BUDGET 2017 COMMENT Federation of Malaysian Manufacturers President Tan Sri Saw Choo Boon

The Federation of Malaysian Manufacturers (FMM) commends the Government for tabling a higher budget than last year and maintaining the fiscal deficit target despite a difficult economic environment. This has been made possible with the implementation of the Goods and Services Tax, which assisted in cushioning the impact of a reduction in indirect taxes. In addition, the Budget addresses the needs of the most vulnerable groups and promotes integration and inclusiveness. We are pleased to note that development expenditure has been maintained. We call upon the Government to ensure that development projects are efficiently implemented and maximise the use of Malaysian goods, services and manpower.
Greater Focus on SME Development
FMM welcomes the numerous programmes and incentives focussed on the development of SMEs, in particular the export promotion funds, insurance credit facilities, the 2% rebates on interest rates charged to SME borrowers, the reduction corporate tax rate from 19% to 18%, extension of incentives for vendor development and additional schemes to support start-ups. All these programmes and additional funds are expected to boost the further development and growth of SMEs and entrepreneurship going forward.
Emphasis on Technical Vocational Education & Training (TVET)
The emphasis on technical and vocational education and training (TVET) is also a step in the right direction. This would address shortages in the supply of skilled labour and contribute to the nation’s aspiration to be a high income economy by 2020. We thank the Government for acceding to our request for double tax deduction incentive. This would encourage private companies to provide the practical industrial training to increase their employability upon graduation.
Improving Human Capital Through Education
FMM fully supports the measures announced to further develop human capital. We particularly welcome the allocation to improve higher education, the empowerment of research activities and fostering of research culture in universities and strengthening English proficiency through the Dual Language and Highly Immersive Programmes. This would certainly contribute significantly to increasing the quality and capabilities of our human resource going forward.
Promotion of Digital Connectivity
The allocation of funds to promote digital connectivity is timely. We look forward to the introduction of the Digital Free Zone and higher broadband speed for the same price and further reduction in costs in the next two years. The RM1 billion allocated to the Malaysian Communication and Multimedia Commission to ensure wider coverage and the quality of broadband is welcomed. We hope these initiatives would also benefit businesses, especially for industrial estates.
Reduction in Corporate Income Tax
The reduction in income taxes for companies would motivate businesses to increase their revenue. However, FMM hopes to see the extension of this incentive to the overall chargeable income in view of the competition from other regional economies that have taken steps to reduce their corporate tax rates aggressively.

While FMM is happy with the above, we hope that more funds could have been allocated to develop SMEs. In addition, we had looked forward to the further extension of Reinvestment Allowances and incentives to promote innovation, research and development, productivity and Accelerated Capital Allowances for automation. Given the importance of water supply to support manufacturing activities, the development projects, including the Water Supply Fund should also cover supply to industry.