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FMM Comments on the 2022 National Budget

Budget 2022 Poised to Help Country Recover and Rebuild National Resilience

Kuala Lumpur, October 29, 2021 - The Federation of Malaysian Manufacturers (FMM) commends the Government for a people’s budget focusing on the wellbeing of the rakyat in line with the Keluarga Malaysia approach. The budget is poised to help our country recover and rebuild national resilience to drive socio-economic recovery and the national development agenda of inclusive and sustainable growth.

Despite the current economic constraints, the budget is expansionary in nature with focus on assisting the middle and lower-income groups as well as the micro, small and medium enterprises (MSME) which had been the more vulnerable segments impacted by the pandemic. The development budget of RM75.6 billion is also an improvement from the previous year’s allocation. Specifically for the manufacturing sector, the budget has provided initiatives and incentives towards revitalising the economy including building MSME resilience; enhancing job opportunities via reskilling and upskilling including Technical and Vocational Education and Training (TVET); boosting trade and investments; driving green and sustainable growth and accelerating digital adoption and automation.

Support for Job Generation

We commend the Government’s initiatives to continue to support job generation via the numerous human capital development initiatives such as the JaminKerja with an allocation of RM4.8 billion targeting 600,000 job opportunities, the RM1.1 billion allocation for upskilling and reskilling and the RM80 million allocation under the Ministry of International Trade and Industry for skills training to support the industry clusters with high value-added activities.

FMM welcomes the RM6.6 billion allocation for TVET and the additional allocation of RM200 million for industry collaboration programmes to drive the national TVET empowerment agenda. We fully support the incentives for employment of apprentices and the extension of the structured industrial training programme as they would further promote the industry-led TVET agenda.

Expanding Trade and Investment

FMM thanks the Government for allocating RM25 million to explore high impact investments and new export markets through trade and investment missions. The RM2 billion Special Strategic Investment Fund and the further extension of the Reinvestment Allowance by another two years will most certainly spur

Science, Technology and Innovation Initiatives

The support for development of science, technology and innovation via the RM423 million allocation to stimulate R&D activities including allocation for public universities to continue to play an active role in the research and innovation ecosystem as well as the RM12 million

matching grant through the Collaborative Research in Engineering, Science and Technology would drive greater collaboration between industries and academia.

Tax Proposals

While FMM welcomes the announcement on the Special Voluntary Disclosure Programme (SDVP) for indirect taxes and the tax deduction for expenses incurred for booster vaccination both for individuals and companies, we are disappointed with the introduction of the one-off Prosperity Tax on companies that generated high income. We are of the view that imposing the prosperity tax on companies that made extraordinary profits during the pandemic period will send a wrong signal to investors both local and foreign. These companies should not be penalised for a once-off or short-term occurrence of extraordinary profits as the demand of the product was directly linked to the pandemic during its peak and will likely taper down as the pandemic situation improves.

While, the industry understands and supports the government's effort to address the Non-Communicable Diseases (NCDs) and obesity issue in Malaysia, we are of the view that an additional excise tax on premix beverages during this current challenging economic situation will unnecessarily burden the consumer & industry. The industry, therefore, is requesting for a moratorium on its implementation. Further clarification is also needed with regard to the products in scope for the taxation

Low carbon economy and preservation of environment and biodiversity

FMM welcomes the Voluntary Carbon Market initiative and would like to urge the Government to expedite the proposed renewable energy Corporate Power Purchase Agreement Scheme that could further support the carbon market trading as well as address the infrastructure constraints such as grid capacity restrictions and the need for integrated, cross-agency support to facilitate necessary renewable energy project approvals at state and local government level.

The RM1 billion allocation to facilitate the MSME transition towards low carbon economy would ease the financial constraints of companies intending to invest in sustainable raw materials and energy usage in their processes.

FMM also looks forward to support Government’s initiatives towards preservation of the environment and biodiversity and would encourage its members to participate in projects and campaigns such as the 100 million tree-planting campaign.

Enhancing Technology Adoption

FMM is pleased to note the RM45 million allocated for technology transformation among SMEs under Industry4WRD and we appeal for priority to be given to the Industry4WRD Intervention Fund (IF) in this allocation.

The government’s initiative to allocate RM30 million to implement the Innovation Hub: Industry 4.0 under Technology Park Malaysia would also enhance the current Industry 4.0 ecosystem.

The RM100 million allocation towards the Smart Automation matching grant targeted at 200 manufacturing and service companies is welcomed. However, we are of the view that the allocation should be further increased in order to allow more companies to benefit given that the pandemic has accelerated the need for automation of operations.

FMM strongly supports the Government’s efforts to upgrade Internet Connectivity in 47 industrial areas under the JENDELA (National Digital Network). However, the government needs to further improve the level of digital connectivity and quality of communication services and needs to review its internet connectivity strategies as well as build a next-generation and holistic telecommunication strategy roadmap. The focus needs to switch from wireless connectivity to 5G and beyond.

Building MSME Resilience

The following measures for MSMEs will help relieve their tight cash flow and put them on the right path to business recovery.

i. Accumulated losses that could not be absorbed are allowed to be brought forward from 7 years to 10 years. Bringing forward the losses for tax computation up to 10 years is a very good measure to help MSMEs on the path to business recovery as many MSMEs suffered heavy losses in FY2020 and FY2021 as a result of the pandemic.

ii. Initiative to allow MSMEs to defer income tax instalments for six months up until June 2022. However, the period of deferment is too short and should be extended up to 12 months to help with business recovery for MSMEs.

Tan Sri Dato’ Soh Thian Lai
President, Federation of Malaysian Manufacturers

About FMM
The Federation of Malaysian Manufacturers (FMM) has been the voice of the Malaysian manufacturing sector since 1968. Representing over 10,000 member companies (3,000 direct and 7,000 indirect) from the manufacturing supply chain, FMM is actively engaged with government and its key agencies at Federal, State and local levels. FMM is also well-linked with international organisations, Malaysian businesses and civil society. Apart from benefitting from FMM’s advocacy, FMM members enjoy value-add services, including training, business networking and trade opportunities as well as regular information updates.

Media Enquiries
Han Mong Ying, Senior Manager, Corporate Affairs,
Tel : 03-6286 7200

Date: 29 October 2021

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