Related topics: |  Key Data | Budget & Plan| Budget 2000

2000 BUDGET STRATEGY

Mr. Speaker Sir,

17.    The 2000 Budget Strategy which I presented in this House in October last year will be maintained. The Budget is aimed at laying the foundation to face challenges and take advantage of opportunities in the new millennium. This will be achieved through strategies to revitalise economic growth, strengthen the nation’s competitiveness and resilience as well as transforming the services sector as the stimulus of growth, strengthening the agricultural sector, developing human resources to meet the nation’s requirements and continuing the nation’s social agenda and programmes for environmental preservation.

18.    This Budget Strategy is in line with the pragmatic macroeconomic policy which places emphasis on fiscal stimulus as well as provide a conducive environment to revitalise private sector activities. As such, all the tax measures which I have announced will be maintained. However, a number of these measures cannot be enforced until the amendments provided in the 2000 Finance Bill are approved. These measures are as follows:

1. reducing income tax rates of individuals, cooperatives and non-residents by one percentage point;
2. increasing personal relief from 5,000 ringgit to 8,000 ringgit;
3. standardising stamp duty rates on ‘Al-Ijarah Term Loan’ instruments with the stamp duty rates on instruments of conventional banking products;
4. providing full tax exemption on all sources of income of venture capital companies for a period of 10 years;
5. increasing relief on medical and education insurance premiums from 2,000 ringgit to 3,000 ringgit;
6. providing relief up to 1,000 ringgit on annuity premiums to tax payers who purchase annuities under the Employees Provident Fund (EPF) scheme; and
7. increasing tax exemption on income derived from the composition of music from 12,000 ringgit to 20,000 ringgit per annum.

19.    I wish to announce that public listed companies will be given exemption from the 25 per cent threshold level to acquire Malaysian-owned intellectual property and Malaysian-owned companies registered in foreign jurisdictions. The exemption is intended to enable the homecoming of intellectual properties and companies. This measure will also support the development of the IT industry, and is in addition to the existing measures, including the granting of pioneer status and investment tax allowance. Further, the purchase of computer equipment is granted accelerated capital allowance, while import duties and sales tax have been abolished.

20.    In order to continue supporting the development of new high technology-based industries as the engine of economic growth, sufficient funds have to be made available in view of the high risk factor. For this purpose, I had announced the establishment of a special fund totalling 500 million ringgit in October last year. Of this, 200 million ringgit is to be channelled through Bank Negara Malaysia (BNM), 50 million ringgit through Maybank Berhad, 50 million ringgit through Bumiputra Commerce Berhad and 200 million ringgit through Bank Industri dan Teknologi Malaysia Berhad (BITMB). Under BITMB, Malaysian-owned companies will have access to venture capital financing to purchase plant, machinery and equipment as well as to build factories for the high technology industries, including advanced electronics, bio-technology, precision engineering, advanced manufacturing, information technology and indigenous technology. With this facility, the Government hopes to accelerate the activities of high technology-based industries. This is in line with the objective of the Second Industrial Master Plan to increase value added of the manufacturing sector as well as our international competitiveness.

21.    BITMB will also manage the Special Education Fund with a sum of 200 million ringgit to enable Private Higher Education Institutions (PHEI) to obtain credit to finance the purchase of training and educational equipment. This facility is for the purchase of machinery and equipment as well as computer hardware and software for courses in medicine, engineering and multimedia.

22.    When tabling the 2000 Budget in October last year, I had announced that the Credit Guarantee Corporation (CGC) would be reorganised to enhance its efficiency and effectiveness to enable it to provide financing to small and medium-scale industries (SMIs). Emphasis is given to SMIs as they provide the base for industrial development in the country. For this purpose, CGC is classified as a financial development institution under the supervision of BNM and will be provided with additional capital totalling 1 billion ringgit. In addition, all SMI Funds under BNM will be placed under the supervision of CGC.

23.    I have also announced that a Capital Market Master Plan is being prepared to further strengthen the capital market in efforts to widen and diversify the activities of the financial market, including the equity and Islamic capital market. This Plan aims at preparing the domestic capital market industry to be more efficient and competitive in meeting the challenges of liberalisation, globalisation and advancements in IT. In line with these efforts, a new category of stockbrokers refered to as Universal Brokers will be identified to undertake the broadening of capital market activities, including corporate financial activities. They will also be allowed to establish branches. However, in line with the objective of consolidating the brokerage industry, Universal Brokers will be required to merge with existing stockbroking companies.

Mr. Speaker Sir,

24.    The Government will continue to implement fiscal stimulus to strengthen as well as reinvigorate the economy. However, in implementing these measures, the Government will continue to emphasise greater efficiency and prudence in its financial management. In this regard, we will ensure that the current account of the Federal Government will continue to register a surplus or at least balanced, while the overall deficit is kept at a manageable level, that is about 5 per cent of GNP.

25.    The Government will ensure that a large part of the deficit is financed from non-inflationary domestic sources, such as the issuance of Government securities and bonds, particularly the employees, pension and insurance funds. This will also ensure that national debt and the debt servicing ratio are maintained at low levels.

26.    The proposed 2000 Budget allocation will remain the same as that tabled in October 1999, totalling 78.03 billion ringgit. From this amount, a sum of 53.35 billion ringgit is allocated for Operating Expenditure and 24.67 billion ringgit for Development Expenditure. Of the Operating Expenditure, 28.37 billion ringgit is for Grants and Fixed Payments, 14.61 billion ringgit for Emoluments, 7.56 billion ringgit for Services and Supplies, 610 million ringgit for the purchase of office equipment and facilities and 2.2 billion ringgit for other expenditure, including tax refunds.

27.    Of the total Development Expenditure, 10.88 billion ringgit is for the economic sector, 7.25 billion ringgit for the social sector, including 3.7 billion ringgit for education and training, 908 million ringgit for the health sector and 1.2 billion ringgit for low and medium-cost housing programmes. In addition, 2.63 billion ringgit is for the security sector, 2.91 billion ringgit for the general services sector and 1 billion ringgit for contingency reserves.

28.    Rural development programmes will continue to be emphasised. A sum of 129 million ringgit is allocated for rural water supply. During this year, a total of 1,000 projects are expected to be implemented, benefiting some 30,000 families. For rural health facilities, a sum of 153.84 million ringgit is allocated for building rural clinics, mid-wife centres and other health facilities. In addition, supply of potable water and upgrading of health and treatment facilities for the interior will be continued with an allocation of 21.1 million ringgit. The Government will introduce the Wireless in Local Loop system to provide telecommunication facilities in rural areas. The system will be implemented by Telekom Malaysia Berhad costing 318 million ringgit and will benefit 120,000 subscribers in rural areas and the interior.

29   .     The Government continues to emphasise the development and welfare of the Orang Asli. In line with this, a sum of 30.5 million ringgit has been allocated for the year 2000. Of this, 7 million ringgit is for scholarships as well as the provision of school uniforms, bus fares as well as stationery for their children. In addition, 336 thousand ringgit is to meet the increase in the allowances for Tok Batin. A further 46 million ringgit is provided for the resettlement of Orang Asli villages and other socio-economic projects, including the provision of potable water.

30.    The replanting programme is an important strategy in developing the smallholders sector in order to overcome poverty among rubber smallholders. For this purpose, a sum of 201 million ringgit has been allocated to RISDA to implement the replanting programme, involving an area of 45 thousand hectares in 2000. In addition, the Smallholders Foundation Fund was established to assist smallholders to carry out supporting economic activities such as cash crops, including fodder, livestock, food processing and other activities. The Government will allocate a sum of 100 million ringgit in addition to the 20 million ringgit contributed by RISDA. To ensure the effective implementation of this Fund, RISDA will be directly involved in planning the activities as well as improving and expanding the marketing system.

31.    During the Seventh Malaysia Plan period, allocation has been provided for the construction of 1,592 kilometres of rural roads. For the year 2000, a sum of 201 million ringgit has been allocated for these projects, including the construction and upgrading of rural roads.

32.    The construction of low-cost houses will continue to be given priority. This is in line with the Government’s policy to provide sufficient and affordable quality dwellings, especially to the lower income group. For this purpose, a sum of 4.3 billion ringgit is allocated under several special funds, including the Housing Fund for Hardcore Poor, Revolving Fund for Low-Cost Housing, Special Scheme for Low and Medium-Cost Houses and also through the low-cost housing development fund of Syarikat Perumahan Negara. To date, under these Funds, a total of 35,000 units has been completed, while another 52,000 units are at various stages of construction.

33.    In addition to these Funds, the Government has also provided an allocation of 492 million ringgit for the construction of low-cost houses. Under the Public Low-Cost Housing Project, a total of 13,307 units has been completed, while 45,447 units are under construction. Under the Integrated Rakyat Housing Project that was launched in Kuala Lumpur, a total of 26 projects comprising 34,892 units has been approved. In order to ensure a comfortable living environment for the occupants, units built under these programmes have three bedrooms and two bathrooms. In addition, each residential area is provided with sufficient infrastructure facilities. In this regard, I strongly urge private developers to build low-cost houses with similar specifications and facilities.

Mr. Speaker Sir,

34.    The Government has announced a salary increase for civil servants of 10 per cent, relaxation of terms for housing loans and a 50 per cent increase in the housing allowances for government employees in the lower income categories. I would also like to announce that pensioners and those receiving pensions will also benefit from the 10 per cent increase in salaries. The pensions will be adjusted in accordance with the salary increase, as provided by the Pensions Adjustment Act 1980. About 400 thousand pensioners and those receiving pensions will benefit from this adjustment.

35.    The Government will also allow civil servants who have been emplaced in the pension scheme to withdraw the balance of their contributions with EPF before reaching the age of 55, while the Government’s contribution will be transferred to the Pensions Trust Fund. This measure is aimed at enhancing purchasing power as well as increasing demand and economic activities. However, the Government would like to urge the civil servants to spend wisely.

36.    In line with developing a caring society, the Government does not neglect the less fortunate, including the elderly, children, the disabled and the poorest households. Towards this end, the Government will increase the pocket allowances for those in institutions under the Social Welfare Department. In addition, the Government will also increase financial assistance for these groups. These increases will involve an allocation of 34.29 million ringgit.

37.    The Government is aware of the increasing cost of living faced by our students abroad. In view of the nation’s improved economic situation, effective from 1 January 2000, scholarships and loans have been increased between 10 per cent and 65 per cent for students sponsored by the Public Services Department and MARA in 15 countries.

38.    For students in local private institutions of higher education, the amount of loans has been increased from 12,000 ringgit to 12,500 ringgit for the arts stream and from 16,000 ringgit to 16,500 ringgit for the science stream. For students in public institutions of higher education, the Government has provided an advance of between 1,000 to 1,500 ringgit for registration fees.

39.    The pension adjustment and additional assistance for the less fortunate as well as the increase in scholarships and loans for overseas students will involve an additional allocation of 370 million ringgit in the Federal Government expenditure.

40.    The Government has established the Education Fund Scheme under the National Higher Education Fund Corporation for students in local institutions of higher learning. As at end 1999, the Government has allocated a sum of 980.6 million ringgit for the Scheme. Presently, 112,826 students in 11 Public Institutions of Higher Education and 5 Private Higher Education Institutions are receiving this assistance. In addition, a total of 100,000 new students are expected to benefit from this Fund this year.

41.    When tabling the 2000 Budget last October, I had announced the Children’s Education Withdrawal Scheme for EPF contributors, which allows contributors to withdraw a portion of their contribution for the purpose of tertiary education of their children. In addition, contributors will also be allowed to make withdrawals for the purchase of computers. This Scheme will be implemented soon.

42.    To upgrade the quality of education, the Government has introduced the Single Session Schooling System. Since June 1999, a total of 6,577 or 75.1 per cent of schools in the country has implemented this system. For the period 2000 to 2001, the implementation of this system will continue, involving 473 additional buildings or replacement of existing schools and 375 new schools.

Mr. Speaker Sir,

43.    Our success in organising the Formula One race in Sepang in October last year has enhanced Malaysia's image as an international centre for sports and tourism. This prestigious sporting event attracted wide international media and electronic coverage, considering that approximately 600 million viewers worldwide witnessed the event through 750 stations in 260 countries. According to a survey, a total of 65,000 foreign visitors and competitors were in Malaysia during the event, contributing more than 500 million ringgit in foreign exchange earnings. The survey also indicated that more than 50 per cent of them utilised the services of Malaysia Airlines, while more than 70 per cent stayed for more than a week in local hotels of international standing. Clearly, the Formula One Race has benefited the nation. The Government hopes the circuit management team will ensure that the sophisticated infrastructure will be fully utilised to increase Malaysians’ interest in specialised sports, while encouraging tourism.

Mr. Speaker Sir,

44.    The Government has always emphasised holistic development in implementing the national development agenda, with the view to achieving a balance between physical and spiritual development. For this purpose, a sum of 236.9 million ringgit is allocated for several religious programmes, including family development and social services as well as Islamic and Moral Management Programmes. The Department of Islamic Welfare will continue to implement various integrated programmes including the economic development of the Islamic community, wakaf land and Baitulmal, as well as improving the zakat collection mechanism.

45.    In addition, the practice of other religions will continue to be emphasised. Towards this end, the Government has provided annual allocations for the construction and expansion of temples, churches and other places of worship. We must strengthen our religious beliefs as well as continue to inculcate moral principles in our efforts to build a Malaysian society which is imbued with self-confidence and integrity. The Government will enhance its efforts to promote a healthy lifestyle and reduce social ills, brought about by activities, including the consumption of alcoholic beverages and smoking. In this regard, the Government will, from time to time, review the tax rates on these products.

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