Special Alert: Budget 2009 Snippets [Part 3: Investment & Businesses]

On the investment and business angle, the budget had been tasteless to say the least. The incentives for domestic investment this time around was uneventful; at least last year's focused on real-estate properties. We believe those who had changed hands in property transactions last year would be smiling when they read this and for the those that could not afford physical properties investment would have also made some decent money on property stocks.

Of course, the beginning was flavourful bliss but the end..., bitter to the core. The benchmark index KL Property Index was down almost half -46%, (noop.... that is not a typo mistake, yes its the BIG -46%) from its peak of 1,216.42 in July 07 to today's 651.00 level. Anyways, thats the past and this year unfortunately is not fantastically different.

Snippets:

1. Witholding tax for REIT dividends by foreign investors was reduced from 20% to 10% and for individual resident and non-resident investors, the reduction was from 15% to 10%. [Not exciting, Malaysian REIT had always been uneventful and very people invest in them. For the benefit of those who do not know what's a REIT. REIT stands for Real Estate Investment Trust - pretty much like a unit trust fund (Public Mutual and the likes) but only focuses on propert real estates only. This type of trust is only traded on the stock market and CANNOT be bought from a unit trust consultant. The typical form of return offered by REITs are dividends, so for those who wants better return than Fixed Deposit, you might want to explore REIT as an alternative.]
2. Properties costing less than RM250k will get 50% stamp duty exemption for their loan agreements.
3. Civil servants' tenure for new housing loans raised from 25 years to 30 years.
4. Tax treatment on group relief enhanced by allowing losses for the purpose of offsetting increased from 50% to 70% (Best to consult your tax agents on what does this mean, we are not entirely sure but it has something to do with tax-offsets on loss-making subsidiaries.)
5. In the effort to promote Malaysia as an Islamic financial hub, government is granting tax exemption status for a period of 3 years for fees and profits earned by institutions
   undertaking activities relating to arranging, underwriting, distributing and trading of non-RM sukuk issued in Malaysia and distributed outside Malaysia.
   
   

This will be the last piece and will conclude our series of Budget 2009 Special Alerts. If you had missed out, click Part 1: Domestic Consumption and Part 2: Infrastructure Development

YouInvest - Malaysian Investing Made Easy

For private discussion email to: youinvest.malaysia@gmail.com

Send this link to a friend if you think our blog is useful. http://youinvest-malaysia.blogspot.com/

Special Alert: Budget 2009 Snippets [Part 2: Infrastructure Development]

The Budget 2009 allocation for infrastructure development is nothing great to shout about. Amongst the biggest portion goes to human capital development followed by improvement spending in public transportation amenities.

Snippets:

1. The government had allocated RM47.7bn for human capital development (in terms of training and education) to create talented, trained and competitive workforce. Now, this amount is huge, representing 23% of total budget allocation. To us, there had been massive brain drain in the last 10-years plagued by Malaysia's poor salary scheme of working professions and the much dissatisfied governing policies. We think, instead of pouring truck loads of excessive funding into building schools and learning institution that are "half-baked", efforts should be focused on inviting brains back in to Malaysia. If you do not already know, there are a many successful Malaysian outside Malaysia doing extremely well and these talents need to be lured back.



2. This is most probably the most controversial of them lots. RM35bn will be spent for public transportation amenities over 2009 - 2014. Urban commuters sure knows what we meant by controversial. This kind of spending had repeated appeared on the national budget year in and year out, however, none of them could translate into tangible and material improvement to the public transport systems we have. To be honest, the PM should already know the congestion problem in mass transit vehicles (KTM Komuter, STAR-LRT, PUTRA-LRT) before boarding them 2 weeks prior to the budget announcement and claiming that he only found out recently that the quality was not acceptable. Sighhhh .. that's just tooo lat(m)e......






3. 
   


4. Last 2 years, we went through a whole lot of no-action no follow up big bang hoo-hahh about the 5 economic corridors. Still remember them, if not then let us remind you. The 5 economic corridors are [1] IDR - Iskandar Development Region (Johor), [2] NCER - Northern Corridor Economic Region (Perlis, Kedah, Perak & Penang), [3] ECER - East Coast Economic Region (Terengganu, Kelantan & Pahang) [4] SCORE - Sarawak Corridor of Renewable Energy [5] SDC - Sabah Development Corridor. The government is going to pump in RM6bn for these corridors.


5. Healthcare get RM13.7bn allocation.


6. Royal Malaysian Police gets RM5.4bn.


7. Only RM1.8bn allocation for the development of basic rural amenities and infrastructure. A bit too little right ???


8. Sabah and Sarawak states gets additional RM3bn and RM3.3bn respectively for development purposes. We wonder if the money has anything to do with possible politician crossing over that has been in the press all this while after the March election.

YouInvest - Malaysian Investing Made Easy

For private discussion email to: youinvest.malaysia@gmail.com

Send this link to a friend if you think our blog is useful. http://youinvest-malaysia.blogspot.com/

Special Alert: Budget 2009 Snippets [Part 1: Domestic Consumption]

In general, the Budget 2009 is less likely to "touch" the mass and ease inflationary burden of average Malaysian in our opinion. Biggest beneficiary for this round are households living in hardcore poverty and very poor status. The government is now reaching out to those households earning less than RM720 in Peninsular Malaysia, RM830 in Sarawak and RM960 in Sabah a month. Hopefully these aids get to them properly and timely through properly government channels. We would not want to see "other hands" meddling with poor people's money.

We think some of these measures are "illusive" and lack the substance to relief inflationary pressure and spur growth in general. Take for example the tax cuts: top-most bracket individuals now pay tax rate of 27% (28% last year) which is still more expensive than corporate tax of 26%. In terms of luring in more foreign direct investment (FDI), Malaysia lacks the incentives and attraction. Whilst Malaysian corporate pays 26% for corporate tax, HK corporate and Singapore corporate tax stood 17% and 18% respectively. Tax rebate for individual relief was only raised by RM50 !!! (OH MY GOD - only equivalent to 11 bowls of noodles - KL standard). Free electricity if your monthly bill is lesser than RM20. Jeez, think about it, very little of us consume that little electricity.

SNIPPETS

1. For individuals paying the highest marginal tax rate bracket, government reduced the ceiling tax rate from 28% to 27%.


2. Tax rate chargable for income group earning RM35,000 to RM50,000 is now 12% compared to 13% last year. Tax rebate (for individual relief) was raised from RM350 to RM400.


3. Allowances and benefits in kind received from employers are tax-exempted. (ie. training and education, TMNet services, books & reading materials are tax free if your employers awards you, which they normally don't)


4. Reduction in import duties of consumer durable goods from 10-60% range to 5-30% range. Essential food import duties lowered to 2-20%.


5. Free electricity bill if your monthly bill is lesser than RM20.


6. Road tax for diesel vehicles reduced to the same rate as petrol vehicles.


7. Interest Income for individual is zero tax.


8. Welfare assistance eligibility criteria raised from RM400 to RM720 for Peninsular Malaysia RM830 for Sarawak and RM960 for Sabah. This is to help more poor and hard-core poor household benefit from this welfare facility.


9. Excise duties on cigarettes raised by 3sen to 18sen per stick. So, duties for a pack of 20's is now raised by 60sen. Starting 1-Sep-2008, pack of 20's Dunhill is RM9.00, pack of 14's is RM6.50. Pall Mall is RM8.20 for (25s) RM7.50 for (20s) and RM5.50 for (14s). We know that the sums do not add up; so this is the breakdown. Example Dunhill (20s): Pre-budget price RM8.20 + new tax hike for 20 sticks RM0.60 + (escalated costs: tobacco leaves, fertilizer, packaging, distribution) RM0.20.


10. Bonus for civil servants for 2008 is minimum of RM1,000 or 1 month.

YouInvest - Malaysian Investing Made Easy

For private discussion email to: youinvest.malaysia@gmail.com

Send this link to a friend if you think our blog is useful. http://youinvest-malaysia.blogspot.com/