Wide-ranging perks in budget 2012

KUALA LUMPUR: Datuk Seri Najib Razak today unveiled the 2012 budget, providing a gamut of incentives to further strengthen the domestic economy, a RM6 billion special stimulus package, perks to attract investments and boost the Islamic sukuk market, banking, finance and hospitality industries, as well as much-awaited support for small-and medium- scale enterprises.

Najib, who is also Finance Minister, also announced that Felda Global Ventures Holdings will be listed by mid-next year to raise funds for the land development agency to emerge as a global conglomerate, as well as income tax exemptions to accelerate development of the Kuala Lumpur International Financial District (KLIFD).

"The listing will create another blue chip plantation company besides attracting international investors to Bursa Malaysia," he said when tabling thebBudget in Parliament.

In clearly keeping the wheels well-oiled in Malaysia's economic transformation process, 17 services sub-sectors will be liberalised besides an allocation of RM2.5 billion under the public-private partnership (PPP) facilitation fund, with RM300 million for Bumiputera entrepreneurs.

To accelerate development of the five regional corridors, the government will allocate RM978 million including an agropolitan scheme in Besut, a palm oil industrial cluster project in Lahad Datu and the Samalaju water supply project in Sarawak.

In efforts to woo multinational corporations and establish treasury management services, the government has proposed an income tax exemtpion of 70 per cent for five years, witholding tax exemption on interest payments on borrowings and stamp duty exemtpion on loans and service agreements.

Najib said the budget will cost RM232.8 billion, of which RM181.6 billion is for operating expenditure and RM51.2 billion for development.

Of the development expenditure, RM29.8 billion is provided for the economic sector to support infrastructure needs, industry, agriculture and rural development.

As for the KLIFD, Najib proposed a 100 per cent income tax exemption for 10 years and stamp duty exemption on loans and service agreements for KLIFD-status companies, an industrial building allowance and accelerated capital allowance for KLIFD marquee-status companies and income tax exemption of 70 per cent for five years for property developers in the district.

Turning to the sukuk (Islamic bond) market, which has emerged as a feather in the cap for Malaysia's Islamic finance, the prime minister said a tax deduction on expenses incurred for sukuk wakala will be given for a three-year period from 2012 to encourage more sukuk issuances.

The income tax exemption given for non-ringgit sukuk issuance and transaction is extended for another three years until the year of assessment 2014.

Najib said the I-VCAP, a subsidiary of Valuecap Sdn. Bhd., will provide RM200 million as seed money for shariah-compliant exchange traded funds (ETF) which will see the fund provide a matching loan subject to a maximum of RM20 million.

The prime minister also said the full exemption of import and excise duties on hybrid and electric cars given to franchise holders will be extended to end-2013.

Realising the importance of small and medium enterprises to the country's economy, Najib said a RM2 billion shariah-compliant SME Financing Fund will be established next year, which will be managed by selected Islamic banks.

The government will finance two per cent of the profit rate.

To prevent entrepreneurs from succumbing to failure due to the economic recession and higher costs, the government will provide RM100 million for the SME Revitalisation Fund.

In addition the goverment will establish a RM10 million SME Emergency Fund to help those affected by natural disasters to recover and restart their businesses quickly.

Najib said the franchise fees borne by local franchisees will be allowed tax deduction in efforts to develop the local franchise industry and Malaysian brands.

Pulau Langkawi will be redeveloped with the Langkawi Five Year Tourism Development Master Plan, to be launched with an allocation of RM420 million to be used to restructure the Langkawi Development Authority, set up a park rangers unit, upgrade museums, beaches and small businesses as well as provide a more efficient transportation system.

Hotel operators in Peninsular Malaysia investing in new four and five-star hotels will be given pioneer status, with 70 per cent income tax exemption or 60 per cent investment tax allowance for five years.

In order not to jeopardise the ability of low-and middle-income groups to buy houses, Najib said the real property gains tax (RPGT) will be reviewed, whereby for properties held and disposed within two years, the RPGT rate is 10 per cent and five per cent for properties held for more than two years and up to five years.

"I am confident the revised RPGT rates are low and will not affect genuine property owners and will curb speculative activities," he said.

He also announced a RM100 million allocation for creativity and innovation, of which RM30 million will be used to establish the Market Validation Fund to be managed by the Malaysian Technology Development Corporation together with the Malaysia Innovation Agency.

A gross national income of more than RM30 billion will be generated by 2020 from commercialisation of some 300 intellectual properties in the form of new products and technology from universities by the private sector.

To enable SMEs to commercialise research products, the government will establish a syariah-compliant Commercialisation Innovation Fund totalling RM500 million with an attractive profit margin.

"Effective 2012, this fund will be available at selected Islamic banks with the government financing two per cent of the profit rate", said Najib. -- Bernama

Source: MOLE