13 October 2011

Najib's Budget for Promising 2012


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The Gross Domestic Product (GDP) for Malaysia is expected to close at 5% to 5.5% for 2011 and 5% to 6% in 2012. Wow!! a rate that is higher than the world's average GDP growth


ouple of days ago the nation witnessed another round of budget presentation by Prime Minister, Dato' Sri Najib Razak (Najib). Many commented that this budget is a safe election budget. Najib referred the budget as Wellfare to "Rakyat" (Citizens) by easing inflation, a theme very much supported by his National Transformation programmes.

Najib started the budget presentation with promising statistics. The Gross Domestic Product (GDP) for Malaysia is expected to close at 5% to 5.5% for 2011 and 5% to 6% in 2012. Wow!! a rate that is higher than the world's average GDP growth (in fact higher than Singapore). I wonder how does the mathematics work. If I am not mistaken, the first half of 2011 registered GDP growth of 4%. So, to achieve 5% for the full year, do we have to touch 6% to 7% for the second half? Is there enough volume in the market to create this 6% to 7%? I certainly hope so. Let us have faith and assume that we will close at 5% to 5.5%.

"... harga beras sekilo gram tanpa subsidi sebanyak RM2.40 kini RM1.20 selepas subsidi......." Najib Razak on 11 Oct 2011 during 2012 Budget presentation

The budget is a socialistic budget for which Najib did mention that such is a reflection of a "Negara Kabajikan" (Socialistic Country). To combat rising prices, as evident by his inflation statistics of 3.5% in 2011, Najib proposes an anti-inflationary budget. He commented "... harga beras sekilo gram tanpa subsidi sebanyak RM2.40 kini RM1.20 selepas subsidi......." (Prices of rice per kg of RM2.40 and RM1.20 without and with Government subsidy respectively). It is quantified that the Government will have to spend RM33 billion to fund all sorts of subsidies. Some of the other examples shared are (in the order of Prices before and after Government subsidies respectively):

1. Sugar at RM2.50/kg to RM2.30/kg
2. Cooking oil at RM4.75/kg to RM2.50/kg
3. Flour at RM1.90/kg to RM1.35/kg
4. Petrol (RON95) at RM2.95/litre to RM1.90/litre
5. Diesel at RM2.26/litre to RM1.80/litre
6. Rice at RM2.40/kg to RM1.20/kg

Many incentives were revealed with Financial Institutions having the most significant impact. I guess that is logical given that the industry contributes 48% to the GDP (or so he claimed). Specific sub-industries are targeted to benefit from the budget. Some of the salient points are:

1. Double tax deductions for human capital efforts: Double deductions for tax allowed for internship, scholarships and career fairs that meet certain qualifying criteria.

2. Tax deductions on previously disallowed business expenses: Many small businesses that pay franchise fees (e.g. Papa Rich) can now claim for tax deduction. We will see more McDonalds?

3. Tax exemptions for selected businesses: 70% to 100% of income from selected businessses will enjoy tax exemption status. They are 4 or 5 Star Hotels, Industrial Design Services, Shipping and Private/International Schools.

4. Bringing back home Malaysian professionals from abroad: Returning experts will enjoy discounted income tax rate as low as 15% for 5 years with automatic Permanent Residence (PR) status for their foreign wives and kids. Who are professionals? Well, it's a wide definition but a parameter known is that their annual income should not be lower than RM106,000.

5. Promotion of new technologies: Hybrid and electric automobiles will be exempted from excise duties or import duties. For example, Honda Insight that used to cost RM109,000 will now be RM98,000. Toyota Pius that used to cost RM175,000 will now be RM139,000.

6. Caring for old age: Relief for retirement funds in personal income taxes has been increased from RM7,000 to RM9,000, consistent with the increase in employers' contribution to Employees' Provident Fund (EPF) from 12% to 13% for those earning RM5,000/month and below.

7. Wellfare of taxi drivers: Taxis or hired cars now will be exempted from excise duties and road taxes provided locally manufactured. In addition, cheap loans at 2% per annum given to replacement cars manufactured locally.

8. Combatting short term profit making in realty: Previously Real Property Gains Tax (RPGT) of 5% is charged if disposed properties are aged 5 years and below. Now, an additional increased rate of 10% is applied if the properties are aged 2 years and below. 5% charge is retained for the age bracket 2 to 5 years. However, if the change in ownership is within family members, full exemption granted.

9. Leaner costs for legal agreements: Stamp duties are exempted for loan agreements for Skim Perumahan Rakyat 1Malaysia (PR1MA) (Cheap Government loan for first time property buyers). Stamp duties are also exempted for loan agreements for micro finance and professional services funds (mainly for small and medium enterprises (SME)).

10. Dedication to refund taxes: The Inland Revenue Board (IRB) will pay interest of 2% p.a. for late refunds to the public. The catch is, if you are audited and errors are found in your tax returns, they charge you interest of 10% p.a. !! haha.... IRB will be more strict now. In 2011 alone they are expected to collect RM3 billion worth of penalties. Tax audits will be increased although time bar for documentation for audit will be reduced from 6 years to 5 years.

It is expected that the new budget will increase Government's revenue by 8%. Out of the RM186.9 billion, RM68.8 billion will come from tax collection, a target (KPI?) that will definitely put IRB at work to stress general public particularly those who are incompetent in filing their tax returns. Be a good citizen and file in your tax returns honestly.

The much awaited verdict on Goods and Services Tax (GST) was not revealed. Perhaps the time is not right for the Government to introduce an unfavourable scheme to avoid emotional response from general public that could impair their mental judgement when voting in elections soon to come. Consequently, no reduction in corporations tax and personal income tax was proposed. Perhaps when GST is being implemented, the wide-based tax collection will allow reduction in corporations tax and personal income tax quite significantly. A day subsequent to the budget release, KPMG, in their 2012 Budget Summit predicted that once GST is implemented, corporations tax may be reduced to a much lower level probably close to 20% (currently 25%).

If I am not mistaken, Najib ended his budget presentation with political sarcasm on "Negara Kebajikan" (Socialistic Country) that the oppositions have been preaching... something along the lines of "... Kerajaan Barisan Nasional sudah lama mengamalkan konsep Negara Kebajikan....."

"... Kerajaan Barisan Nasional sudah lama mengamalkan konsep Negara Kebajikan....." Closing by Najib Razak on 11 Oct 2011 at 2012 Budget presentation






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05 October 2011

Ungku Aziz on 'Minda Melayu'


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What happened in the past centuries that made the Malays a less acknowledged ethnic group in the world?


ecently I had the privilege of listening to Royal Professor Ungku Aziz Ungku Abdul Hamid (Pak Ungku) talking about the literature creativity and intelligence of the Malay mind (Minda Melayu). Such intelligence and creativity, although arts in nature, originated from a reality of skilled traders of international quality some 800 years ago. It is truly a refreshing feeling to know that we (Malays) were once masters of the sea and land in this archipelago (South-East Asia).

What happened in the past centuries that made the Malays a less acknowledged ethnic group in the world? Of course I wouldn't want to agree 100% on that statement/question for the Malays have indeed proven themselves to be worthy of international acknowledgement. The Malays, in the context of what Pak Ungku was referring to are the Bumiputeras which consist of Malays, Orang Asli, natives of Sabah and Sarawak and other Bumiputeras whom I think best if reference is made to the constitutional definition of it.

800 years ago Malays possess 3 prominent strengths that gave them the status they enjoyed: Berdikari, Perkasa and Muallim.

So what did happen 800 years ago? 800 years ago the Malays were masters of the archipelago. They were traders, merchants and poets. The Malay language was the Lingua Franca of the region for which foreign traders from China, India, Middle East and even Europe had to learn in order to coupe with the bussiness needs of that era, akin to what English Language is nowadays. You must agree that that is an International quality worthy of acknowledgement. 800 years ago Malays possess 3 prominent strengths that gave them the status they enjoyed: Berdikari (Independence), Perkasa (Might) and Muallim (Trading skills).

Why were they independent? Well, they established the first effective governments of the region. We are talking about the likes of Srivijaya, Majapahit, Langkasuka, Mataram and of course the most elegant of all, Melaka.

Why were they mighty? Well, this region was known to have the most atrocious pirates around. They (the pirates) came from all sides of the world who travelled in the same directions with the traders towards the 'Spice' islands (Note that spices were as valuable as petroleum or gold those days as it was the first scientific chemical for preservation of food). Naturally, the Malays had to be strong to defend their entrepot for the sake of their economic significance in the eyes of traders.

Why were they skillful traders? As mentioned earlier, they were the custodian of spices. The produce and trade spices and they did it quite intelligently. The fact that they managed to protect this bussiness advantage over many centuries suggest that they must have been smart traders. For the record, they only lost the custodianship of spices because they were not equipped with cannons like the Portuguese, Dutch or English.

.....they (Malays) lost to Portuguese (1511), Dutch (1640) and English (1824) who robbed the Malays of their independence, might and skills.

I repeat, they (Malays) lost to Portuguese (1511), Dutch (1640) and English (1824) who robbed the Malays of their independence, might and skills. The Malay archipelago was conquered, the Malay hospitality to traders were destroyed and the Malays international status was replaced by the Europeans. The Malays were systematically deprived from being involved in trading and were encouraged to appreciate life in the Kampungs (villages) where not much efforts were needed to get food such as vegetation, fish, fowl, etc. This was when the Chinese took over the role of traders.

500 years later realisation came to materialise. In 1957, via political methods, the Malays once again ignited their aspirations to uphold independence, might and skills which was significantly supported by Affirmative Actions. Specific targets and achievement instead of general considerations were made clear to the public. After 500 years of deprivation, surely this action has to be serious! Indeed it was and still is. Hence the establishment of quotas, scholarships, land reserves and many other controversial matters that earned political mileage intertwined with racial sentiments.

I believe Pak Ungku's thoughts are not just food for excellence to the Malays. It has to..., must...., be taken as learning points by all Malaysians. Only then the new generation can understand why certain matters that appear unfair prima facie, are actually the means to undo the unfairness itself... unfairness created, nurtured and left behind by the colonial masters who robbed the Malays of their independence, might and skills.

Pak Ungku ended his talk by saying ".... it has now become necessary for the Malays to be 'kurang ajar' (shrewd) like how the Chinese are 'kiasu' (opportunist, for lack of better words) in order to be successful..." (Note: For non-Malay readers, please do not take offence of the word 'kurang ajar'. It is just a symbolic word to give strength to the need for Malays to be on par with the rest in all aspects possible for the sake of level playing field).

There are many thoughts Pak Ungku has shared with fellow Malaysians particularly on Malays. These thoughts ought to be taken as a motivational driver to boost the Malays' aspirations for a better future. These thoughts are captured in his published books Renaissance Man and Pantun dan Kebijaksanaan Akal Budi Melayu.

".... it has now become necessary for the Malays to be 'kurang ajar' like how the Chinese are 'kiasu' in order to be successful..." quotation by Ungku Aziz





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