Budget 2012: Reactions from corporations

Reactions from corporations, rating agency, fund management, PwC

MMC Corp managing director Datuk Hasni Harun:

Measures put in place to stimulate the domestic economy would boost domestic consumption and productivity of the economy in the long run.

The higher allocation of RM29.8 billion for the economic sector to support the needs of infrastructure would raise the level of CONSTRUCTION [] activities and in turn provide more business opportunities.

The construction sector would also receive a boost from the implementation of the ETP and the Second Rolling Plan beginning in 2012 which focus on high-impact development projects such as the Gemas-Johor Bahru double tracking project.

The economic impact of the Ipoh-Padang Besar portion of the double tracking project, of which we are involved as the contractor, has been far reaching, with RM10 billion worth of contracts awarded to more than 600 contractors.

The MMC Corp group remains committed to the ETP implementation, via nation-building initiatives such as the Klang Valley MRT (KVMRT) project, expected to be rolled-out next year.

As the Project Delivery Partner for the KVMRT project, we are excited with the project’s prospects as it will provide an efficient, integrated and sustainable transport system for the Klang Valley and will serve as an economic multiplier, estimated to create 130,000 employment opportunities and generate RM3-4 billion annually in terms of gross national income (GNI).

MMC Corp’s track record in building complex tunnels, such as the SMART tunnel, bodes well for its bid to undertake the KVMRT tunneling works.



Shahril Mokhtar, Group mananging director of Syarikat Prasarana Negara Bhd

Overall, the 2012 budget remains business and rakyat-friendly and continues to build on last year’s plan of accelerating economic growth via soft infrastructure development and agriculture.

The 2012 Budget demonstrates the Government’s commitment to the strategic thrusts under the Government’s Transformation Plan. It is a well balanced budget that promotes equitable wealth distribution for the rakyat.

As a key operator for the country’s public transport system, we will continue to support the Government’s commitment by participating in both physical and soft infrastructure developments such as transportation and tourism.

To support the Government’s aspiration to raise capacity for knowledge and innovation to nurture first–class mentality, we will continue our efforts on human capital development, increasing employability of graduates and developing competitive Bumiputera entrepreneurs.

We will also continue to play an active role in driving the country’s transformation towards a TECHNOLOGY [] and knowledge-intensive economy.



JT INTERNATIONAL BHD [] managing director Shigeyuki Nakano:

JT International is encouraged that the government has not increased the excise duty in light of the significant issue of illegal cigarettes in Malaysia.

Excessive taxation is one of the critical factors which fuel the trade of illegal cigarettes.

As such it is very heartening that the government has shown pragmatism in its cigarette taxation approach.

Coupled with the government agencies’ strong and persistent enforcement efforts which we hope will culminate into the imposition of enhanced sanctions and penalties, JTI Malaysia believes the government’s two-pronged approach of a prudent excise policy and enhanced enforcement is a constructive and effective strategy to fight the huge illegal cigarette trade in Malaysia today.



BOUSTEAD HOLDINGS BHD [] deputy chairman/group managing director Tan Sri Lodin Wok Kamaruddin:

This year’s National Budget has indeed become a very attractive one particularly for the masses. As for the Boustead Group, the Budget will have a particular impact from two broad areas namely property development and hospitality.

Given the fact that property prices locally have been experiencing high appreciations due to speculations, we believe the measures introduced by the Prime Minister in the 2012 Budget will temper the speculations and provide stability to property prices.

Hence with the staggered taxation schedule introduced in today’s budget, as one of the premier property developers in the Klang Valley and Johor, we hope that as much as property prices reflect demand, it will not be prone to excessive speculation.

Our view is that measures such as these will provide Malaysians with an opportunity to benefit from stable property prices that will appreciate organically.

We laud the Government’s initiative to promote the hospitality sector particularly with the announcement of the 70% tax exemption for five years for the building of new four-star hotels. The Boustead Group, being a key participant in this sector via our highly established and successful franchise of Royale Bintang & Royale Chulan Group of Hotels, will certainly benefit from this budget especially since we have 700 new rooms in three new four-star hotels coming up in Kuantan, Selangor and Pulau Pinang.

As the Chief Executive of Lembaga Tabung Angkatan Tentera, we are also very delighted with the Government for allocating half a billion ringgit under the Army Care programme which LTAT will be very much involved in to upgrade and maintain army camps and quarters nationwide. This will certainly help raise the morale of armed forces personnel. This will also most certainly spur strong economic interest especially for small and medium enterprises in the construction and building materials segment, throughout the nation.



Maxis Bhd chief executive officer Sandip Das:

We can see that the budget for 2012 is a continuation of the efforts being undertaken to secure a strong future for the nation.

The Budget addresses fundamental areas of raising investment, developing human capital, uplifting rural areas, spreading economic development and raising administrative efficiency as key pillars.

In the telecommunications industry, we are keen to play a decisive role in the economic transformation programme by providing a technological plank to fast-track the process.





Standard & Poor's Ratings Services: Budget provides buffer against uncertain environment:

Malaysia's budget for 2012 is not likely to improve the country's credit quality significantly, despite some fiscal consolidation because of the still moderately high level of deficit.

Malaysia's 2012 budget, as widely expected, is aimed at buffering against the uncertain global macroeconomic and financial environments. It also appears to be a 'people-focused' budget, against the backdrop of the general election, which must be held by 2013.

In the spirit of 'People First', the government will continue all subsidies, incentives, and assistance totaling RM33.2 billion.

This amount is 60% more than the expected total size of subsidies for fiscal 2011, as the deputy prime minster mentioned in May 2011.

The total size of the budget is RM232.8 billion, of which RM181.6 billion is toward current expenditure and RM51.2 billion is for development expenditure.

RM29.8 billion of the development expenditure is for investment in infrastructure, and industrial and rural development. On the other hand, MYR13.6 billion is allocated for the social sector, including education and training, welfare, and housing and community development.

"In our view, the new budget makes some progress in fiscal consolidation but the level of fiscal deficit is still not healthy enough to maintain in the medium term," said Standard & Poor's credit analyst Takahira Ogawa.

The government targets a fiscal deficit of 4.7% of GDP for 2012 against the revised government estimate of 5.4% this year.

Higher revenues, particularly petroleum-related revenues, and slower disbursement of some of the expenditure items for the first seven months of this year resulted only in RM1.6 billion in deficit being recorded until July, against RM43 billion budgeted for the whole year.

However, the government kept the estimate of the ratio of fiscal deficit to GDP for 2011 the same as in the budget for 2011, with the view to accelerate the disbursement of public funds later this year.

"The introduction of the Goods and Services Tax (GST) and structural reforms of the country's large subsidy system were not included in the budget. In our view, those measures would have been politically sensitive ahead of the general election," said Ogawa.

On the other hand, the government announced a series of measures to alleviate rising prices, which hit the lower- to middle-income groups hard.

From 2012, the government will abolish tuition fees for primary and secondary education.

It announced an increase in the salaries and pensions of civil servants and introduced the single-tier pay scale for civil servants.

This pay scale increases the maximum salary in the same grade for civil servants and enables them to receive annual increments over a longer period; this is the first time in 21 years that the size of the increment has been increased.

The government also announced the extension of the mandatory retirement age of civil servants to 60 years from 58 years.

The upper limit of the housing price was increased to RM400,000 from RM220,000 to be eligible for the 'My First House' special low-interest mortgage scheme.

In addition, budgets for upgrading hospitals, better medical services, enhancement of social welfare programs, financial support for start-ups, and packages for small and midsize enterprises were also announced.

The government also announced a rural transformation scheme, which includes a budget of RM5 billion for investment in basic infrastructure.

The government will separately announce the programs to supply clean water in rural areas, particularly in Sabah and Sarawak. The government provided 20,000 water tanks in this region as an immediate measure, and has additional budget for more in 2012. The government will also provide RM400 million to improve the situation in the northern states of peninsular Malaysia.

As the moderately high levels of fiscal deficit and government debt outstanding are the most significant negative factors for the sovereign ratings on Malaysia (foreign currency A-/Stable/A-2; local currency A/Stable/A-1; ASEAN scale axAA+/axA-1), we will continue to focus on the development of macroeconomic growth and the prospects of fiscal consolidation and structural reforms in the next few years.





Gan Eng Peng, Head of Equities of HwangDBS Investment Management Bhd:

A People-Centric Budget

The 2012 Budget is focused on people-centric with initiatives that will accelerate the nation's push to be a developed and high-income economy by 2020. Moreover, with the issue of rising cost of living on the minds of most people, the Budget 2012 has tabled incentives to ease cost pressures now being felt by the low and middle-income groups.

Malaysia is seen to be able to achieve gross domestic product (GDP) of 5 to 6 per cent in 2012. This expected GDP growth appears to be optimistic given to the current global markets that remain plagued by uncertainty and extreme volatility.

As a fund management company, we feel that the impact of the global slowdown is only starting to filter through into the real economy from late 2011.

Thus, it is unrealistic for the government to expect a pick up in growth momentum now. Malaysia remains largely an open economy.

Hence, the more realistic GDP growth figure would be approximately 2 to 3 per cent for 2012 on the back of a recessionary Europe, a very slow US economy and a tight monetary policy in China.

Construction Sector

One of the key planks of the growth engine in Malaysia is slated to be the construction sector. However, we have our doubts about key projects like the Mass Rapid Transit (MRT) and the building of a new financial district.

The tender of the MRT is already delayed, the size has been scaled back, financing has not been sorted and disputes about land acquisition are heating up. Besides that, rushed tender deadlines, slow decision-making and an abrupt change of project owners is blighting the MRT projects.

Thus, we would not be surprised if further delays occur since MRT Co, under the Ministry of Finance Incorporated is the new owner of the MRT projects, taking away from another government unit, Syarikat Prasarana Negara Bhd.

On the building of a new financial district and the 100 storey building, it would not be such a great idea when one considers that we are already heading into an oversupply situation in the commercial property space.

The oversupply situation should be considered before taking into account these projects. On the demand side, Kuala Lumpur does not have enough critical mass nor growth to support a new financial district.

Essentially, the overall growth forecast is a bit unrealistic to as how we are going to achieve it. We do not think that the stock market will be impressed by it since many people can see through the flaws of the mega projects. As markets do not have much expectations built into it, it will also not cause any untoward sell down. Furthermore, given that a few of the policies announced in the previous budget has been totally reversed, the credibility of more policy announcement here has worn thin. Hence, we think this budget is a non-event for the market.

Fixed Income Market

For the fixed income market, it is positive if one takes the government economic growth forecast at face value. Inflation is being controlled and growth is strong. Moreover, deficit is being reduced. Thus, this means lower issuance of papers, resulting in stronger bids and better pricing.

Real property gains tax (RPGT)

The fact that there is no drastic change to the ruling on RPGT encourages long-term ownership of property which also helps the owner with capital appreciation and wealth creation as they will hold on to the property for longer. However, the 10 per cent increase in the first two years is not an effective measure to try and curb speculation activities. Thus, if we want to curb speculation, it should be higher than 10 per cent.





Khoo Chuan Keat, senior executive director and tax leader, PwC Taxation Services:

Although captioned National Transformation Policy, the 2012 budget speech is actually geared towards the guiding philosophy of “People First”, very much with a socialist agenda in mind. A lot of focus has been made to addressing the day to day issues faced by the rakyat and small businesses struggling in a very competitive global landscape, with rising costs, resource and talent challenges.

A number of budget allocations and incentives have been provided towards strengthening our nation’s foundations through the youth and education, relieving poverty, and assisting the small and medium enterprises.

There was emphasis on investing in our youth through the allowances for internship and scholarship awards to attract talent back to Malaysia. In line with the focus on education, tax breaks are granted for private schools registered with the Ministry of Education. There is initiative to penetrate the rural areas with professional services such as legal and accountancy.

The budget also placed special emphasis on senior citizens who have contributed and can continue to contribute to nation building. For example, there is extended relief for pension schemes.

The promotion of small and medium businesses in Malaysia was seen through tax breaks for local franchises, budget taxis and industrial design service providers to promote creativity and innovation.

Except for the tax breaks in promoting a regional management treasury centre and the KLIFD, there seems to be little by way of encouraging corporate investments and FDIs. As expected, there were no changes to the corporate and personal tax rates, which can only realistically materialise with the implementation of GST.



Stuart Dean, Chief Executive Officer, GE Asean:

General Electric (GE) applauds the Government’s 2012 Budget tabled this evening. The company’s relationship with Malaysia dates back to 1975, and today, the country continues to be a significant market for GE in the region.

“The Government’s forecast for private and public investment of a 15.9% and 7% increase bodes well for Malaysia’s continued development, and with the liberalization of 17 service sub-sectors, Malaysia will increase in its competitiveness and remain an attractive destination for foreign investment.

We believe that Malaysia is set to transform itself into a leading global economy and strongly support the Government’s efforts particularly in driving sustainable development, spurring innovation and growing the healthcare sector”.

The Government’s 2012 Budget has reiterated the commitment it made under the Economic Transformation Programme (ETP) for sustainable development and has focused on promoting innovation.

“The budget has set out steps to drive innovation with an allocation of RM100m to promote it along with the establishment of a Commercialisation Innovation Fund amounting to RM500m.

At GE we believe that innovation is key to driving development and these steps will support Malaysia as it transforms itself into a high-income nation. GE has developed “ecosystems” – collaborations to develop better and smarter solutions faster – in Malaysia where we work with local partners to support Government initiatives.

Key partnerships include those with the F1 Team Lotus to develop and implement programs for innovative solutions for the automobile industry in Malaysia and globally for hydrocarbon-based and electric vehicles (EVs), including EV infrastructure.

With the Government’s decision to extend full exemption of import and excise duties on hybrid and electric cars to 2013, the take up rate for green vehicles will continue to increase. GE will be able to support these developments through our partnerships and with ecomagination products such as the WattStation, a fast, easy-to-use, award-winning EV charging station”.

The Budget announcement also highlighted efforts to grow Malaysia’s healthcare sector.

“The significant amount allocated to healthcare, including a RM15bn allocation for operating expenditures and a further RM1.8bn for development expenditures reaffirms the Government’s commitment to growing this sector and will result in opportunities for further growth and investment.

GE is committed to investing in R&D to develop innovative, cost efficient products and will continue to support the Government’s efforts to grow Malaysia’s healthcare sector.

We recently launched a new healthymagination fight against cancer in a global campaign aimed at accelerating cancer innovation and announced a breakthrough ultra-portable mammography device which takes the capability of a digital mammography system and miniaturizes it into an affordable, ultra-portable unit.

Through the ETP, GE has already committed to supporting the Government create a diagnostic services nexus (DSN), Malaysia’s teleradiology hub that will connect public and private sector radiologists in Malaysia to a teleradiology grid. DSN will improve the quality of radiological services and increase access for the rakyat, while offering radiologists more opportunities to sub-specialize”.



Ismet Suki, President of UMW Toyota Motor:

UMW Toyota Motor welcomes the announcement by the Prime Minister Datuk Seri Najib Tun Abdul Razak to extend the exemption of the Import Duty and Excise Duty for Hybrid Vehicles below 2000cc until 31st December 2013.

We are delighted with the announcement by the Prime Minister. This shows that the government is committed to make Hybrid vehicles affordable for more Malaysians. It would be exciting to see more Hybrid vehicles on our roads and more people would be aware about the effectiveness of Hybrid technology as a proven alternative to lowering fuel consumption and environment friendly.

The government is moving towards the right direction in promoting a “greener living” by reducing the CO2 emission with more hybrid vehicles on our roads. UMW Toyota Motor strongly supports this government initiative and will continue to promote hybrid vehicles.

We at UMW Toyota Motor would like to congratulate the Prime Minister on the successful budget announcement that is favorable to private companies and will definitely ease the burden of more Malaysians.