Budget 2012: Reactions from banks, Bursa, Khazanah

Comments from on Budget 2012 by Datuk Seri Abdul Wahid Omar, the President & CEO of Maybank and Chairman of the Association of Banks in Malaysia:

Overall, Budget 2012 Overall, Budget 2012 is most comprehensive and reflects the Government's effort to strike a balance between dealing with people, cyclical and structural issues. Rising living costs and income gap are the number one people issue.

The current challenging global environment and the attendant risk to external demand require domestic macroeconomic policy responses to support internal demand, especially consumer and business spending. At the same time, the Government needs to keep the momentum going with regards to transformation programmes, economic restructuring and policy reforms.

Budget 2012 clearly listened and responded to the concerns voiced by the Rakyat over the issue of living costs, given the plethora of measures benefiting especially the poor, lower income group, the middle class, civil service, pensioners and ex-servicemen or their families.

These include things like the allocations for welfare programme, cash handouts and one-off payments to target groups, new remuneration scheme and automatic annual increment for civil service and pensioners, as well as the abolition of school fees.

We are extremely pleased that the Government continues to give a high priority for the growth and development of the financial services sector. Budget 2012 is no exception given the slew of tax incentives for the setting up of MNC’s treasury management centres (TMC), sukuk issuance & transactions, private retirement scheme, exchange-traded fund (ETF), Skim Amanah Rakyat 1Malaysia and the development of Kuala Lumpur International Financial District (KLFID).

This will further promote the comprehensive development of the conventional and Islamic banking, insurance and takaful, investment banking and other financial services in terms of the range and offerings of products and services.

With human capital development and attracting and retaining talent being one of the key issues facing the banking/ financial services sector, we are grateful for the tax incentives for companies providing structured internship programme and scholarships as well as participating in careers fairs abroad.

We welcome further liberalisation of the non-financial services sectors covering 17 sub-sectors such as healthcare, education, business and professional services. This will complement the above-mentioned measures to promote financial services sector by enhancing the country’s post-industrialisation development strategy that is centered on, and driven by, services sector.

The review of Real Property Gains Tax (RPGT) is a good move to ensure macroeconomic and financial stability as well as social justice by curbing speculative activities and preventing excessive rise in property prices. This is also balanced with incentives and allocations for the purchases and provisions of affordable and public housing schemes. We also welcome the Government’s commitment to reduce the deficit in 2012 to 4.7% of GDP compared with 5.4% in 2011.



Datuk Seri Nazir Razak, Group Chief Executive, CIMB Group:

“A creative and responsible budget, bringing down the deficit to 4.7 per cent in 2012 and yet delivering benefits to the most deserving segments of the rakyat. I particularly like measures focussing on human capital development and those addressing concerns on rising consumer debt levels. In addition, I would like to compliment the Government for the estimated 14.9 per cent increase in its revenues for 2011, which is a reflection of overall efficiency improvement in the public sector.”



Datuk Tajuddin Atan, Chief executive officer, Bursa Malaysia:

We welcome the Government’s move to continue with focused measures to drive growth for the economy, in anticipation of the uncertain and challenging economic environment in the immediate to mid-term. Given the expectations of a sustained GDP growth of 5%-6%, we feel that the initiatives, as well as the ongoing Economic Transformation Programmes (ETP) implementations will help sustain growth.

With regards to the capital market, we certainly welcome and look forward to the listing of Felda Global Venture Holdings, which is expected to be listed on our Exchange mid of next year. This listing will create yet another blue chip in the PLANTATION [] sector and add to our niche offerings, attracting larger international portfolio funds to the Malaysian market.

This move shows the Government’s focus to bring blue chip stature companies to the public domain so that institutional investors as well as the rakyat can participate in the growth of such well run entities. TERAJU’s aim to guide over 1,000 performing Bumiputera companies to potentially list on Bursa Malaysia is also an added drive to bring more breadth and depth to our capital market offerings.

Our efforts to grow and profile our strength in the Islamic finance and investment space is bearing results with the attestation of Malaysia as the world’s largest sukuk issuance centre. The announcement to extend exemption of income tax on non-Ringgit sukuk issuance and transaction, as well as the tax deduction on expenses for sukuk wakala issuance is a further boost towards increasing participation in our thriving sukuk market.

Boosting retail investment participation has always been at the forefront of our business agenda. Therefore, we welcome the extension of a concessionary tax rate of 10% on dividends to further spur our REITs market. The attractive tax rate of 10% on dividends received can also serve to incentivise inflow of foreign funds into our real estate sector. Given the current uncertain climate, the nature of REITs as a tax-managed defensive investment product will provide an alternative investment to investors.

We believe there is more to be done to galvanise the Exchange Traded Funds (ETFs) market. The provision of seed monies for issuance of Shariah compliant ETFs are welcomed as ETFs offer many advantages such as transparency, broad exposure to the stock market, liquidity, flexibility, diversification, as well as lower investment costs.

The growing interest in ETFs has been fuelled by the increase in the range of asset classes accessible via this product. Many investors, particularly, large institutions have included ETFs in their investment portfolio owing to its transparency and its ability to provide a means of accessing specific investment strategies or exposure.

In anticipation of the global growth and opportunities available, Bursa Malaysia has embarked on a series of structural initiatives to strengthen and build the domestic ETF market.

Focus is also being channeled towards increasing awareness via series of product centric seminars. This announcement augurs well as it will be an incentive to boost the supply of ETFs in the market.



Dr. Nungsari Ahmad Radhi, Executive Director, Khazanah Research & Investment Strategy:

This is a finely balanced budget that has to take into consideration the variety of demands from various constituencies and the trade-offs of decisions that have to be taken in the context of prudential budget constraints.

The deteriorating external environment is particularly challenging to a small, open economy such as Malaysia which will now have to rely on domestic sources of growth.

The Budget introduced many measures that address cost of living and human capital development issues while also targeting to boost private consumption at the same time.

There is a discernible shift towards bite-sized, direct transfers that have a broad reach and direct impact on people's lives and private consumption numbers. On a longer term, there were attractive incentives for investments in the services sector, particularly in the leisure and tourism industry.

Fiscal discipline is maintained by further reducing the deficit to below 5% of GDP which suggests that the budget also seemed to have built in some reserves should the global economic environment deteriorate further. A very efficient budget that manages immediate needs in an uncertain environment.



Roger C. Ng, Head of Fixed Income and Corporate Sales for South East Asia, Goldman Sachs:

Malaysia has made great strides in establishing itself as a leading international and regional hub of Islamic finance. This is in large part the result of the government's strategic planning and policy initiatives.

The new incentives and projects such as the Kuala Lumpur International Financial District will further strengthen Malaysia's position as an international centre for banking and finance.