MALAYSIA: WIDE-RANGING INCENTIVES TO BOOST NKEAS IN BUDGET 2011

KUALA LUMPUR, Oct 15 (Bernama) -- Malaysian Prime Minister Najib Tun Razak
unveiled the 2011 Budget providing wide-ranging incentives to boost the business
sector, re-invigorate private investments including allocations to
promote the National Key Economic Areas (NKEAs), Islamic banking and advancing
green technology via tax exemptions and extending incentives to ensure
sustainable development and usage of renewable energy sources.

In what is surely a comprehensive, well thought-out and realistic package,
incentives have also been given to boost the capital market through issuance of
three new stockbroking licences to eligible local, foreign or joint-venture
companies to raise retail market participation as well as perks to boost
Islamic finance and Malaysia's position as a globally-renowned Sukuk issuer.

Najib, who is also Finance Minister, announced the budget against a backdrop
of a robust growth of 7.0 per cent expected for this year from 6.0 per cent
forecast earlier and set to expand by between 5-6 per cent next year, buttressed
by a superlative showing of the ringgit regionally.

Growth for next year will be supported by private investments, expanding
10.2 per cent, private consumption 6.3 per cent and exports 6.7 per cent, with
the manufacturing sector continuing to spearhead growth, expanding by 6.7 per
cent and services 5.3 per cent in 2011.

In efforts to further strengthen niche areas where it has expertise, Najib,
said that the government has set aside RM857 million (US$277.7 million)
(US$1=RM3.08) next year for local companies to invest in high-value-added
activties in the electrical and electronics industry plus allocations to propel
downstream activities in the oil, gas and energy industry.

A fund of RM297 million (US$96.27 million) would be made available to
encourage replanting to replace aged trees with high quality new clones and a
further RM127 million (US$41.16 million) to support domestic oleo derivatives
companies as well as RM23.3 million (US$7.55 million) to expand downstream palm
oil industries including production of vitamins.

He said Bursa Malaysia (Malaysia Exchange) will develop an international
board to enable foreign securities to be listed including syariah-compliant
products, while tax deduction would be allowed on expenses for issuing Islamic
securities.

The move would strengthen Malaysia's position as the leading sukuk
(Islamic Bonds) market and promote transactions in Bursa Suq al-Sila -- the
world's first syariah-compliant commodity trading platform while double
deductions would also be allowed for takaful contributions for export credit.

These allocations would go a long way towards the projects under NKEA to be
implemented successfully, Najib said, adding that "we are not dreamers. We are
realists. Our success is not mere coincidence but the result of clear and
careful planning as well as firm implementation.

He said the overseas investments by the Employees provident Fund (EPF)
would be raised to 20 per cent of the total assets managed from 7.0 per cent now
as part of efforts to allow Government-Linked Investment Companies (GLICs) to
increase investments in overseas markets and explore opportunities for betetr
returns.

As part of efforts to boost high-impact strategic development, he announced
that Permodalan Nasional Bhd (Malaysia's biggest fund management company) would
develop Warisan Merdeka (Merdeka Heritage), another landmark and an integrated
development project comprising a 100-storey tower -- the tallest in Malaysia,
costing RM5 billion (US$1.62 billion) and which will retain Stadium Merdeka
(Merdeka Stadium) and Stadium Negara (National Stadium) as national heritage.

As for the development of the Malaysian Rubber Board land in Sungai Buloh,
he said the EPF would undertake mixed development comprising affordable houses
as well as commercial, industrial and infrastructure facilities costing RM10
billion (US$3.24 billion) with the project to be completed by 2025.

Najib said the Bumiputera Property Trust Foundation, would set up a fund to
enable Bumiputera ownership of prime commercial properties in the Klang Valley
through a group ownership scheme with a size of RM1 billion.

Information and Communications Technology, another of Malaysia's strong
growth areas, will be receiving RM119 million (US$38.56 million) for the
development of local content creation, hosting local content and unlocking new
channels for content.

He also said the investment allowance period for the last mile broadband
service providers would be extended while the import duty and sales tax
exemptions on broadband equipment would also be extended for two years until
2012.

"For the purpose of streamlining tax treatment, the government proposes
that sales tax be exempted on all types of mobile phones," he said.

He said the proposals in the budget were crucial ingredients towards
enabling the nation to emerge as a high-income economy by 2020.

And in doing so, Najib showed the government's magnanimity by allocating
these funds for E&E firms located in the Opposition-held northern states of
Penang and in the Kulim High-Tech Park in Kedah.

True to Malaysia's commitment to cut down carbon emissions, Najib announced
the extension of the exemption of import and excise duties for hybrid and
electric cars as well as electric motorcycles.

Besides this, the government would implement the programme on blending of
biofuels with petroleum diesel (B5 programme) on a mandatory basis beginning in
Putrajaya, Kuala Lumpur, Selangor, Negeri Sembilan and Melaka in June 2011.

"The government will also implement the feed in tariff (FiT) mechanism under
the Reneweable Energy Act to allow electricity generated from RE by individuals
and independent providers to be sold to electricity utlity companies.

To promote the business services industry, RM91 million (US$26.52 million)
would be allocated for capacity building in the maintenance, repair and overhaul
(MRO) services industry, aerospace and aeronautical engineering training
programmes as well as promotion of business outsourcing services.

To promote research, development and commercialisation, RM411 million
(US$133.3 million) would be allocated to enhance value-added activities across
economic sectors in efforts towards accelerating Malaysia's quest towards
becoming a high-income nation.

To intensify the Public-Private Partnership (PPP) initiatives, Najib said
the government had identified several PPP projects under the 10th Malaysia Plan
to be implemented next year through private investment of RM12.5 billion.
(US$4.05 billion)

He said the government would allocate RM1 billion from the facilitation
fund.

Among the PPP projects are the construction of a 300-megawatt
combined-cycle gas power plant in Kimanis, Sabah; construction of highways and
projects such as International Islamic University Malaysia Teaching Hospital in
Kuantan and Integrated Health Research Institute Complex in Kuala Lumpur.

Another PPP project worth RM2 billion (US$648.9 million) is a joint venture
between Academic Medical Centre Sdn Bhd and Johns Hopkins Medicine International
as well as the prestigious Royal College of Surgeons Ireland.

Touching on the RM26 billion (US$8.43 billion) Kuala Lumpur International
Financial District (KLIFD) which would strengthen Malaysia's position as the
premier Islamic hub, he said the government was prepared to consider special
incentive packages to attract investors to KLIFD.

Another high-impact strategic development was the Mass Rapid Transit (MRT)
in Greater KL (Klang Valley) which will be implemented beginning next year, he
said the project with an estimated private investment of RM40 billion (US$12.9
billion) will be fully completed in 2020.


Elaborating on efforts to boost the oil, gas and energy industry, he said
the projects to be implemented include the establishment of the Oil Field
Services and Equipment Centre in Johor with private investment of RM6 billion
(US$1.94 billion) over 10 years.

"To meet the increase in gas demand by industries, Petronas will implement
a regasification project with investment of RM3 billion (US$973.3 million) in
Melaka to be operational in 2012," Najib said.

In continuing efforts to boost corridor and regional development, the prime
minister said RM850 million would be set aside for infrastructure support with
focus on joint-venture projects between local and foreign investors as well as
high-impact industries with competitive edge.

For Iskandar Malaysia, RM339 million (US$109.9 million) has been allocated,
he said, revealing that RM62 billion (US$20.1 billion) has been commited by the
private sector as at June this year, surpassing the targeted RM47 billion.
(US$15.2 billion)

Total actual investment in the corridor up to June 2010 was RM25 million.
(US$8.11 million)

Najib also said the Newcastle University Medicine Malaysia and Chelsea
Factory Outlet are expected to be completed in 2011 and Legoland and Marlborough
College in 2012.

Turning to the Northern Corridor Economic Region (NCER), he said RM133
million (US$43.15 million) has been allocated to develop an agricultural
products processing centre, tourism infrastructure and a biotechnology incubator
centre.

As for the East Coast Economic Region (ECER), Najib said RM178 million
(US$57.75 million) has been allocated to develop industrial parks, water
treatment plants, tourist areas and redevelopment of the former Pahang Tenggara
Development Authority and Jengka Region Development Authority areas while RM93
million (US$30.17 million) has been given for the Sarawak Corridor of Renewable
Energy (SCORE) and RM110 million (US$35.69 million) for the Sabah Development
Corridor.

He also said an Act will be formulated to enable the Special Innovation Unit
(UNIK) set up by the government to commercialise R&D findings by universities
and research institutions for which RM71 million (US$23.03 million) will be
allocated to UNIK.

To help entrepreneurs facing financial difficulties, Najib announced relief
mechanism for companies and individuals with financial problems through the new
Insolvency Act, which will consolidate the Bankruptcy Act 1967 and Part 10 of
the Companies Act 1965.


The review would also involve amending the current minimum bankruptcy limit
of RM30,000. (US$9,733)

In efforts to strengthen the country's financial position, the government
would raise the service tax to six per cent from five per cent currently, but
Najib gave the assurance that it would not unduly burden the people as the tax
rate was minimal.


"The government also proposes that the service tax be imposed on paid
television broadcasting services," he said.

As for the earlier announced move by the government to set up a Talent
Corporation under the Prime Minister's Office in early 2011, he said Talent
Corp would formulate a National Blueprint and develop an expert workforce
database as well as collaborate closely with talent networks globally.

In Malaysia's quest to expand women participation in national development,
Najib urged the private sector to provide more opportunities to hold posts at
decision-making levels, particularly as Board of Directors and Chief Executive
Officers.


Najib said in efforts to ease the people's burden, the government would
establish "1Malaysia Smart Consumer" portal to help them keep abreast with price
movement of goods in almost 7,000 business premises nationwide, whereby
consumers will have the option to buy goods at competitive prices.

"Consumers can also utilise short messaging services (SMS) to obtain
latest information on prices of goods," the prime minister said.

He also announced that toll rates in four highways owned by PLUS
Expressways Bhd will not be raised for the next five years effective
immediately.

Najib also gave his commitment that the government would ease private
sector's dealings with its agencies, with the MyCoID Gateway initiatives
utilising the Companies Commission of Malaysia's single reference number, which
has been implemented, will be extended to other ministries and agencies.

He said the Federal Government's deficit for next year would further decline
to 5.4 per cent of the gross domestic product (GDP) compared to 5.6 per cent
this year based on the 2.3 per cent increase in revenue collection to RM165.8
billion (US$53.79 billion) next year from RM162.1 billion (US$52.59 billion)
this year.

Of the RM212 billion allocated for Budget 2011, which is 2.8 per cent higher
than this year's budget, he said RM162.8 billion (US$52.82 billion) was for
operating expenditure and RM49.2 billion (US$15.96 billion) for development
expenditure.

Under the development expenditure, RM28.3 billion (US$9.18 billion) has been
allocated for the economic sector for infrastructure, industrial, agriculture
and rural development, he added.

-- BERNAMA



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