Banks’ comments on 2017 Budget proposals
* Tan Sri Azman Hashim, Chairman of the Malaysian Investment Banking Association:
We appreciate the Government’s efforts to further invigorate the Capital Market by introducing the Small and Mid-Cap PLC Research Scheme with the aim to conduct research on 300 companies.
Capital Market Research Institute will be established with initial funding of RM75 million, provided through Capital Market Development Fund.
The Budget 2017 has also proposed to strengthen PR1MA House Financing Scheme by announcing 1Malaysia People’s Housing (PR1MA) House End-Financing Scheme.
This scheme will be offered by four financial institutions comprising of CIMB, Maybank, RHB and AmBank in collaboration with EPF and Government with the aim to assist low to middle income groups earning between RM2,500 to RM10,000 per month to acquire their first homes.
It is through the special stepped-up feature for the financing allowing servicing of only interest by borrowers for the first 5 or 10 years of the loan tenure to be followed by a principal and interest repayment for the balance of the tenure. This measure is to improve the affordability of low to middle income for first time home buyers.
In an effort to encourage youths to embark on long-term investment through the Private Retirement Scheme, the Government unveiled a one-off increase of the existing RM500 incentive to RM1,000 to the Private Retirement Scheme contributors with a minimum accumulated investment of RM1,000 during the period of two years.
Such measure will provide opportunities and inculcate the importance of saving by the youths from an early age to ensure sufficient savings after retirement.
To further boost the contribution of the Small and Medium Enterprises (SMEs), the Government unveiled a new scheme specifically for the year of assessment 2017 and 2018 which offers a reduction by stages based on a percentage increase in income compared to the previous year of assessment.
Other measures includes export promotion programmes through MATRADE, MIDA and SME Corp, loan financing and insurance credit facilities, 2% rebate on interest rates charges, tax reduction on chargeable income up to the first RM500,000 from 19% to 18% effective next year, revitalizing eUsahawan and eRezeki programmes and introducing new and various entrepreneurship programmes.
We are pleased to note that the Government is also placing priority on empowering human capital which is a critical factor for the future of the nation and placing priority on addressing the rising cost of living for the Rakyat, especially the low-and middle-income groups.
To cushion the burden of the Rakyat, the Government continues to provide various assistances and incentives to the targeted groups.
* Datuk Sulaiman Mohd Tahir, Group CEO, AmBank Group:
The 2017 Budget continues to focus in ensuring the economy continues to expand at a healthy pace, and at the same time reduce the fiscal deficit and address the public debt with the overall objective of bringing prosperity to the nation and promoting the wellbeing of the Rakyat.
One of the key initiatives of the Budget 2017 is on the affordable homes. The introduction of PR1MA house end-financing scheme bodes well. In particular, it will benefit those household in the M40 category whose salary bracket falls between RM3860 to RM8319 per month as well as the B40 category whose salary bracket is RM3855 and below.
This scheme will help address the first time home buyers’ in these income categories who are currently experiencing difficulties to own affordable homes due to its limited supply.
Another initiative under the Budget 2017 which will bode well for the economy is the introduction of reduction of tax payable by stages based on percentage increase income for the SME sector. Also, the tax reduction on chargeable income up to the first RM500,000 from 19% to 18% effective next year. Such incentives are expected to place the SMEs in a better footing and will enable them to contribute more significantly to the economy.
* Tan Sri Teh Hong Piow, Founder and Chairman of Public Bank:
We view positively the government’s commitment to address the nation’s fiscal challenges. Budget 2017 affirms the ongoing fiscal reforms. Prudent fiscal spending together with an expected increase in government revenue enables further reduction in budget deficit to 3.0% of GDP in 2017.
Thus, Malaysia should remain on track to achieve a near balanced budget as the economy progresses into a high-income nation by 2020.
We are delighted to note the continued pro-business measures in stimulating private investments in major infrastructure projects and economic corridors.
The introduction of the new scheme of income tax for companies would help to lower the cost of business and stimulate further growth of businesses including the small and medium enterprises.
We welcome the government’s wide-ranging and targeted measures to enhance the well-being of the rakyat, particularly the lower income group. Budget 2017 reflects significant strategies and initiatives to address the need of the rakyat.
We note that new sources of prosperity lie in the ingenuity to mine existing resources which uncover economic opportunities and elevate the growth potential of the Malaysian economy. Particularly, raising productivity and innovation, and enhancing human capital, are essential for a sustainable economic growth ahead.
* Datuk Abdul Farid Alias, Group President & CEO of Maybank and Chairman of the Association of Banks Malaysia:
Budget 2017 is in line with Maybank’s view that it is underpinned by three elements:
First and foremost, we are very happy to see that the Government remains focused on fiscal discipline and consolidation. Reducing further the budget deficit to 3% of GDP next year reflects the Government’s unwavering commitment to achieve a near-balanced budget by 2020.
This should alleviate any lingering concerns on fiscal policy credibility and the country’s finance; sustain our investment-grade sovereign credit ratings; and mitigate any pressure on key macroeconomic variables like market interest rates and the exchange rate.
Secondly, we are living in an environment where the global economy and world trade – and therefore external demand – has been weak for several years now. What we need is to see a rate of growth that is sustainable over the long term, and despite the challenging external environment, we are planning for such growth.
It is our hope that we remain vigilant over the possible higher volatility in the global markets as central bankers around the world will start re-introducing risks into the financial markets.
This is in view of major central banks like the US Federal Reserve’s prepping for interest rate hikes, with the European Central Bank and the Bank of Japan potentially rethinking their quantitative easing and negative interest rate policies.
Budget 2017 supports domestic demand amid such external uncertainties and volatilities with reduction in corporate income tax rates to boost private investment, as well as incentives to promote the tourism industry, e-commerce, digital economy, SMEs and exports, as well as sustaining the momentum in infrastructure spending.
Third, the issue of inclusive growth and equality is global, not just local, and they are addressed in this budget via specific measures targeted for the bottom 40% (B40) and middle 40% (M40) of the income groups. These include the increase in BR1M amount; supply-side and demand-side measures to address the issues of building and purchasing low-cost and affordable houses; additional personal income tax reliefs; and higher budget allocations for education, training and healthcare. These measures will boost the well-being of the lower and middle income groups, as well as allow them home ownership while generating wealth and equity.
Maybank is proud to be part of the new special “step up” end-financing scheme for the PR1MA housing programme in collaboration with the Government, BNM and EPF, and we are pleased to announce that we will be allocating a facility of up to RM2.0 billion to end finance PR1MA homebuyers eligible for this new scheme.
* Tengku Datuk Seri Zafrul Aziz, Group Chief Executive, CIMB Group:
Budget 2017 is both pragmatic and people-centric, with the right balance between public sector fiscal discipline and various thrusts that will help the private sector contribute meaningfully to the nation’s GDP growth.
CIMB Bank is pleased to have been selected as one of the four Malaysian banks to provide PR1MA end-financing to facilitate home ownership of houses valued at RM150,000 – RM300,000 among the lower income group. In Asia particularly, home ownership is perceived as part of a sound retirement plan, and with these initiatives, the Malaysian government is clearly taking a long-term view on helping the Rakyat with their lifelong financial planning.
Continued capital expenditure on necessary infrastructure projects like improving public transport and road networks, particularly in Sabah and Sarawak and rural areas, is again, evidence of the long-term view taken by the Government on providing the right ecosystem to support future economic growth.
As a banking group who is at the forefront of digital banking, we also welcome the government’s initiative on making broadband services better and cheaper for the people, which is beneficial for both consumers and corporates.
Overall, we are confident that the proposed measures in Budget 2017 will achieve the fiscal deficit target at 3% of GDP for 2017, and will go a long way towards supporting domestic demand and the Rakyat’s short- and long-term interests, as well as in meeting the development targets set out in the 11th Malaysia Plan (2016–2020).
* SME Corporation Malaysia:
Budget 2017 themed “Ensuring Unity and Economic Growth, Inclusive Prudent Spending, Wellbeing Of The Rakyat”, is comprehensive and supportive of SMEs, with year 2017 declared as the Start-up and SME Promotion Year.
The Budget looks into both the long-term development as well as the short-term needs of SMEs to cushion the impact of the current economic challenges. A total allocation of RM6.7 billion has been allocated for SME development to be implemented by the various Ministries and agencies.
The most impactful incentive announced is the reduction in the corporate tax rate for SMEs. SMEs that will benefit the most will be those that have an expanding revenue base as besides the special rate of 18% given for the first RM500,000 of the taxable income, the incremental revenue will also be subject to a lower tax rate, which will be enjoyed by all businesses.
The specific measures related to SMEs include the following:
For the SME Masterplan, a total of RM70 million has been allocated for the implementation of the High Impact Programmes;
A total of RM350 million is allocated for export promotion of SMEs. This includes RM130 million under the National Export Promotion Funds channeled through MATRADE, SME Corp. Malaysia and MIDA, RM200 million financing and insurance credit facilities with coverage valued up to RM1 billion by EXIM Bank, as well as RM20 million (RM100 million for 5 years) in the form of 2% interest rate rebate on the guarantees provided under the “Syarikat Jaminan Pembiayaan Perniagaan” (SJPP) scheme;
Initiatives to support start-ups include RM200 million for Working Capital Guarantee Scheme (WCGS) and introduction of a new pass category Foreign Knowledge Tech Entrepreneurs to encourage investment in high technology startups;
To stimulate development of B40 entrepreneurs, a total allocation of RM290 million has been provided for Mobileprenuer Programme by GIATMARA (RM30 million), Agropreneur programme (RM100 million), eUsahawan and eRezeki programmes under MDEC (RM100 million) and RM5,000 per taxi driver to purchase new vehicles with individual taxi permits given (RM60 million);
To empower Bumiputera entrepreneurs, a total of RM1.4 billion has been allocated for programmes implemented by various agencies such as SME Bank (RM100 million), Amanah Ikhtiar Malaysia (RM100 million), TEKUN (RM300 million), PUNB (RM200 million), MARA (RM120 million) and TERAJU (RM600 million);
For Indian entrepreneurs, a total of RM200 million has been allocated for business financing programmes under TEKUN and Amanah Ikhtiar Malaysia (RM150 million) and another RM50 million for programme to increase capacity and income;
For Chinese entrepreneurs, a total of RM90 million has been allocated for SME loans through KOJADI (RM50 million), RM20 million for microcredit loans under the Malaysian Chinese Women Entrepreneurs Foundation and RM20 million for loans to Chinese hawkers through 1Malaysia Hawkers and Petty Traders Foundation;
For women entrepreneurs, a total of RM2 billion is allocated for I-KIT, I-KeuNita and Women Career Comeback programmes; and
MDEC has been allocated RM162 million for implementation of E-commerce initiatives such as e-commerce ecosystem and Digital Maker Movement as well as the introduction of new location category as Malaysia Digital Hub.
Overall, the budget is broad based and inclusive, taking into consideration the various economic groups of SMEs including agriculture farmers and smallholders, women and B40 entrepreneurs, exporters, start-ups, Bumiputera entrepreneurs, etc.
On the long term development, the Government is committed to continue with the implementation of the Masterplan initiatives and other development programmes aimed towards meeting the 2020 targets.
In view of this, SME Corp. Malaysia shall continue to work closely with the relevant Ministries and agencies to reach out to more SMEs as well as to ensure that the programmes and incentives announced under Budget 2017 are expeditiously implemented to bring maximum benefit to SMEs.
* Mahendra Gursahani, MD & CEO, Standard Chartered Bank Malaysia Berhad
Budget 2017 has indeed proven to be a people-centric budget aimed at increasing the rakyat’s disposable income. Measures tailored for various groups such as B40, M40, fresh graduates and first time homebuyers would certainly ease the burden of high cost of living amidst the slowing global economy.
Domestic consumption and private investments are needed to support GDP growth, hence we are encouraged to see the pro-business strategies announced in Budget 2017. The RM2.1b allocation to the five economic corridors will be a positive for financial services as we support and participate in the country’s infrastructure development. We are also pleased to see that small and mid-cap companies are given attention in this Budget, opening up participation in the capital markets to more players.
As a leading Islamic Finance institution, we welcome the extension of the period of income tax exemption for entities carrying out Islamic banking and Takaful business through the International Currency Business Unit in foreign currencies as well as stamp duty exemption on instruments of such activities.
We look forward to 2017 as Start-ups and SME Promotion Year. SMEs are the backbone of the economy, contributing one third of the country’s GDP, and Standard Chartered will continue to help local enterprises seeking to internationalise their businesses.
Budget 2017 placed the financial system’s direct and facilitative role in encouraging Malaysian youth to make long-term investments through the Private Retirement Scheme. Such measures help them kick start their retirement savings at a young age.