TRANSITIONING TO FURTHER GROWTH ON TAX

By : RAYMOND LIEW

FORGING ahead with its continuous rapid economic development and political stability Malaysia will likely to see another year of growth with the implementation of its Economic Transformation Programme (ETP).

The 10-year plan will provide a clear roadmap for the country’s increase in productivity, as well as the development of its infrastructure in terms of its human resources and research and development capabilities.

The 2011 budget aims for Transformation towards a developed and high-income nation. The budget is underpinned by the ETP and the Government Transformation Programme (GTP), both of which will be used as the drivers to meet the country's economic goals.

Sabah, being the eastern gateway into Malaysia, has developed rapidly in tandem with its western counterparts. The aspiration is to make Sabah a developed state, in line with the rest of the country by 2020. Like its next door neighbour Sarawak. the state has undergone a remarkable change from an agriculture-based economy into one that is focused more on manufacturing and service-based sectors. Within this, its strongholds are still very much in oil and gas, palm oil, rubber and until today, to a certain extent, timber.

To begin with, the government envisages a partnership with the private sector in commissioning large scale projects through public-private partnership initiatives. Projects include the construction of power plants, the Academic Medical Centre and highways.

To further strengthen private investment. the government is fortifying the capital market via measures such as government-linked investment companies to divest their shareholdings in firms listed on Bursa Malaysia. Other initiatives include strengthening the Islamic capital market, intensifying venture capital. Promoting participation of bumiputeras (people native to Malaysia) through a Bumiputra Property Trust Scheme and setting up a private pension fund in 2011.

Sabah is targeted as one of the states that will provide foreign investors with opportunities to participate in the fast emerging Malaysian economy. Industries such as agriculture, tourism, palm oil and ICT will be encouraged via additional government allocations, tax incentives and various projects.

The proposed measures include the extension of the existing Pioneer Status and Investment Tax Allowance (ITA) incentives; exemption of import duty and sales tax for those involved in the generation of renewable energy or energy efficiency activities; extension of the existing tax exemption on income derived from the trading of Certified Emission Reductions certificates; abolishing the import duties ranging from 5% to 30% on some 300 tourism and daily use products to promote the tourism industry; exempting mobile phones from sales tax; and, finally extending the existing ITA incentive and exemptions for import duty and sales tax on imported broadband equipment for 'Iast mile' broadband service providers for until December 31, 2012.

To intensify human capital development and enhance workforce competitiveness, the government will allocate funds to attract talent, expand access to quality education, and intensify training and skills programmes with the support of the 1Malaysia Training Programme to expand women's participation in entrepreneurship.

Additionally, to ensure the success of both the ETP and GTR the government has also proposed to enhance the productivity of civil servants who work under these two programmes. One of the suggested measures is the MyCoID Gateway initiative utilising the Companies Commission of Malaysia’s single reference number.

Above all, 2011 is likely to be yet another year of accelerated economic growth. It is anticipated that the private sector: together with foreign investors, will participate actively in investment opportunities, taking advantage of a more liberalised financial sector and the RM30bn ($9.88bn) earmarked for various projects through the ETP

This will be accompanied by domestic demand, which will continue to be the key driver in 2011 and beyond. It will keep the Malaysian economy growing close to the targeted 6% per annum, with the state of Sabah contributing to this development.

(NOTE : Raymond Liew, is Managing Partner, McMillan Woods, Chartered Accountants)