious schools with an allocation of RM95 million.

''

62.'''' To provide competent and quality teachers and instructors to better guide and educate students, the Government allocates RM576 million in the form of scholarships for those wishing to further their studies.

''

63. '''' A sum of RM213 million is allocated to enhance proficiency in Bahasa Malaysia, strengthen the English Language as well as streamline the Standard Curriculum for Primary Schools (KSSR). In this regard, the Government will recruit 375 native-speaking teachers including from the United Kingdom and Australia to further enhance teaching of English.



Strengthening Higher Education



64.'''' Strengthening institutions of higher learning to be world-class is a key agenda of the Government in view of its significant contribution to the socioeconomic development of the nation. The following measures will be implemented:

''

First: '''''''''' Increase the number of PhD qualified academic staff to 75% in research universities and to 60% in other public institutions of higher learning with an allocation of RM20 million; and

''

Second: '''''' Improve opportunities for promotion of lecturers in public institutions of higher learning. Lecturers can be considered for promotion to the highest grade of Staff III, II and I as well as conferred Premier Professors without holding administrative positions.

''

Intensifying Training and Skills Programmes

''

65.'''' The Government allocates RM60 million to further intensify the Industrial Skill Enhancement Programme in State Skills Development Training Centres. This programme will enhance skills of engineering graduates and technical employees in line with market requirements. A sum of RM220 million is also allocated to ensure graduates from other fields are able to enhance their competence and employability. These include the Professional Certification Programme, Sports Development, Entrepreneurship Development and Graduate Employability Management Scheme. The Government will also allocate a sum of RM50 million to Multimedia Development Corporation to train graduates in ICT to enhance their employability and to meet the demand of the ICT industry.

''

66.'''' A sum of RM474 million is provided to enhance'' productivity and skills of non-graduates, including school leavers, youths and workers as there is high demand for skilled workforce in technical fields.



1Malaysia Training Programme

''

67.'''' The nation requires human capital that continually enhances knowledge through upskilling and reskilling. In this regard, I am pleased to announce the 1Malaysia Training Programme, which will commence in January 2011 with an allocation of RM500 million.

''

68.'''' The training programme comprises three components. First, a sum of RM200 million is allocated to conduct part-time training in the evenings and weekends in selected training centres nationwide. It will be conducted by Community Colleges, National Youth Training Institutes, Giat Mara Centres and Industrial Training Institutes, utilising the existing facilities. Among courses to be offered in the evenings include language classes in Bahasa Melayu, Mandarin, Tamil, English and Arabic as well as music classes. During the weekends, skills and technical courses will be conducted, including baking, tailoring, spa therapy, mechanical, electrical and welding.

''

69.'''' Second, the 1Malaysia Training Programme also includes an allocation of RM200 million from the Human Resource Development Fund to be used by companies to fund specific training programmes for their employees. Third, the Ministry of Human Resource will provide RM100 million to enable employees to enhance skills in various technical fields.

''

Enhancing Employees Productivity

''

70.'''' In tandem with the increase in productivity, employees should be remunerated with higher salaries and wages to enable them to cope with the rising costs of living. I am pleased to announce the establishment of a National Wage Consultation Council as the main platform for wage determination. The Council will comprise representatives from employers, trade unions, ''''''''''non-unionised employees, Government agencies, academia, NGOs and individuals. The Ministry of Human Resource will be the Secretariat for this Council.

''

71.'''' The National Wage Consultation Council will determine the rate and mechanism of minimum wage. The basic salary of postmen was raised to RM710 on 1 July 2010 from RM610 per month. With this adjustment, the monthly salary of postmen including fixed allowances increased to RM1,285 from RM1,035. The Government will enforce basic minimum wages for security guards, to between RM500 and RM700 a month depending on location, compared with RM300 and RM400 currently.'' With this increase, security guards will now enjoy a monthly salary including allowances exceeding RM1,000. The increase will be effective January 2011.

''

72.'''' The Government will continue to reduce the number of foreign workers by increasing in stages the levy according to sector. It is also mandatory for employers to procure health insurance for their foreign workers.

''

Expanding Women Participation



73.'''' Women account for half of the population and play a very important role in family and national development. Therefore, the Government recognises the role of women in the nation's development. To enhance women's participation in entrepreneurship, the Government allocates RM30 million, among others, to introduce the Single Mother Skill Incubator Programme and the Prime Entrepreneur and Women Activist Award in conjunction with Women's Day commencing 2011.

''

74. The Work Regulations (Part-Time Workers) 2010 was enforced by the Government effective 1 October 2010 to encourage the participation of more women as part-time workers. I urge the private sector to hire female part-time workers, particularly those who are married. The Government will also implement a pioneer Small Office Home Office programme to train disabled women in various skills for a period of three months.

''

75. '''' The Government will provide and re-brand 40 1Malaysia TASKA, managed by the Department of Social Welfare to assist women to obtain quality childcare and early education for their children.

''

76.'''' The Government is concerned with the career prospects and welfare of female civil servants as they need to take care of their families, particularly newborn babies. To improve the maternity leave facility for female civil servants, the Government will allow flexibility to self-determine fully-paid maternity leave, not exceeding 90 days from the current 60 days. This facility is subject to a total of 300 days of maternity leave throughout the tenure of service.



77.'''' The Government continues to provide opportunities for qualified female civil servants to hold key executive posts.'' As at end-2009, 30.5% of key posts in the public sector were held by women. I urge the private sector to provide opportunities for more women to hold post at decision-making level, particularly as Board of Directors and Chief Executive Officers.



Developing National Sports

''

78.'''' The Government will continue to encourage sports research and development, organise more international games, provide facilities and expertise to mould competitive athletes and develop high-performance sports. For sports development and management, a sum of RM365 million is allocated to the Ministry of Youth and Sports. To develop football, the Government will establish a Football Academy in Pahang with an allocation of RM20 million to produce quality and highly skilled football players.

''

79. '''' I would like to take this opportunity to congratulate all athletes who took part in the 19th Commonwealth Games in New Delhi. I would also like to congratulate the medal winners who have made the nation proud at the international arena. They won 12 gold medals, surpassing the target of 10 gold medals. This is Malaysia's best achievement in the Commonwealth Games.



THIRD STRATEGY:'''' ENHANCING QUALITY OF LIFE OF THE RAKYAT



80.'''' It is widely accepted that the main role of the Government is to enhance the well-being of the rakyat. Achieving a developed and high-income economy is meaningless if the quality of life of the rakyat deteriorates. In efforts to become a developed and high-income nation, we need to strengthen socioeconomic development in an inclusive manner. It is important to attain a more balanced development and ensuring a better quality of life.

''

Assisting the Less Fortunate

''

81.'''' The Government is concerned with the difficulties faced by the less fortunate and will continue to ensure their welfare. In 2011, the Government will allocate RM1.2 billion to the Ministry of Women, Family and Community Development to carry out various welfare and community programmes as follows:

''

First:'''''''''' Welfare assistance for senior citizens with an allocation of ''''RM166 million. This group is estimated to increase to more than 15% of the total population by 2030;

''

Second:'''''' Children's assistance programme with an allocation of ''''''''RM121 million to enable them to receive quality childcare and early education. This programme will benefit 97,000 children;

''

Third:'''''''''' Assistance programme to benefit 80,000 disabled individuals with an allocation of RM218 million;

''

Fourth:'' '''''' Excise duty exemption be increased from 50% to 100% on national vehicles purchased by the disabled; and

''

Fifth:'''''''''' Construction of an intervention centre for the homeless by providing employment opportunities, housing facilities and counselling.

''

82. '''' Since 2008, the Government provided a rebate on electricity bill payment for monthly consumption of below RM20. The rebate has benefited more than one million consumers nationwide. The Government will continue this rebate programme with an allocation of RM150 million to ease the burden of the low-income group.

''

83.'''' Currently, tax relief on expenses incurred for parents is limited to medication in clinics and hospitals including treatment in nursing homes as well as dental treatment. In an effort to lessen the cost burden in caring for parents, the Government proposes that the existing tax relief of up to a maximum of RM5,000 be extended to cover other expenses such as day care centre, cost incurred to employ caretakers for parents and other daily needs such as diapers.

''

Increasing House Ownership

''

84.'''' The Government empathises with the rakyat's need to own affordable houses, particularly the poor and low-income group. A sum of RM568 million is provided to build 300 units under Projek Bantuan Perumahan Bandar, 79,000 units under Program Perumahan Rakyat and 8,000 units under Projek Bantuan Rumah Sewa. To assist estate workers to own houses, the Government will provide Skim Pembiayaan Perumahan Kos Rendah with an allocation of ''''RM50 million, managed by Bank Simpanan Nasional. The scheme is open to all Malaysian permanent estate workers to assist them to obtain housing loans with a maximum of RM60,000 for the purchase of low-cost houses at 4% interest rate and a repayment period up to 40 years extending to the second generation.

''

85.'''' The Government is aware of the difficulties faced by the rakyat, particularly young adults who have just joined the workforce with income less than RM3,000, to own a house. To assist this group, the Government will introduce Skim Rumah Pertamaku through Cagamas Berhad which will provide a guarantee on down payment of 10% for houses below RM220,000. This scheme is for first-time house buyers with household income less than RM3,000 ''''''''per month. In other words, the house buyers will obtain a 100% loan without having to pay the 10% down payment.

''

86.'''' In addition, first-time house buyers will also be given stamp duty exemption of 50% on instruments of transfer on a house price not exceeding RM350,000. The Government also proposes that stamp duty exemption of 50% be given on loan agreement instruments to finance such first-time purchase of houses.

''

Enhancing Quality of Life of Rural Population

''

87.'''' Efforts to develop rural areas began a long time ago. At the end of Emergency, the Government established the Ministry of Rural and National Development to lead efforts to bring development to rural areas. The Government is still committed to this endeavour although today approximately 60% of the population of Malaysia live in urban centres. In efforts to transform the country towards a developed nation, the Government will not neglect the rural population. Development projects and programmes to improve the quality of life of the rural population will be given priority. A sum of RM6.9 billion is allocated to implement basic infrastructure such as water and electricity supply as well as rural roads. Among the main projects to be implemented are to:

''

First:'''''''''' Build and upgrade rural roads in Sabah and Sarawak with an allocation of RM2.1 billion and RM696 million in Peninsular Malaysia;

''

Second:'''''' Provide water and electricity supply in rural areas of Sabah with an allocation of RM1.5 billion, Sarawak RM1.2 billion and Peninsular Malaysia RM556 million;

''

Third:'''''''''' Implement the housing assistance programme to provide comfortable houses for the poor and hardcore poor in rural areas with an allocation of RM300 million. This programme will involve the construction and repair of 12,000 houses nationwide, particularly in Sabah and Sarawak; and

''

Fourth:'''''''' Provide Unit Khas Bergerak Jabatan Pendaftaran Negara to facilitate rakyat in the interiors of Sabah, Sarawak and Peninsular, to register for citizenship.

''

Easing Burden of the Rakyat

''

88.'''' To increase food production, the Government will allocate RM974 million as price subsidy for paddy, fertilisers and paddy seeds as well as RM230 million for production incentives and increasing paddy yield. The Government will also allocate RM170 million in incentives for fishermen as well as boat owners and workers to increase fish landing.

''

89.'''' The Government is concerned with the issue of higher prices of goods faced by the rural population, particularly in Sabah and Sarawak as well as selected areas in Peninsular Malaysia due to high transportation costs. To standardise the prices across areas, the Government introduced the Distribution of Essential Goods Programme for goods such as rice, cooking oil, sugar, flour, gas, petrol and diesel in 2010 with an allocation of RM100 million. For 2011, a sum of RM200 million is allocated for the programme.

''

90.'''' In the Government's dealings with the rakyat, the prices of retail good is often highlighted. In this context, the Government will establish a '1Malaysia Smart Consumer' portal to help the rakyat keep abreast with price movements of goods in almost 7,000 business premises nationwide. Through this portal, consumers have the option to purchase goods at competitive prices. Consumers can also utilise short messaging services (SMS) to obtain latest information on prices of goods.

''

91.'''' To strengthen the wholesale and retail sector, the Government will also introduce the Retail Shop Transformation Programme (TUKAR), Automotive Workshop and Community Market projects to upgrade and modernise facilities with an allocation of RM73 million.

''

92.'''' The assumption that the Government is ignoring small contractors is unfounded. The Government will continue implementation of Projek Penyelenggaraan Aset Awam or better known as PIA/PIAS with an allocation of RM500 million. Among the activities are repairing and upgrading of public amenities, drains, drainages, small bridges and rewiring as well as construction of agriculture and kampung roads. The implementation of these small projects will assist Class F contractors nationwide.

''

Appreciating Contributions of Community Leaders

''

93.'''' The Government has always appreciated the role and contributions of community leaders. In line with this, the Government will increase the monthly allowance for the Chairman of Jawatankuasa Kemajuan dan Keselamatan Kampung (JKKK) and Persekutuan (JKKP), Tok Batin, Chairman of JKKK Orang Asli, Chairman of Kampung Baru to RM800 compared with the RM450 currently.

''

94.'''' To ensure this allowance is enjoyed by all community leaders, this allowance will also be extended to the Ketua Kampung Baru Rangkaian and Ketua Kampung Bagan. The Government will also increase the meeting attendance allowance to all committee members from RM30 to RM50.

''

95.'''' Effective January 2011, the monthly allowance of Imam will be increased from RM450 to RM750, while the monthly allowance for KAFA teachers will be increased to RM800 compared with the RM500 currently.

''

Development of Orang Asli and Pribumi

''

96.'''' As we are aware, Malaysia is made up of multi ethnicity and cultures. We have never discriminated the minority for they are also citizens of the country. Efforts to accelerate the nation to a developed and high-income economy will be implemented inclusively by enhancing the socioeconomic status of Orang Asli and Pribumi. A sum of RM100 million is allocated to implement various programmes, including resolving Orang Asli land rights and border settlement issues as well as formulating a new development model for Orang Asli. In line with this, Jabatan Hal Ehwal Orang Asli will be restructured and strengthened as Jabatan Kemajuan Orang Asli.

''

Reducing Transport Cost

''

97.'''' The Government is very concerned with the rising transport cost borne by the rakyat. To alleviate the burden of highway users, I am pleased to inform that the toll rates in four highways owned by PLUS Expressway Berhad will not be raised for the next five years, effective immediately.

''

Expanding Public Health Services



98.'''' The Government is committed to ensure that access to quality healthcare is available to all rakyat. To achieve this objective, a total of RM15.2 billion is allocated to construct new hospitals, increase the number of doctors and nurses as well as to obtain supplies of medicines and equipment. Since 2009, 51 1Malaysia Clinics are in operation and the Government will provide an additional 25 1Malaysia Clinics.

Combating Crime, Securing Safety

''

99.'''' Public safety is important in creating a safe environment. In the first ''''''9 months of 2010, the street crime index declined 38% while overall crime index declined 16%. In line with this, the Government will allocate RM350 million to implement various programmes to combat crime, including burglary, motorcycle and car thefts as well as promoting safe townships and Voluntary Patrol Scheme in high-risk areas. The Government will establish an additional 25 special courts to expedite prosecution.

''

Empowering Non-Governmental Organisations

''

100.'' The Government appreciates the contribution of civil society in providing services which always been under the purview of the Government. This has to be viewed positively and as a complimentary effort and should be encouraged further. The Government recognises the contribution of Non-Governmental Organisations (NGOs) in overcoming social problems in assisting the less fortunate and providing shelter facility as well as conducting training and generating income.

''

101.'' In appreciation, the Government will allocate RM70 million for programmes and activities involving selected NGOs to assist the Government in strengthening family institution and addressing social ills such as baby dumping, mat rempit and gangsterism. The selected NGOs will undertake an integrated programme with Government agencies, particularly in high-risk crime areas to prevent crime at its root cause.



Preservation of Environment

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102.'' To preserve, sustain and protect the environment, the Government will allocate RM1.9 billion to finance environmental preservation projects, including implementing the River of Life Programme and greening of Kuala Lumpur. The Government will also undertake efforts to preserve marine sources and coastal areas including Pantai Siring in Melaka, Pantai Sabak in Kelantan, Teluk Lipat in Terengganu and Rompin in Pahang.



Corporate Social Responsibility



103.'' Corporate Social Responsibility (CSR) is important in the implementation of community projects. In 2011, Khazanah Nasional Berhad (Khazanah) in collaboration with the Ministry of Education, will establish 10 Trust Schools which will be managed more professionally to ensure students obtain quality education. Apart from the normal Government allocation, the Trust Schools will also receive contributions from Khazanah.

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104. '' To assist children, particularly those from the low-income group excel academically, the 1MDB will provide multi-vitamins for primary school students. It is hoped this programme will enhance the mental development and strengthen the immune system of students.

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105.'' Following a proposal from the youth lab, 1MDB will provide RM20 million to the 1Malaysia Youth Fund. This fund will be utilised to instil the 1Malaysia spirit. In addition, 1MDB will implement 1Malaysia Mobile Clinics with four buses as mobile clinics in collaboration with the Ministry of Health.





FOURTH:'''' STRENGTHENING PUBLIC SERVICE DELIVERY.

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106.'''' In steering Malaysia towards a developed nation, the Government, comprising 1.2 million civil servants needs to continuously improve to enhance productivity.

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Facilitating Dealings with Government Agencies

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107.'' It is clear that the role of the Government is to facilitate and not frustrate. Dealings with any Government agency should be made easy. The Government will ease private sector dealings with its agencies. Towards this, the MyCoID Gateway initiative utilising the Companies Commission of Malaysia's single reference number has been implemented. This initiative will be extended to other ministries and agencies.

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108.'' The Government will introduce a point system to facilitate applications for permanent resident status (PR). The application for PR may be submitted after ''5 years of residence compared with 10 years previously. With this system, applications for PR will be more transparent, expeditious and objective based on clear criteria.

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109.'' To expedite the process of property registration, the Stamp Act 1949 was amended to enable the Valuation and Property Services Department assess properties after the payment of stamp duty to the Inland Revenue Board. This improvement will reduce the property registration process from 30 days to one day.

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Refining Appraisal System

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110.'' Civil servants are an important component in the nation's effort to realise its vision. Without efficient, effective and dynamic policy formulators, the nation's vision will remain a dream. In relation to this, in our continuous effort to provide a more responsible, relevant and holistic framework of assessment as well as taking into account the feedback from civil servants, the Government agrees to abolish the Competency Level Assessment or PTK and replace it with a more suitable evaluation system by June 2011, which is acceptable to civil servants.

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Appreciating Civil Servant's Contributions

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111.'' The Government appreciates the contribution and full commitment of civil servants in ensuring the success of Government initiatives including the GTP and the ETP. The Government will:

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First:'''''''' Reduce the burden of civil servants in coping with schooling expenses by providing a Special Financial Assistance amounting to RM500. This assistance will be provided to all civil servants from Grade 54 and below, including contract officers and retirees. The payment will be made in December 2010;

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Second:'''' Increase the rate for Funeral Arrangement Assistance to RM3,000 from the current RM1,000 in line with rising funeral expenses. This assistance is also extended to retired civil servants; and

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Third:'''''' Extend the services of Pegawai Khidmat Singkat (PKS) for an additional period of one year from December 2010. However, Ministries and agencies are not allowed to increase the number of PKS.

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112.'' To facilitate civil servants in owning houses as well as improving the terms and conditions for housing loans, the Government will:

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First:'''''''''' Allow the purchase of properties from parents, children and siblings;

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Second:'''''' Raise the amount of loan from RM10,000 to RM20,000 for additional works on low-cost houses for Support Group II; and

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Third:'''''''''' Raising the maximum loan eligibility to RM450,000 compared with RM360,000 currently.

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The above improvements to housing loans will be effective 1 January 2011.



2011 BUDGET ALLOCATION

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113.'' The Government is committed towards accelerating the transformation process by ensuring projects and programmes under the 10MP, NKRA and NKEA are implemented successfully. To implement these strategies and measures, I propose an allocation of RM212 billion for the 2011 Budget, which is 2.8% higher than the allocation for 2010. Of this, RM162.8 billion is for Operating Expenditure and RM49.2 billion for Development Expenditure.

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114.'' Under Operating Expenditure, RM45.6 billion is allocated for Emoluments, RM28.2 billion is for Supplies and Services, RM86.4 billion is allocated to Fixed Charges and Grants, and RM1.4 billion is for the Purchase of Assets and'' RM1.2 billion for Other Expenditures.

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115.'' As for Development Expenditure, a sum of RM28.3 billion is allocated to the economic sector for infrastructure, industrial, agricultural and rural development. A total of RM15.5 billion is allocated to the social sector, including education and training, health, welfare, housing and community development.
A sum of RM4.4 billion is allocated for development of the Security Sector, RM955 million for General Administration and RM2 billion Contingencies.

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116.'' Federal Government revenue collection is estimated to increase 2.3% to RM165.8 billion in 2011, compared with RM162.1 billion in 2010. Taking into account the estimated revenue and expenditure, the Federal Government deficit for 2011 is expected to further decline to 5.4% of GDP, compared with 5.6% in 2010.

CONCLUSION



117.'' The strategies and programmes in this Budget have been designed to meet the aspirations of the rakyat. We want to build a nation where every rakyat will be able to enjoy the benefits of development. We want a Malaysia where everyone can attain success through hard work and perseverance.

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118.'' This Budget has taken into account the needs of the rakyat. This Budget is possible due to the efficient and prudent financial management thus far.

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119.'' My Cabinet members and I share the vision to continue the noble tradition of bringing prosperity to all segments of society. This is not impossible, neither is it wishful thinking. Facts and history have proven that the Government is capable of bringing development.

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120.'' We have successfully transformed the nation from a low-income agriculture-based to a modern middle-income industrial-based economy.

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121.'' We succeeded in increasing the income per capita from USD260 during early independence to more than USD8,000 today.

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122.'' We have reduced poverty from 60% to 3.8% and are on target to eliminate ha