Friday, October 7, 2011

Budget 2012: Highlights

Highlights of Budget 2012 proposals announced by Prime Minister Datuk Seri Najib Tun Razak on Friday, Oct 7.

FDIs: Inflows of foreign direct investment have regained momentum. Foreign direct investment increased six-fold to RM29 billion in 2010, the highest growth in Asia. In 1H of 2011, FDI surged further by 75% to RM21.2 billion compared with RM12.1 billion for the same period in 2010. Private investment to expand 15.9% in 2012.

Expenditure: RM232.8 billion to implement all Government development plans, which include the projects and programmes. Of the amount, RM181.6 billion is for operating expenditure and RM51.2 billion for development expenditure.

Federal Government revenue expected to increase 1.9% to RM186.9 billion in 2012 compared with RM183.4 billion in 2011. Ddeficit in 2012 is expected to improve to 4.7% of GDP compared with 5.4% in 2011.

Stimulus package: RM6 billion for Special Stimulus Package through Private Financing Initiative to undertake several public projects. Projects include upgrading and maintenance of schools, including CONSTRUCTION [] of new blocks, upgrading hospitals, flood mitigation programme, upgrading basic rural infrastructure.

RM978 million to accelerate the development in five regional corridors, including building Johor Bahru-Nusa Jaya coastal highway in Iskandar, Johor; heritage tourism development in Taiping in the Northern Corridor; agropolitan scheme in Besut in the East Coast Economic Region; palm oil industrial cluster project in Lahad Datu in Sabah Development Corridor; and Samalaju water supply in the Sarawak Corridor of Renewable Energy.

Kuala Lumpur International Financial District (KLIFD): Income tax exemption of 100% for 10 years and stamp duty exemption on loan and service agreements for KLIFD status companies; Income tax exemption of 70% for 5 years for property developers in KLIFD.

Sukuk: Income tax exemption given for non-ringgit sukuk issuance and transactions is extended for another 3 years until the year of assessment 2014.

ETF: To boost Exchange Traded Funds (ETFs), Valuecap Sdn. Bhd subsidiary, I-VCAP, to provide RM200 million as seed monies for shariah-compliant ETFs. This fund will provide a matching loan subject to a maximum of RM20 million.

FELDA: FELDA Global Ventures Holding to be listed on Bursa Malaysia by mid-2012 to raise funds for the company to be a global conglomerate. Listing will create another blue chip PLANTATION [] company besides attracting international investors to Bursa Malaysia.

Rights and interests of FELDA settlers will continue to be protected by Koperasi Permodalan FELDA as the majority shareholder. FELDA settlers are expected to receive a windfall, with the amount to be announced before listing.

REITS: Govt to extend incentive for concessionary tax rate of 10% on dividends of non-corporate institutional and individual investors in Real Estate Investment Trusts (REITs) for another five years from Jan 1, 2012 to Dec 31, 2016.

SMEs: Government'' to provide RM100 million for the SME Revitalisation Fund. This scheme offers soft loans up to a maximum of RM1 million for entrepreneurs to revive their businesses. To help SMEs to commercialise research products, government to set up shariah-compliant Commercialisation Innovation Fund totalling RM500 million with an attractive profit margin.

Hybrid cars: Full exemption of import duty and excise duty on hybrid cars and electric cars will continue to be given to franchise holders. Tax exemption extended until Dec 31, 2013.

Tourism: Langkawi Five Year Tourism Development Master Plan will be launched with an allocation of RM420 million.

Property: Government proposes review of real property gains tax (RPGT) as current rate of 5% not effective in curbing real estate speculative activities. Government proposes RPGT rate be reviewed. For PROPERTIES [] held and disposed within 2 years, the RPGT rate is 10%. For properties held and disposed within a period exceeding 2 years and up to 5 years, the rate is 5%. Properties held and disposed after 5 years are not subject to RPGT.

Schools: RM1 billion for the construction, improvement and maintenance of schools, particularly to cater for the immediate needs of schools.

Civil service, bonus: Government proposes new Civil Service Remuneration Scheme or SBPA which includes an exit policy for underperforming civil servants and for those who opt to leave the service.

Annual increment of civil servants increased between RM80 and RM320 according to the grade. Also civil servants who accept SBPA will receive an annual increment between 7% and 13%.

Compulsory retirement age increased from 58 to 60 years old to optimise civil servants' contribution.

Additional bonus of half-month salary with a minimum payment of RM500 and an assistance of RM500 to government pensioners to be paid together with the December salary this year.

For 2011, this totals to one month pay with a minimum payment of RM1,000 for civil servants and RM1,000 for Government pensioners. This will benefit 1.3 million civil servants as well as 618,000 Government pensioners. The total bonus and assistance payments for this year accounts for RM4 billion.

Homes: Under My First Home Scheme for those earning below RM3,000, government to increase the limit of house prices from a maximum of RM220,000 to RM400,000.

Government will introduce Skim Amanah Rakyat 1Malaysia for households with income below RM3,000 per month, to benefit 100,000 households. Participants can apply for a RM5,000 loan with a repayment period of 5 years.

Entrepreneurs: Government will allocate RM200 million to develop Bumiputera entrepreneurs and contractors through the Ministry of Rural and Regional Development.

Venture capital: Government will establish MyCreative Venture Capital with an initial fund of RM200 million.

EPF: Tax relief up to RM6,000 for EPF and life insurance to be extended to the Private Pension Fund now known as Private Retirement Scheme. Employers' contribution be increased from 12% to 13% for contributors who earn RM5,000 and below, benefit 5.3 million EPF contributors.



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