What to expect in Malaysia’s Budget 2020 ahead of the budget announcement on Friday October 11, 2019.
- Last budget for the 11th Malaysia Plan and expected to address elimination of income and wealth gaps across ethnic groups and regions by 2030.
- Budget 2020 expected to be expansionary in nature with higher allocation for development expenditure and construction related projects like hospitals, schools, and railways.
- Budget 2020 will take into account trade wars risks and downside risks that exists from slower global growth.
- No reintroduction of GST. SST expected to be retained with widened scope.
- Removal of tax incentives which are outdated and replaced with targeted tax incentives.
- Subsidies expected to be targeted for certain groups especially in the B40.
- Based on government designed cost of living index to determine living costs to sustain a comfortable life.
- Tax incentives for green technology and zero waste.
2020 Budget Categories
- Addressing Cost Of Living
- Improving The Quality of Education
- Improving Job Opportunities
- Strengthening the Public Sector
- Improving Public Infrastructure
- Exploring New Technology and Innovation
- Fostering Entrepreneurship and Businesses
- Ensuring Social Welfare and Development
- Encouraging a Healthy Lifestyle
- Improving Access to Housing
- Preserving the Environment Through Sustainable Development
- Maintaining Public Safety and Security
- Spurring the Development of Sports
- Strengthening Malaysia’s Finance
Rafiq Hidayat, Managing Director of Wealth Vantage Advisory
The government launched the Financial Literacy strategy recently, which was a good move. It’s about time the government takes a proactive role in helping to improve the level of financial awareness and education of Malaysians to help more people understand the importance of managing their personal finances properly.
I would like the government to also look into the following suggestions seriously to help the government to achieve the goals set out in the Financial Literacy strategy.
- Provide tax incentives to employers who provide Financial Awareness or Financial Wellness Programs to their employees. This will help the government then to focus their efforts on communities that can’t afford to learn financial literacy on their own.
- Provide tax reliefs for individuals who engage the services of licensed financial planners. This would help increase the number of people who would have access to the right advisors to manage their personal finances.
- Continue to provide funding thru CMDF to enable more financial services intermediaries to upgrade their knowledge to take professional certifications such as a Certificate in Financial Planning and equivalent.
Wong Wai Ken, Country Head of StashAway
With Budget 2020 looming, StashAway hopes to be considered for retirement investment schemes such as Employees Provident Fund of Malaysia’s MIS and Private Pension Administrator Malaysia (PPA)’s PRS. With the government focused on reducing debt and reducing OpEx, Malaysians have to be more self sustaining than ever (less handouts, less subsidies, less pensions). Begin planning and investing for your retirement today!
The value that robo-advisors bring to investors’ saving for their retirement is clear/ By reducing investment costs while making it convenient, we enable investors to grow and protect their retirement funds.
File pic L-R: Linnet Lee (FPAM), Marshall Wong (PlanNerd), Stev Yong (MyPF), Spark Liang (FinSpark), Julian Ng (Akru), Suraya (RinggitOhRinggit – who also favours UBI)
Julian Ng, CEO and Co-founder of Akru
Can Malaysia afford a version of the Universal Basic Income (UBI)?
Assuming 40% of our 8 million households are B40 = 3.2m households (Note: the poverty line is currently being redefined). To give each household monthly income of RM1000 or RM12,000 annually requires a RM38-40b budget yearly. The household number grows by about 1% a year so that also needs to be budgeted for.
It would appear that Khazanah with RM100b net assets can fund a quarter of the UBI to the tune of RM10b inflated at 1% annually. The 1% inflation only caters to household growth and not an actual rise in the monthly income. Using a retirement calculator, these payouts would still result in about RM20b assets for Khazanah at the end of 20 years if unused monies are invested in a high-growth portfolio returning 8% p.a.
It may seem alarming to run down the nation’s “strategic assets” in such a way but there are a few alluring effects:
- Khazanah has skin in the game and 20 years to define and achieve what exactly is its purpose or strategic goals
- Khazanah fulfils its goal of reducing stakes in GLCs which might lead to other interesting developments eg more vibrant ex-GLCs
- Households will spend the income creating positive economic multiplier effects
- It transforms and shifts politics from race/religion to needs: all eligible households get the income
The rest of the UBI funding can come from:
- GST collection (At last collection: RM40b) – RM10b
- Petronas (Total assets: RM600b) – RM10b
- Running down PM’s Office budget of RM15b a year to the White House budget of RM3b yearly, yielding a possible RM12b yearly
- Possible further sources from corruption recovery and redistributing wealth and inheritance taxes
I don’t know if the PMO idea is possible since it houses many ministries but worth using the White House running a much bigger country as a comparison.
In fact if the current govt gets creative it might even be able to give a UBI to the (lower) middle class. The middle class might feel shortchanged but they should also be given lower income tax rates which overcompensates for higher GST for the rich.