New Straits Times, 28 October 2000

Broad–based Budget ‘ friendly ‘ to growth and the k-economy

Analysts and economists described the 2001 Budget as a broad-based “people friendly” one which covered the basic aspects of growth with special emphasis on knowledge-economy (k-economy) development.

The budget did not spring many surprises for the corporate sector nor is it expected to have much impact on the Malaysian capital market, they said in an interview.

President of the Malaysian Investors’ Association Dr P.H.S.Lim said the Budget proposals, among other things, were aimed at stimulating the economy as well as promoting growth in new areas, particularly the ICT (information and communication technology) industry.

It was also aimed at promoting further growth for the year 2001 to achieve the projected rate of seven percent in gross domestic product (GDP) growth. He said the manufacturing sector would lead the Malaysian economy for the year 2001.

Meanwhile, an investment analyst from research house Surf88.com Sdn Bhd said the Budget set strategies that are good for the long term. She said there were not many surprises for the corporate sector with the lifting of the exit tax being widely anticipated while goodies in the form of an anticipated reduction in corporate duty and income tax did not materialize. Also, with the scant removal of taxes and measures which are more focused on specific sectors, the Budget would thus not have much of an impact on the stock market, she added.

However, both  the analyst and Dr Lim agreed that the main thrust of the Budget is on ICT development, with the k-economy being viewed as holding the key to future growth.

Dr Lim said the IT industry could benefit from the RM500 million Venture Capital Fund, as the local IT industry companies have been experiencing difficulties in securing loans on the basis of their IT merits but lacking collateral.

On the construction sector, he said the seven new projects allocated with a sum of RM11.25 billion under the Budget could further spur the growth of this industry. The construction of hospitals, universities, training schools and rural roads will inject new life into the industry.

The Budget announced today also saw both cigarette and liquor being hard-hit again by increased taxes. The sales tax on liquor will be increased from 15 to 20 per cent while the tax on cigarettes will rise from 15 to 25 per cent.

This, he said, could lead to the equity stocks in these categories being badly affected in the near term, but the relevant companies are likely to show satisfactory profits in the coming years.

On food, Dr Lim said RM11 billion was spent on the import of food items and the new incentives for agriculture and food production would stimulate food production to reduce the need for imports. Plantation companies, he said, should take advantage of the attractive conditions for investing in agriculture and food production.

Incentives for food production include those encouraging investment by companies in their wholly-owned subsidiaries for the purpose of food production. The companies are allowed tax deductions equivalent to the amount invested against their statutory income. - Bernama

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