THE Perikatan Nasional government is set to table its maiden spending plan on November 6, at a time when the country is grappling with the Covid-19 pandemic and tough economic climate.

Finance Minister Tengku Zafrul Tengku Abdul Aziz, who will be tabling Budget 2021, had said the spending plan will be based on four broad themes namely caring for the people, steering the economy, sustainable living and enhancing public service delivery.

For many businesses, it’s about surviving and trying to avoid closure.

For key economic sectors such as construction and manufacturing, it’s also about surviving amid a pandemic, which is not expected to abate until a reliable vaccine is tested, found safe and rolled out on a mass scale.

The Malaysian Insight spoke to these two key sectors on what they hope to see for important aspects of the economy under Budget 2021.

Construction: Master Builders’ Association Malaysia

Held-back projects should be resumed, such as the MRT 3, KL-Singapore High-Speed Rail, JB-Singapore RTS, and remaining packages of the Pan Borneo Highway.

There should also be lower financing costs for projects through interest subsidy or government guarantee.

A Buy Malaysia First policy should be implemented for local construction materials, along with stricter government control on prices of construction materials to prevent cartels and monopolies.

Illegal foreign workers who are already here and have no criminal or health records should be legalised for a period of two to three years.

Their numbers can be reduced slowly, and in stages, while helping the construction industry pursue automation and digitalisation. Ultimately, the government needs a holistic plan to cover the short-term and long-term issues involving foreign labour supply for the construction industry, while boosting local skills and interest.

Smaller contractors must not be neglected in the push for automation. Simpler automation systems can be introduced for those not up to par with high technology.

Manufacturing: Federation of Malaysian Manufacturers

Given uncertain times, there must be a stronger push for automation and digitisation that can enhance productivity.

FMM has suggested various programmes for the government to support technology and digital adoption, training centres, a bigger role by higher learning institutions, and more online courses.

There should also be tax incentives for local companies involved in robotics, as well as for industries and universities that collaborate together on manufacturing research.

All companies should also be given the chance to qualify for the double tax deduction for expenses incurred on research and development (R&D).

As part of automation efforts, affordable and good quality broadband access is a must, FMM added.

To help companies recover from the pandemic, any plans for raising energy tariffs in 2021 should be postponed, and the rebate or discount on electricity and natural gas for 2021 should be extended, perhaps by targeting companies that use it most, FMM also suggested.

Lower personal and corporate tax

FMM also asked for a more competitive tax regime for taxation, suggesting a 20% rate for corporate tax, and a flat corporate tax rate of 15% for all SMEs.

For personal tax, it suggested a rate of 5% to 10% for assessment years 2020 and 2021, as a direct assistance method to mitigate the impact of Covid-19 on individuals.

The rate for personal tax for the year 2022 onwards should be at 22% maximum, FMM suggested, as it will help economic recovery by increasing disposable income and boosting consumption.

Personal income tax bands should also be restructured so that taxpayers will not reach higher tax rates too quickly, it added.

Human capital: vocational training and minimum wage

Re-skilling is ever more needed with job uncertainty caused by the pandemic.

FMM has proposed a Technical Vocational Education and Training (TVET) Apprenticeship Fund and a TVET Commission governed by an Act of Parliament to function as a “single champion agency”.

As to the apprenticeship fund, the foreign worker levy can be utilised to fund programmes by employers to train locals.

On the minimum wage, there should be a moratorium on any rate increase for the next two years to give room to companies to revive business and return to pre-pandemic positions.

The definition of minimum wage should also be reviewed, to include take home pay and not basic wage.

“Minimum wage should be basic wage and all fixed cash payments and allowances defined as wages under Section 2 of Employment Act,” FMM said.

Wages must also be linked to productivity, and the government can support this by having clearer guidelines on the Productivity Linked Wage System (PLWS), as well as stronger legislation and enforcement capability.

Double tax deduction on cost incurred to set up the PLWS should also be granted as a form of support to companies.

Labour market: foreign workers

FMM is also repeating the call for a single ministry to be in charge of foreign workers, related policies and management.

These shifts should involve a single online processing and approval system for end-to-end processes, from recruitment to repatriation. Third party-service providers should be done away with.

A levy mechanism for foreign workers that has easy and transparent criteria should be implemented and announced at least three years ahead of deadline.

Levy increment should be planned based on a transparent schedule, and should be gradual to minimise impact on business costs. The levy should be ploughed back into the industry to support mechanisation and automation efforts.

Incentives and rewards should be given to businesses which manage to reduce the use of foreign workers.

Trade: positioning malaysia

The goods and services tax (GST) should be reinstated at a rate of 3%, and with a transition period of six months.

The outstanding GST refunds should also be paid in full before the new tax system is introduced, FMM said.

To promote Malaysian brands abroad, a brand promotion grant should be started, while the RM300,000 ceiling on the market development grant should be removed.

Pursuit of regional and international free trade agreements should be pursued to have greater market access for Malaysian exporters, including with non-traditional markets such as the Middle East, Eastern Europe and Africa.

New and existing businesses should be given support to diversity into the essential goods sector with the aim of replacing imported items and hitting the export market.

This is especially for items that have become essential during the pandemic, such as masks, respirators and thermometers, hand sanitiser, protective wear; and reusable medical and surgical gown fabric.

Domestic consumption

Enforce a “Buy Made in Malaysia” policy, including for government procurement, FMM added.

Other forms of support can include more tax incentives such as rebates and double deductions to encourage companies to adhere to the policy.

FMM also welcomed a Finance Ministry proposal for a government procurement legislation and called for public consultation on the proposed law.

To protect domestic consumption, it also urged the government to tighten enforcement on smuggled and counterfeit goods. – October 29, 2020.