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DPM: Malaysia welcomes more FDI from China

KUALA LUMPUR, Oct 18 — Malaysia is in a strategic position to welcome more foreign direct investments (FDI) in 2019 and beyond, especially from China, with the support of the thriving Hakka community in the country. Deputy Prime Minister Datuk…

Higher growth forecast in tandem with Malaysia's GDP projection

KUALA LUMPUR, Oct 18 — The forecast improvement in global economic growth to 3.4 per cent next year from three per cent this year is in tandem with the country’s higher projected gross domestic product (GDP) expansion of 4.8 per cent from 4.7…

More incentives needed to build a sustainable nation: AIMS

KUALA LUMPUR: The government needs to look into providing incentives and exemptions for local players in the online and digital sectors to create a more competitive and conducive business environment.

AIMS Data Centre Sdn Bhd (AIMS) chief executive officer Chiew Kok Hin said while the 2020 Budget has indicated a promising outlook for advancing digital infrastructure and there is still room for Malaysia to grow into a more sustainable and prosperous digital nation.

He said the government is building the right foundation for a digital Malaysia following its recent announcement towards implementing the National Fiberisation and Connectivity Plan (NFCP) and promoting more digital application pilot projects utilising fibre optics and 5G infrastructure.

“The government is focusing on incentives for small and medium enterprises and other new digital applications like blockchain and similar technology that leverage Malaysia’s investments in fibre optics and 5G infrastructure, but it lacks incentives for one of the core infrastructures that supports the development of a digital Malaysia, namely data centre.

“Data centres are not just fundamental to the development of cloud and digital applications, they also serve as an important element in attracting foreign direct investments into the country to enable the creation of jobs and knowledge transfer,” he said in a statement.

Finance Minister Lim Guan Eng (pix), when tabling the 2020 Budget last Friday, said the government will develop the infrastructure needed to form Digital Malaysia via the implementation of the NFCP over a five-year period.

He also announced an allocation of RM210 million to accelerate the deployment of digital infrastructure for public buildings, especially schools and high-impact areas as industrial parks. -Bernama

US-China trade war offers upside to Malaysian medical device makers: Fitch Solutions

PETALING JAYA: The US-China trade war offers an opportunity for Malaysian medical device manufacturers to continue to position themselves as alternative producers and suppliers to China, Fitch Solutions Macro Research said in a report.

According to the report, recent moves by the US government to further ramp up tariffs on Chinese-made products will increase pressure on Chinese companies to relocate manufacturing operations; therefore, Malaysia’s access to the US and other major world markets would increase its attractiveness as an alternative manufacturing base.

In the short term, local rubber glove manufacturers stand to benefit from the recent US tariffs imposed on Chinese medical gloves.

“The US government has imposed a 15% tariff on medical gloves made in China effective from Sept 1, 2019, as a result of which US importers are seeking alternative sources of supply from other manufacturers in Asia.

“As the world’s largest producer of rubber gloves, Malaysia stands to benefit from this shift in supply chain. The US imported medical gloves valued at US$2 billion in 2018, of which around three-quarters came from Malaysia and 11% from China,” the report said.

The Fitch report also said higher US demand for Malaysian gloves will boost industry profit margins which have been hit by increases in raw material costs and surplus capacity due to over-expansion by Hartalega Holdings Bhd, Kossan Rubber Industries Bhd, Supermax Corp Bhd and Top Glove Corporation Bhd.

“On the downside, the market environment for medical gloves in Europe is likely to become more competitive as Chinese producers shift their focus away from the US market.”

Over the longer term however, Fitch said, additional tariffs on a broad range of medical devices could help drive direct foreign investment into Malaysia’s medical device industry, boosting its international competitiveness.

“We highlight that the Malaysian government is actively encouraging more investment from China, particularly in high-tech industries.

“Finance Minister Lim Guan Eng stated that Malaysia is keen to learn from Chinese expertise in artificial intelligence, advanced materials, robotics and cloud computing. This would allow Malaysia to build on current initiatives to boost high-tech manufacturing,” Fitch said.

To date, US tariffs on Chinese-made medical devices have mainly targeted diagnostic imaging and electro-medical apparatus with most consumables remaining exempt.

Conversely, Chinese tariffs on US products have targeted a much broader range of devices and this could encourage more investment into Malaysia’s manufacturing sector from the US.

US medical devices companies with manufacturing operations in Malaysia include Abbott, Becton Dickinson, Boston Scientific, Cardinal Health, Medtronic and Teleflex.

Malaysian developers see property sector recovering, credits ‘self discipline’

KUALA LUMPUR, Oct 17 — Malaysia’s property market is expected to improve following moves to address a chronic oversupply, said a developers group. The Malaysian property sector is facing a severe glut due largely to a surfeit of luxury homes…

Fitch unit sees Putrajaya struggling to find private funding for Budget 2020’s infra plans

KUALA LUMPUR, Oct 15 — The federal government will face obstacles in convincing the private sector to help finance the massive infrastructure projects planned in Budget 2020, Fitch Solutions Macro Research said. In a research note today, the Fitch…

GDP growth target for 2020 realistic: Guan Eng

KUALA LUMPUR: The estimated gross domestic product (GDP) growth forecast of 4.8% for 2020 can be realised, according to Finance Minister Lim Guan Eng, despite some quarters saying that the projection looks to be high amid global headwinds and weak demand.

Speaking during a moderated panel session at the Budget 2020 Forum today, Lim said that while the figure was contingent on the country’s economic performance this year, the projection was made based on available data.

“If there is any necessity to revise the figures, then we will do so. We want to be transparent and open,” he said.

According to the 2020 Economic Report, GDP growth is projected to improve marginally to 4.8% in 2020 from 4.7% in 2019.

Lim also defended the government’s fiscal deficit target of 3.2% and tabling an expansionary budget.

“These figures are in line with what other institutions like Bank Negara Malaysia (BNM) have projected for next year. The fact that we have widened the deficit estimate from 3% will allow us fiscal room to make the necessary adjustments (if there is a slowdown in global trade).

“Malaysia is a trading nation, and the WTO (World Trade Organization) has lowered their trade projections to 1.2% from 2.6%, so we must offer ourselves that fiscal space. This is a necessary pre-emptive measure in case the worst happens,” he said.

As for the collection expected from the new 30% income tax band, Lim said that about RM100 million in revenue is expected to be raised.

“This proposal was actually made by the World Bank. The World Bank feels that our top marginal tax rate for the wealthy is too low compared to neighbouring countries. Even by increasing the income tax to 30%, we are still among the lowest.”

He said the wealthy should be able to afford the increase in tax, adding that this will contribute to economic growth, which will in turn grow the income of the wealthy and hence cover the marginal rise in tax.

Addressing concerns that the budget did not have many measures included to increase overall revenue collection, Lim said the government’s expectations for the coming year still stood.

“The projections we made are based on stress-tested figures. We have kept within the projections for the last two years, and we will maintain that for next year. If there are any contingencies, then we will make the necessary revisions, but at the moment, no,” he told the media on the sidelines of the forum.

According to the 2020 Economic Report, revenue for next year is expected at RM244.53 billion, down 13.1% from RM263.3 billion this year.

On the second issuance of yen-denominated bonds (also known as samurai bonds), Lim said the low rate was a sign of the Japanese government’s confidence in Malaysia.

“I was informed that the Japanese government has not offered such a low rate to other countries. The offer given is at 0.5% and we are still continuing discussions on how we can get a better deal. Of course, the size of the bond issuance is dependent upon these discussions,” he said.

Commenting on the proposed merger of Bank Pembangunan Malaysia, Danajamin Nasional, SME Bank, and the Export-Import Bank of Malaysia, Lim was tight-lipped on who would be leading the merger, but said the proposal was made by BNM.

“The central bank is independent, so when they make a proposal they want to study it and we have to give due consideration to them. Depending on the outcome of this study, only then the government will consider it,” he said.

On the privatisation of highways owned by Gamuda Bhd and PLUS Malaysia Bhd, Lim reiterated that the government will consider acquisition proposals that do not add to its debt burden.

RM100m in collections expected from new tax band

KUALA LUMPUR: The new tax band of 30% for those with a chargeable income of RM2 million a year is expected to generate about RM100 million for the government, according to Finance Minister Lim Guan Eng (pix).

Speaking at the Budget 2020 Forum this morning, he said the announcement was based on a proposal by the World Bank.

“According to the World Bank, even the rate of 30% is considered low, compared to other countries who levy a much higher rate on their top earners.

“We don’t expect to raise that much, but I think it would be roughly RM100 million,“ he said.

Meanwhile, Lim said the government’s expectation for revenue collection in the coming year still stands.

“I think what was said for collection is what we are sticking to,“ he told the media on the sidelines of the forum.

According to the 2020 Economic Report, revenue for next year is expected at RM244.53 billion, down 13.1% from RM263.3 billion.

The government also revised their fiscal deficit target to 3.2% from 3%.

Lower price threshold for foreign buyers of properties – boon or bane?

PETALING JAYA: While one of Budget 2020’s allocations for the property sector is aimed at reducing the supply overhang in the country, not all property players think this will solve the problem.

To reduce supply overhang of condominiums and apartments amounting to RM8.3 billion in the second quarter of 2019, the government has announced that it will lower the threshold on high-rise property prices in urban areas for foreign ownership from RM1 million to RM600,000 in 2020.

After tabling the Budget in Parliament, Finance Ministry Lim Guan Eng explained that the move is only applicable to existing unsold units and does not cover new projects that are yet to be launched.

However, National House Buyers Association (HBA) secretary-general Datuk Chang Kim Loong cautioned that existing property owners in the secondary market may capitalise on this situation to increase the selling prices of their properties.

“As a result, property prices could see a sudden shock effect of high increase across the board that will not only result in locals being squeezed out of the housing market but increasing the risk of a property bubble as this sudden rapid rise in property prices caused by lowering the minimum price threshold is definitely not sustainable in the long run.”

Rahim & Co International CEO of real estate agency Siva Shanker believes the Malaysian market is driven by domestic consumption, where property buyers in Malaysia are Malaysians.

“This (lowered threshold for foreign ownership) will open a bigger pool of properties for foreigners to choose from. It will help decrease the overhang, but the overhang problem will largely remain,” he told SunBiz.

PropertyGuru country manager Sheldon Fernandez opined that the move to reduce the foreign ownership threshold is an interim measure to address the ongoing residential overhang in the country.

“However, domestic sentiment must be balanced against the short-term benefit of reducing the oversupply, as external intervention is not an ideal solution,” he said.

SP Setia Bhd president & CEO Datuk Khor Chap Jen said the reduction of the foreign ownership threshold value for unsold stocks of condominiums and apartments located in city areas will help to reduce the overhang for these type of properties as developers can market these range of products to foreign buyers.

“We hope that the state authorities will follow suit on this criteria.”

Mah Sing founder & group managing director Tan Sri Leong Hoy Kum said there has been growing interest in Malaysian properties among foreign buyers, and the reduction in the price threshold will directly benefit the group.

“Lowering the threshold of high-rise property prices in urban areas will have a positive impact as foreign buyers are a blue-ocean pool of potential buyers which can reduce the overhang of properties in this price point.

“It is crucial that respective state governments will respond to this positively and revise their ceiling price accordingly,” he added.

Merger of DFIs can reduce contingent risks: Economist

PETALING JAYA: The proposed consolidation of development financial institutions (DFIs) in Budget 2020 could help reshape the roles and functions to be more specific, targeted and effective, according to Sunway University Business School Professor of Economics Dr Yeah Kim Leng (pix).

“It is a welcome move to consolidate the DFIs given the fast-changing economic landscape whereby most of their functions are better served by the commercial and investment banks,” he told SunBiz.

Yeah said the rationalisation of the institutions will also reduce the contingent risks and liabilities to the government.

In Budget 2020, Finance Minister Lim Guan Eng announced that Bank Negara Malaysia has proposed a two-phase restructuring plan for Malaysia’s DFIs to form a new financial institution through the merger of Bank Pembangunan Malaysia, Danajamin Nasional, SME Bank, and the Export-Import Bank of Malaysia, in a bid to strengthen the country’s development finance ecosystem.

With the proposed consolidation, Yeah highlighted that one of the key challenges is to reduce the incompatibilities and tap the synergies of the DFIs with different specialised functions such as providing financial guarantees, channelling development funds and import and export insurance.

He also identified staffing as another hurdle to such a merger, especially if it involves reducing workforce, as well as developing the corporate culture appropriate to the merged entity and its mandated role.

“However, a key benefit from such a move is the economy of scale, particularly in terms of capitalisation.”

Yeah pointed out that the consolidation could also improve the sharing of market and client information which would translate into better risk assessment.

However, a banking analyst who declined to be named said he is unable to comprehend how such a merger would be able to strengthen the development finance ecosystems. He conceded that there might be some efficiency gains from the consolidation although he is unsure how such a move would reduce the liabilities of the institution.

Furthermore, he cautioned that like any other bank mergers, it will be subjected to execution risk, as well as the cost involved involved in restructuring and reorganising the entities, with more capital needed for larger institutions.