Oleh/By : DATUK SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : DEWAN RAKYAT
Tarikh/Date : 12/09/2003
Tajuk/Title : THE 2004 BUDGET SPEECH
Versi : ENGLISH
Penyampai : PM
"BUILDING ON SUCCESS, INVESTING FOR THE FUTURE"
Mr. Speaker Sir,
1. I beg to move the Bill entitled "An Act to apply a
sum from the Consolidated Fund for the service of the
year 2004 and to appropriate that sum for the service
of that year'' be read a second time.
INTRODUCTION
In the name of Allah, the most gracious and most
merciful.
2. Praise be to Allah, for enabling the Government to
once again table the 2004 National Budget in this
Honorable House. The Mid-Term Review of the Eighth
Malaysia Plan (8thMP), which is currently being
undertaken will be tabled in this House on 30 October
2003.
3. In formulating the 2004 Budget, we have therefore,
taken into account the performance of the first half of
the 8thMP period with the view to ensuring the full
implementation of development policies and strategies.
HALF A CENTURY OF RAPID PROGRESS
Mr. Speaker Sir,
4. The nation has just celebrated its 46th year of
independence. We are grateful to the Almighty as
Malaysians from all walks of life were able to
celebrate the occasion in an environment of peace,
prosperity and jubilance. We value our independence. We
are free from colonisation. We are also free from
domination by super powers. We are also able to regain
our honour and dignity. We are able to manage our
country. Our country has achieved significant progress
as well as gained recognition and respect of the world.
5. When we gained independence, our economy was
completely dependent on rubber and tin. However, our
efforts to transform the economy since the 70s have
turned Malaysia into a modern economy, with the
industrial and services sectors contributing almost 90%
to the Gross Domestic Product (GDP). The nation has
embarked on the development of heavy industries and is
now producing our very own national cars, which have
penetrated nearly 80% of the domestic market. Today, we
are the 17th largest trading nation in the world and a
major exporter of electronic products. Exports of
manufactured goods exceed 85% of the nation's exports.
6. To meet our industrialisation needs, we have also
put in place a network of modern and efficient
infrastructure. The nation is now connected by the
North-South and East-West Highways. We have also built
modern urban transportation in Kuala Lumpur and its
surroundings with the construction of the Light Rail
Transit (LRT), monorail and electric rail commuter. We
have also constructed ports and world-class
international airports. Malaysian ports presently have
the capacity to handle 11 million TEU containers and
about 450 million tonnes of cargo. Port Klang presently
ranks 11th while the Port of Tanjung Pelepas 22nd in
the World Container Port League. The Kuala Lumpur
International Airport (KLIA), which has the capacity to
handle 25 million passengers and 5 million tonnes of
cargo, is the most modern airport in the region.
7. We have also made headways in the area of ICT. The
Multimedia Super Corridor (MSC) has been developed with
state-of-the-art multimedia infrastructure. Indeed, MSC
marks yet another significant step towards propelling
the nation into an ICT-based economy. To date, MSC has
attracted more than 900 local and international ICT
companies, far exceeding the target of 500 for 2003.
Clearly, earlier skeptics have now been proven wrong.
8. In the past, the construction of such large
infrastructure was carried out by foreigners. Now
Malaysians have the expertise and technological
capability to undertake these projects ourselves. The
nation has nearly 44,000 engineers in civil, mechanical
and electrical engineering as well as 3,000 architects
and 2,000 quantity surveyors. With our experience in
the construction of the Second Link, the Kuala Lumpur
Telecommunications Tower and Petronas Twin Towers,
Malaysians have successfully built the Putrajaya
Administrative Centre, a well-planned and beautiful
city, a model for other countries.
9. We have been successful in the construction of the
Sepang F1 track, which is acclaimed as one of the best
in the Grand Prix circuits. Our young engineers
participated in the venture to further enhance high-
performance cars used by Sauber Petronas to compete in
the FI race. Such experience has contributed towards
further developing the engineering capability of
Petronas to produce petroleum products for the
automobile industry.
10. Many Malaysian companies have ventured abroad. The
largest is Petronas, which is now one of the major
international petroleum companies, operating in 34
countries across the world. Petronas is involved in
exploration, production, refinery and marketing of oil
and gas and is listed in the Fortune Global 500.
11. We have also become a centre of excellence in
education. Today, we have 18 public institutions of
higher learning, including an International Islamic
University, as well as hundreds of private colleges to
meet the educational needs of Malaysians. A total of 70
colleges has also been established to produce technical
manpower. We have also been recognised as a centre of
excellence in education by foreign students. Currently,
there are more than 36,000 foreign students from 150
countries studying in our local institutions.
Mr. Speaker Sir,
12. These achievements require a shift in the mindset
of Malaysians towards the adoption of positive values
and attitudes, especially perseverance and
determination, ability to compete, to be confident and
innovative as well as resilient. We began 21 years ago
with the adoption of the Look East Policy to emulate
the work ethics and culture of the Japanese and Koreans
that emphasises dedication, discipline and loyalty as
well as diligence towards attaining national
development. We also instilled the principle of clean,
efficient and trustworthiness as well as leadership by
example. The public service has been built on the
principle of efficiency, discipline and quality.
13. The Government also adopted the Malaysia
Incorporated Policy, recognizing the paramount
importance of closer cooperation between the public and
the private sectors as well as the employees to work
together to achieve economic growth. The Privatisation
Policy was implemented to meet the increasing demand
for public infrastructure facilities apart from
reducing the financial burden of the Government.
14. We are a country with a vision. We are almost mid-
way towards our Vision 2020 to become a fully developed
nation in our own mould. We have succeeded in
diversifying our economy. We have also achieved a
paradigm shift in the mindset of Malaysians so that we
can become a more responsible, modern and progressive
society, with astute thinking skills and proud of our
achievements and have confidence in our abilities, in
line with the information age.
Mr. Speaker Sir,
15. In the span of almost half a century, our ability
to manage the economy has often been put to test.
Malaysia experienced its first recession since
independence in 1985, following sharp declines in
commodity prices. We experienced deficits in the
balance of payments and the Government financial
account. We have not forgotten the Black Monday
incident on 19 October 1987 when major stock markets in
the world crashed and adversely affected our stock
market.
16. These experiences have made us wiser and more
confident in planning and managing our economy. The
high level of economic growth averaging more than 9%
achieved during the period 1988-1996 bears testimony to
our success.
17. The regional financial crisis was yet another test
of our resilience and capability. We have thwarted the
attempts of international currency speculators to
impoverish the nation by devaluing the ringgit. The
Government implemented unorthodox measures and did not
yield to pressures to seek IMF financial assistance and
subjecting the nation to IMF policy prescriptions. Our
measures were severely criticised then and were said to
be doomed to failure. The ringgit peg and capital
controls were strongly objected to, whilst the
establishment of Danamodal, Danaharta and CDRC were
construed as bailouts of Government cronies. On the
contrary, these agencies have succeeded in
strengthening our banking system. With this success, we
have gained recognition from the world and
international agencies. They are now urging other
countries to learn from our experience.
18. Danamodal had injected RM7.6 billion into 10
banking institutions to enhance their capacity to
provide loans, while more than 70% of the loans have
been repaid.
19. Danaharta has to date succeeded in reschedulling
NPLs worth RM50 billion. The NPL is currently at 6.7%.
Meanwhile, CDRC had successfully resolved 48 corporate
debt restructuring cases amounting to RM52.6 billion.
Indeed with all these, we have strengthened the banking
institutions as well as restructured and turned around
companies. As such, we have also avoided fire sales of
our national assets to foreigners.
20. Our success in overcoming the financial crisis and
in turning around the economy has disappointed all our
critics. Only politicians and the mass media with
vested interests refuse to acknowledge our success.
21. Our ability to manage the economy has resulted in
the nation achieving a growth rate of 6.7% during the
First Outline Perspective Plan, OPP1 1971-1990 period
and 7.1% in the Second Outline Perspective Plan, OPP2
1991-2000 period. Consequently, Malaysians from all
walks of life have benefitted from the economic growth,
with per capita income increasing from RM1,132 in 1970
to RM13,683 in 2002. Our purchasing power parity has
also improved significantly from US$1,247 to US$8,862.
At the same time, the incidence of poverty has declined
substantially to 5.1% in 2002 from 52.4% of total
households in 1970.
22. However, we sympathise with those in some states,
who remain entrapped in poverty and sufferings in the
midst of our prosperity. This is because the leaders
whom they elected are incompetent and incapable of
bringing development to the states. Even worse, they
claimed poverty and sufferings are fated and should be
accepted. They believe that it is also fated, if
Islamic states are poor, backward and undeveloped.
Mr. Speaker Sir,
23. The success, prosperity and excellence that we have
achieved, is all due to Malaysia.
24. However, let us not be lulled into complacency. We
must be prepared to face challenges and brace ourselves
for future tribulations.
25. With our capability to successfully develop and
manage our economy, Malaysia is now regarded as a model
for developing countries. Many officials and leaders
from developing countries have come to learn from our
development experience. Malaysian officials have often
been invited by other countries to provide expertise
and training in various aspects of administration and
development.
26. Our willingness to express our strong views on
international issues, including against injustices has
inspired those who are unable to do so. As such,
Malaysia has become the spokesman for the third world
and given the honour to host and lead the Non-aligned
Movement.
27. Malaysia has also been recognised as an advanced
and progressive Islamic nation and become a model to
many Islamic countries. They are impressed by our
success in building a truly developed and prosperous
Islamic nation. We have succeeded in undertaking the
jihad in many aspects of development, particularly
economic, social, religious and political and proven
the capability of the Islamic community in this age. As
such, we have been chosen to host and lead the 10th
Conference of the Organisation of Islamic Countries
(OIC) in October this year.
28. To be able to voice our views effectively at
international fora, we must be proficient in the
English language. In the past, Malaysian officials have
often been tasked to chair committees and lead in the
drafting of communiques at international meetings, as
we were proficient in English. To enable the nation to
become a global player in the international arena, we
must master the English language. In this regard, we
have embarked on the teaching of science and
mathematics in English. These are subjects of
importance in this era of information technology. As
our society progresses, our language will also be
enriched. No one will be interested to learn the
language of poor and backward people.
CONTINUED ECONOMIC RECOVERY
Mr. Speaker Sir,
29. The Government had announced the Package of New
Strategies Towards Stimulating The Nation's Economic
Growth in May this year. The Package focused on four
main strategies, namely promoting private investment,
strengthening the nation's competitiveness, developing
new sources of growth and increasing the effectiveness
of the delivery system. Ninety measures were formulated
under this Package. Indeed, the impact of the Package
of New Strategies has indeed been positive.
30. The performance of the Malaysian economy since the
implementation of the Package of New Strategies is very
encouraging, with a growth of 4.6% for the first
quarter of 2003. During the second quarter, GDP growth
remained strong at 4.4%, higher than expected, despite
the negative impact of the war in Iraq and Severe Acute
Respiratory Syndrome (SARS). As such, the economic
performance for the first half of 2003 has achieved the
growth target of 4.5% for the whole year. Clearly, the
approach taken by the Government and the support of all
Malaysians have contributed to the stronger growth.
31. All sectors of the economy registered strong
growth, with the manufacturing sector recording the
highest growth of 6.5%, followed by mining 4.5% and
services 4.2%.
32. In terms of expenditure, private consumption
continued to increase by 3.9% during the first half of
the year, while private sector investment responded
positively to the incentives provided under the Package
of New Strategies. Private sector investment is
expected to record a growth of 2%, after experiencing a
sharp deceleration since the financial crisis.
33. Notwithstanding the weak external demand, the
contribution of exports to GDP growth remained
positive, reflecting the competitiveness of Malaysian
products in the international market. This is also due
to our concerted efforts to seek new markets, mainly in
Africa, South America and West Asia, apart from
expanding regional markets, especially among ASEAN
countries and East Asia. This has also reduced our
dependence on traditional markets like the United
States and Europe.
34. The feel good factor has clearly returned to the
share market. The Kuala Lumpur Composite Index surged
to its highest level of 756.48 points on 5 September
2003 compared with 632.43 points on 2 January 2003.
Total daily transactions reached 586 million units or
RM1.17 billion compared with 107 million units valued
at RM0.5 billion during the same period. The market
capitalisation is now at RM581.98 billion compared with
RM473.16 billion on 2 January 2003. The buoyant stock
market has also attracted active domestic and foreign
investor participation with total transactions
increasing more than three-fold.
Mr. Speaker Sir,
35. The tourism sector in particular has recovered from
the negative impact of SARS. The preventive measures
put in place by the Government have succeeded in
containing the spread of the disease. In addition, the
US-led invasion on Iraq has not adversely affected us.
The measures under the Package of New Strategies to
mitigate the impact of SARS have indeed been
successful.
36. The better performance of the economy has further
strengthened the nation's economic fundamentals.
International reserves continue to increase to RM146.9
billion or US$38.7 billion, which is sufficient to
finance 6 months of retained imports and is 4.3 times
our external short-term debts. The banking system
remains strong with several banking institutions
recording good profits. The high liquidity in the
system has enabled the Government to continue with its
accommodative monetary policy, particularly with
respect to the low interest rate regime. In addition,
the Government continues to mobilise non-inflationary
domestic resources without crowding-out the private
sector. As such, the Government does not have to depend
on external sources of funding to finance its
development programmes. Price increases have also been
contained with the increase in the Consumer Price Index
at 1.2%.
37. Despite signs of improvements in the global
economy, it is unlikely that the world economy will
recover to its level before the financial crisis in the
immediate term. The path to sustained recovery remains
uncertain, given the geo-political risks still
prevailing. The super powers continue to force and
exert pressure to effect regime changes in countries
which oppose them. Since the September 11 incident, the
global war against terror has been used as an excuse to
threaten nations accused of sympathising and protecting
terrorists.
38. This is how super powers legitimise their
aggression and oppression on countries like Afghanistan
and Iraq and justify their pre-emptive measures on
other countries. Clearly, they practise the law of the
jungle. For the super powers, might is right. Their
strength legitimises everything.
39. We have repeatedly stressed that the only solution
to the geo-political conflicts is to identify the root
cause of terrorism. Force and massive retaliation will
further aggravate the situation and undermine efforts
to revive the global economy.
40. The development in the global economic environment
calls for greater concerted efforts towards enhancing
regional cooperation. Stronger regional cooperation
will enable us to speak with one voice. During the
Asian financial crisis, countries in the region have
demonstrated their willingness to collaborate to
provide support to affected economies. More than half
of the funds mobilised to assist the affected economies
was from this region. In addition, the ASEAN+3
countries have also mobilised billions of dollars under
the Chiangmai and the Miyazawa Initiatives. We have
also pointed out the weaknesses and shortcomings of the
international financial system, which had contributed
to the Asian financial crisis.
Mr. Speaker Sir,
41. It has been more than a decade, since we proposed
the establishment of the East Asian Economic Group
(EAEG). The proposal was rejected then and even deemed
to be dangerous. However, after 13 years, the proposal
is considered viable and has become a reality that will
lay the foundation for greater economic, trade and
financial cooperation. We had remained steadfast in our
stand despite the opposition. If EAEG had been accepted
earlier, we could have avoided the Asian financial
crisis or at least minimised its impact. Since many
years have passed since we first mooted this idea, we
need to redouble our efforts towards realising the
EAEG.
42. The East Asia region has trillions of dollars in
reserves, which are largely invested in the West. It is
now timely that we seek the best alternative to
maximise the use of these resources for the prosperity
of the region. In this regard, we welcome the
establishment of the Asian Bond Market Initiative
(ABMI), which was initiated by the Finance Ministers of
East Asia. Under this Initiative, long-term financial
instruments will be made available to finance private
sector investments. This will help prevent mismatch in
financing as experienced during the financial crisis,
where short-term borrowings were used to finance long-
term investments. This will also avoid foreign exchange
risks. To ensure success of this Initiative, Malaysia
will provide appropriate tax incentives. In addition,
we will also take the opportunity to widen the use of
Islamic financial instruments in ABMI, based on our
experience and expertise in developing the Islamic
financial system.
43. Regional cooperation must be based on mutual
benefits and respect as well as equal rights and
democracy. No one should be selfish and pressure their
neighbours. No one should dominate other nations nor
force others into agreements. Agreements must not be
biased. Unilateralism cannot be accepted. Instead,
progress must be based on consensus, consultations and
mutual understanding. Shortfalls and inequities among
neighbours must be redressed as best possible. The
prosper-thy-neighbour principle must be the underlying
thrust and practice in relations among nations.
44. However, the action of a neighbouring nation had
often tested our patience with baseless accusations. We
will not do the same. We will continue to adhere to the
principle of good neighbourliness and fair play. When
two parties are unable to resolve disputes through
negotiations, then there is a need for a third party to
arbitrate. We are willing to seek arbitration.
Confrontation and war are not our way to resolve
disputes. Threatening and demeaning others are also not
our way. We do not give baseless excuses neither do we
manipulate facts. It is our hope that our proposal for
arbitration will be accepted as soon as possible.
ENHANCING EFFORTS TOWARDS ACHIEVING EXCELLENCE
Mr. Speaker Sir,
45. The external environment remains uncertain. Many
people are still living in fear, especially to travel
by air, which have restricted business transactions.
Therefore, we cannot depend on the external sector.
Neither can we continuously rely on Government
expenditure to generate economic growth, as its
financial resources are not unlimited.
46. As such, the private sector must resume its role as
the engine of economic growth. We must also seek new
markets for our exports. We must become a truly trading
nation whereby we produce our own goods and export
directly to foreign importers.
47. When we planned to become an industrialised nation,
we were driven by the need to provide as many
employment opportunities as possible for our people.
The agriculture sector was unable to generate
sufficient jobs. Only the manufacturing sector could
provide significant job opportunities.
48. The Government did not intend to earn tax revenue
from industries. Hence, we were prepared to give tax
exemptions for longer period as long as there are
employment opportunities for our people.
49. Our industrialisation strategy has been very
successful. Job opportunities are so abundant that it
had led to an influx of foreign workers into the
country. Malaysians who are willing to work will always
find jobs.
50. In line with the growth in the manufacturing sector
driven especially by foreign investment, the nation's
trade has increased rapidly. Currently, our total trade
is RM760 billion equivalent to US$200 billion. We can
justly be proud of our success in transforming our
nation from an agricultural to an industrial economy.
51. Malaysians have benefitted immensely from
industrialisation. At the same time, we have also
acquired skills that enable us to establish our own
industries. There are many electrical and electronic
products as well as other manufactured goods which are
produced by Malaysians. When we produce our own goods,
the contribution to national wealth is higher.
52. We do not intend to reduce foreign investment but
to maximise national wealth, we must increase
investments by Malaysians. Furthermore, foreign direct
investment has been declining and has largely flowed to
low-wage economies.
53. Japan, South Korea and Taiwan have not depended on
foreign investment for their industrialisation. Their
local entrepreneurs with the support of the Government
have developed their industries through acquisition or
development of their own technology. We were unable to
do so initially as we did not have adequate capital,
technology, management skills and global market
knowledge. However, after we have gained knowledge and
experience in these areas, we are now able to venture
and develop our own manufacturing industries. This is
evident from the increased number of our own products,
including automobiles, lorries, buses, light trains,
electrical and electronics, various types of cranes,
IT, refineries for oleo and petrochemical products as
well as construction materials and many others.
54. Our investors are less confident in venturing
abroad and prefer to focus only on the domestic market.
Since our domestic market is small, our local producers
cannot reap economies of scale that will enable them to
reduce costs. We can only compete with the advanced
economies, if we produce high quality products on a
large-scale basis. As such, our producers must be bold
in undertaking ventures to produce high quality
products on a large-scale for the world market.
55. Apart from manufacturing, we must also increase our
agricultural production. There are many agricultural
products that can be processed to give higher value. In
addition, the tourism and education sectors can also
contribute towards national economic development.
56. In fact, we must take stock of our existing
capacity as well as potentials in the industrial
sector. There are many areas that can be further
developed to contribute to our economic growth as well
as to enable us to become a larger trading nation.
57. We trade with more than 200 countries, big and
small. However, there are many more countries that we
have not explored fully as trading partners. These
include the Gulf, North Africa and other African
countries.
58. Malaysia has made a name in infrastructure
development. In the past, foreign contractors were
awarded contracts to build roads, bridges and dams. But
now Malaysians are able to compete to secure such
contracts. In oil exploration and production, Petronas
has operations in more than 30 countries. We need
another consortium to undertake oil exploration,
production and refining. In Malaysia, the Government
can allow another consortium to undertake the
development of marginal fields so as to gain the
confidence of other countries.
59. In promoting Malaysian companies abroad, the
quality and ability of Malaysian companies are of
paramount importance. We must not allow companies which
do not have the capability to seek contracts and
business opportunities abroad so as to sell them to
other companies. This will only result in the erosion
of confidence in Malaysian companies as well as our
nation.
Mr. Speaker Sir,
60. We have constructed ports and airports to provide
excellent services to our exporters and importers. In
addition, our traders must fully utilise our
expressways and railways.
61. Currently, in the production of goods, not all
components are produced locally. Many are sourced from
overseas. Of importance is the brand name of the
product. There are many well-known brands in the world
that have components made in Malaysia. However, these
products are not regarded as Malaysian products.
62. We must also have Malaysian brands even though they
may use components from other countries. It is also
necessary to create as well as design Malaysian brands
that can be marketed abroad. Western brands are not
always necessary. Today, Hitachi, Honda, Toyota,
Hyundai, Samsung and many others are well known in the
world. It is, therefore, not impossible for Malaysian
brands in our language to be accepted globally.
63. We must further enhance our trade by exporting
goods and services produced by Malaysians. However, we
do not have to reduce the export of goods by foreign
investors in the country. The involvement of Malaysians
in the production of all goods and services in
industries must be increased. They must also manage by
themselves all aspects of trade, both for domestic and
foreign markets. The Government will provide support in
terms of putting in place appropriate policies and
funds as well as improving the delivery system.
Strengthening Small and Medium Industries
Mr. Speaker Sir,
64. The Government continues to give focus on the
development of small and medium industries (SMIs) as
part of its efforts to promote private investment. SMIs
will be further developed not only to support large
domestic industries, but also to produce components for
industries abroad. The Government has established a
Micro-Credit Scheme under the Package of New Strategies
to provide easier accessibility to loans for small
entrepreneurs, such as farmers, cattle rearers, night
market traders, hawkers and others. The response to the
Scheme has been overwhelming.
65. To date, Bank Pertanian Malaysia (BPM) and Bank
Simpanan Nasional (BSN) have received almost 88,000
applications worth RM1.4 billion, of which nearly
42,000 applications valued at RM430 million have been
approved. Loan repayments have also been encouraging,
with almost 86% of schedulled repayment being received.
The Government is encouraged with this response.
However, there are a few who have abused and misused
this facility. To those who have received these loans,
they must ensure that they repay on schedule. We must
be reminded by the saying of the Prophet that it is
indeed a cardinal sin for one to leave debts behind
upon death, with no one to settle them.
Stimulating Private Consumption
66. One of the measures to stimulate economic
activities is to encourage greater domestic consumer
spending. Every ringgit that is spent will generate
significant multiplier impact on the economy. Towards
this end, the Government has introduced various
measures to increase disposable income through tax cuts
and provision of incentives, reduction in the
employee's contribution to EPF as well as providing
bonus for Government employees when our financial
position permits. In addition, our national savings
rate at 32% further strengthens our financial position.
The ringgit peg has ensured stability in our purchasing
power.
67. The ability to balance savings with investment
reflects sound financial management. This is the best
financial practice.
Enhancing Competitiveness to Face Challenges of
Globalisation
Mr. Speaker Sir,
68. Globalisation as presently interpreted means the
free flow of trade across boundaries. The Government
cannot intervene in the market system. The market is
supposedly able to regulate itself.
69. In fact, the market is only interested in reaping
huge profits. As such, the developed countries have
formed larger companies and banks to overcome
competition by traders of developing countries. It is
not possible for the small companies and banks in
developing countries to withstand the onslaught of
giant companies when they have access to domestic
markets as a result of globalisation. This is not a
level playing field. Once again, might is right is the
belief of the day.
70. We support globalisation but not as advocated by
the West. We must have our own interpretation of
globalisation, which we will pursue relentlessly until
its acceptance in WTO.
71. We must persevere and stand up to face these
challenges. We must enhance our sovereign competitive
edge to enable us to compete with global players in the
international market. This can only be achieved through
increasing productivity, reducing the cost of doing
business, acquiring technology and be more innovative.
Efforts to improve the effectiveness of the public
sector delivery system have contributed towards the
efficient implementation of Government development
policies and strategies. In addition, measures must be
taken to effect a shift in the mindset of Malaysians to
enable us to become more competitive.
BUDGET STRATEGY 2004
Mr. Speaker Sir,
72. The Government has taken prompt and bold measures
to implement policy shifts from growth that is solely
based on exports to domestic-led growth. The shift in
policy has succeeded in preventing the country from
experiencing recession. As such, the thrust of the 2004
Budget will continue with policies and strategies to
stimulate and accelerate domestic economic activities,
with greater participation of Malaysians in economic
growth. However, the Government cannot continue to be
the engine of growth. As such, the Government
introduced the Package of New Strategies to enable the
private sector to resume its role as the engine of
growth.
73. Taking these into consideration, the 2004 Budget
will focus on the following strategies:
First : Accelerating domestic private sector and
stimulating the services sector to spearhead economic
growth.
Second : Implementing fiscal consolidation towards a
balanced budget in the near term.
Third : Implementing monetary policy that can support
and harness private consumption and investment.
Fourth : Enhancing the nation's competitiveness to
enable Malaysia to become a truly trading nation.
Fifth : Strengthening the social agenda and caring
society to enhance the quality of life and well-being
of Malaysians.
First Strategy:
Domestic Private Sector as the Engine of Growth
Mr. Speaker Sir,
74. During the ten years prior to the financial crisis,
the private sector had been successful in driving
economic growth with their investment expanding by more
21% per annum. A major contributor to this growth was
from foreign direct investment (FDI), particularly in
the manufacturing sector. Indeed, almost 90% of our
exports are goods produced by foreign companies in
Malaysia.
75. Foreign companies in Malaysia finance their
investments largely from our domestic sources. As such,
the inflow of foreign capital into the country is
actually smaller than perceived. Furthermore, these
companies do not produce Malaysian brands, have low
backward and forward linkages and utilise foreign
technology developed abroad. The main contribution of
FDI has only been in terms of job creation. But today,
since Malaysians are fully employed, it only benefits
foreign workers.
76. We must change all these and be bold enough to
transform the economy from being FDI-driven to domestic-
led investment. We must act immediately to make a
quantum leap to become the nation's investor, producer
and exporter. Our domestic private sector must develop
and produce Malaysian brands of world-class quality,
able to penetrate international markets. We must export
goods, which we produce ourselves. We must promote
private sector initiatives to produce local products
with high value creation, beginning from our own
research findings to utilising local components as well
as domestic logistics. This will ensure wider spin-off
effects and higher wealth creation for all Malaysians.
77. We must redouble our efforts to become a global
trader by promoting Malaysian products directly to a
wider international market, in particular non-
traditional markets. As one of the strategic measures
towards this goal, MATRADE will be corporatised.
MATRADE will bring in expertise from the private
sector, including expatriates in the promotion of
exports. For this purpose, the Government will provide
a launching grant of RM100 million. MATRADE will
immediately undertake roadshows, including export
promotion on wheels to the Middle East and Africa. In
addition, the Government will also encourage private
sector initiatives to establish trading houses for our
exports. The Government will identify and assist
capable individuals and private companies to undertake
these initiatives.
Mr. Speaker Sir,
78. SMIs can contribute to economic growth. They also
have the potential to produce high quality and value-
added products, which can be exported. A strategic
direction for the development of SMIs must be
formulated not only to enable them to be the backbone
of large industries but also able to export their own
products abroad. Towards this end, a High-Level SMI
Council has been established to formulate comprehensive
policies and strategies to ensure a more integrated
development of SMIs in all sectors.
79. To encourage SMIs to increase their investments,
the Government proposes to increase the threshold of
chargeable income that is subject to a corporate tax of
20% as announced in the 2003 Budget, from RM100,000 to
RM500,000. With this increase, SMIs will have an
additional RM322 million for reinvestment.
80. To further strengthen the role of private sector,
the Government proposes the following measures:
i. providing existing locally owned companies, which
reinvest in the production of machinery and equipment,
including heavy machinery and machine tools, with the
following incentives:
a. Pioneer Status with tax exemption of 70% on the
increased income from reinvestment for a period of 5
years; and
b. Investment Tax Allowance of 60% on the additional
investment for a period of 5 years;
ii. enhancing incentives for companies producing goods
using oil palm biomass as follows:
a. increasing the rate of income tax exemption under
Pioneer Status from 70% for 5 years to 100% for 10
years; and
b. increasing the rate of Investment Tax Allowance from
60% to 100% for 5 years;
iii. providing existing companies using oil palm
biomass with the following incentives:
a. Pioneer Status with tax exemption of 100% for 10
years on the increased income from reinvestment; and
b. Investment Tax Allowance of 100% for 5 years on
additional investment;
iv. improving tax incentives for companies in Sabah,
Sarawak and the eastern corridor of Peninsular Malaysia
as follows:
a. increasing the rate of income tax exemption under
the Pioneer Status from 85% to 100%; and
b. increasing the rate of Investment Tax Allowance from
80% to 100%. This allowance can be fully deducted and
not limited to 85% of the statutory income; and
v. exempting tax on income remitted from abroad by
individuals, as presently enjoyed by companies. It is
hoped that this measure would encourage individuals to
remit their income from their investments or savings
abroad for domestic investment.
81. To further promote the development of private
venture capital companies, the venture capital fund for
Malaysian Venture Capital Management (MAVCAP) will be
increased by RM300 million, thereby increasing the
total amount of funds under MAVCAP to RM800 million. In
addition, the Government has established the Malaysian
Debt Venture (MDV) with a fund of RM650 million and the
Malaysian Technology Development Corporation (MTDC)
with a fund of RM1 billion to finance investment in
areas, such as logistics and modernisation of
agriculture.
82. The Government has also granted income tax
deduction to venture capital companies equivalent to
their investments in venture companies, provided the
shares in venture companies are disposed through
initial public offerings (IPOs). To further enhance
this incentive, tax deduction will be allowed for
shares disposed through other approved exit mechanisms,
such as put option and management buyout.
83. Apart from this, the method of computing the 70%
investment in venture companies will be relaxed to take
into account the amount of funds invested instead of
the total funds of the venture capital company.
84. In addition, the Government also proposes that
venture capital management companies be given tax
exemption on income received from profit sharing
agreements with venture capital companies.
Stimulating the Services Sector
Mr. Speaker Sir,
85. The services sector is a major contributor to
economic growth and foreign exchange earnings. The
potential sources of growth in this sector has yet to
be fully exploited to produce high value-added
services, especially those services related to
manufacturing, education, tourism, transportation and
logistics as well as ICT.
86. In the past, the flow of FDI had focussed on the
manufacturing sector. We must now undertake efforts to
attract FDI to the services sector, especially those
with high value-added potentials through incentives. In
the Package of New Strategies, we have further relaxed
equity conditions, apart from providing many tax
incentives to attract services-oriented companies, such
as Operational Headquarters (OHQs), Regional
Distribution Centres (RDCs) and back-room outsourcing
operations by multinational companies (MNCs) to operate
in this country.
87. The Multimedia Development Corporation (MDC), as a
one-stop shop for investment in the MSC has succeeded
in attracting many local and foreign companies to
invest in ICT. For companies granted with MSC status,
the Government has given 10 commitments under the Bill
of Guarantees, including the provision of
infrastructure, freedom of ownership and sourcing of
funds as well as recruitment of knowledge workers,
regardless of citizenship.
88. MDC has successfully attracted and encouraged
companies to provide shared services, especially for IT
support services for their global operations, including
information and data processing centres. Recently,
Ericsson established its headquarters here, while HSBC
and Standard Chartered Bank, among the largest banking
and financial institutions in the world, set up their
electronic data processing offices to provide back-end
processing and customer contact services to their
groups worldwide. Shell, a major petroleum company in
the world and also DHL have created similar services in
MSC. These activities have succeeded in providing
employment opportunities for highly qualified Malaysian
professionals.
89. To further stimulate the services sector, it is
timely that a one-stop agency be set up to hand-hold
and guide investors in obtaining approvals from various
authorities, with the view to expediting their project
implementation. In view of the success of MDC in
developing MSC, the Government will expand its role to
become a one-stop agency ala MIDA for selected services
sectors. We are confident that MDC will be able to
undertake its new role effectively.
90. The financial sub-sector, with a contribution of
14.5% to the GDP, is one of the major components of the
services sector. In line with the objective to make
Malaysia a regional financial centre, the Government
will allow Labuan offshore companies to establish their
marketing offices in Johor Bahru, which is rapidly
developing with the increasing number of MNCs that have
relocated their operations there. This measure will
also complement the Government's efforts in making the
Port of Tanjung Pelepas and the Senai Airport as an
international logistics hub.
Mr. Speaker Sir,
91. To further enhance the incentives for OHQs, the
Government proposes that income derived by OHQs from
the provision of services to its related companies in
Malaysia, will be given income tax exemption not
exceeding 20% of its total income from its global
operations. This is similar to the incentive currently
enjoyed by RDCs.
Promoting Malaysian Industries In The Global Market
Mr. Speaker Sir,
92. While the nation's exports are high, we must focus
on the production of goods and services by our domestic
entrepreneurs for both the domestic and export markets.
If we ourselves are not keen to buy our own locally
produced goods and services, it will be difficult for
our producers and businessmen to market their products
abroad. Efforts to develop domestic products with
export potentials must be made an important national
agenda. To further promote local products, a Fund for
the Development and Promotion of Malaysian Brands has
been established with an initial allocation of RM100
million. The Government will further increase the Fund
by an additional RM100 million.
93. To enhance demand for local goods and services, the
Government and the private sector must together
increase the consumption of local products to ensure
these products have a strong domestic market base. In
other countries, the domestic market has provided the
base for local industries to venture into the global
market. We must emulate these countries to spearhead
the growth of our domestic industries.
94. In order to promote domestic heavy industries, the
Government will continue to support such industries.
Since February 2003, sales of passenger cars have been
declining, as consumers are postponing their purchases
in anticipation of lower prices on imported cars when
the automotive sector is liberalised under AFTA. The
Government has indicated earlier that the prices of
cars will not be lowered even after the reduction of
import duties on cars from ASEAN countries. To mitigate
the loss in revenue, the Government proposes to levy
excise duties on imported cars when import duties are
reduced from 1 January 2004. Therefore, consumers are
encouraged to purchase cars now for themselves and
their families.
95. The Government will also review its procurement
system. Presently, the evaluation of Government tenders
focusses on two aspects, namely technical and
financial. To provide a market base for our
entrepreneurs, the use of local content and value-added
will be given due consideration in the Government's
tender evaluation.
96. The agenda to promote domestic industries is of
utmost importance. As such, the Government will require
Tenaga Nasional, Telekom, Proton and Petronas as well
as the stable of companies under Khazanah and PNB and
other Government companies to spearhead the development
of domestic products and technologies in their
respective sectors. These companies must take advantage
of their domestic market and their global network as
well as funds to promote domestic industries, capable
of competing in the international market. In line with
this policy, the vendor and umbrella system will be
reviewed.
97. The Government hopes that our private sector
companies will take this challenge and work towards
developing domestic industries that can compete
globally. In this regard, the Government will ensure a
conducive environment, including development of R&D,
provision of funds, increased promotional and marketing
efforts, provision of logistics services and improved
public sector delivery system, in line with the
objective of achieving sovereign competitiveness.
98. The Government is committed to the New Economic
Policy (NEP) launched in 1971, including the creation
of a Bumiputera Commercial and Industrial Community or
BCIC, to provide opportunities for Bumiputera to
succeed as entrepreneurs. The policy has produced many
successful Bumiputera entrepreneurs and corporate
leaders. However, the financial crisis had adversely
affected them. This is one aspect of the NEP that has
not been fully achieved. As such, the Government
through its own companies will intensify efforts
towards achieving this objective, especially through
the vendor and umbrella system, which will be reviewed.
99. In this regard, we strongly oppose the agenda to
open up markets for Government procurement, which is
being discussed at the WTO forum in Cancun. Once again,
the West is using the WTO to push forward their agenda
for economic colonisation. If we do not oppose this
agenda, our efforts to implement the National
Development Policy, which safeguards the interests of
domestic entrepreneurs, including Bumiputera as well as
the objective of promoting domestic industries, will
not be achieved.
100. To enable us to produce quality products that can
compete in the global market, we must have appropriate
technologies as well as develop our own patents and
brands. Apart from developing our own technologies,
patents, products and brands, we can also acquire them
from abroad. In the automobile industry, we have
succeeded in acquiring Lotus, while in the aerospace
industry we have acquired Eagle and Lance Air (USA),
which produce twin and four-seater aeroplanes using
composite materials. InventQJaya was also established
to promote a society of inventors that can develop new
frontier technologies. Recently, we have also acquired
the MM chip from a Japanese R&D company, FEC
Incorporated. The MM chip is the smallest in the world
measuring 0.25 square milimetres. In addition,
Malaysian-owned companies have also been successful
internationally, such as fashion design and shoes.
Malaysians also own the London Circus, the largest in
the world, as well as Laura Ashley and Crabtree &
Evelyn and others.
101. To enable Malaysians to venture into latest
technologies, measures are being taken to develop the
aerospace industry. Three years ago, the Government
successfully launched Tiungsat and will soon launch the
Razaksat. This success will enable us to launch
additional satellites, including low-orbit equatorial
satellite and the possibility of establishing Malaysia
as a rocket launching centre. We also hope to send the
first Malaysian astronaut into space. Malaysia Boleh.
Second Strategy:
Fiscal Consolidation Towards A Balanced Budget
Mr. Speaker Sir,
102. When the 8thMP was formulated, the Government had
targetted achieving a balanced budget by 2005. However,
the sharp decline in private sector activities
following the regional financial crisis, uncertainties
in the external environment, including the September 11
incident, geo-political tensions in the Middle East,
war in Iraq and the outbreak of SARS, had necessitated
the Government to implement several stimulus packages
to revitalise domestic economic activities to prevent
the economy from going into recession. As such, the
objective of a balanced budget cannot be achieved in
2005. However, the Government remains committed to
achieve a balanced budget in the near term by
implementing fiscal consolidation measures.
Notwithstanding this, the public sector account remains
strong, with the public sector deficit below 1.5% of
GDP in 2003, significantly lower than the 3% set for
the euro region. The increase in public sector deficit
is due to large investments by Petronas in 2003.
103. Government expenditure will focus, especially on
the provision of more efficient infrastructure
facilities to reduce the cost of doing business and
support economic growth. Allocations will continue to
be provided for the implementation of programmes to
improve the socio-economic well-being of Malaysians. In
this regard, emphasis will be given to the provision of
goods and social services for the benefit of all
Malaysians, especially the lower income group.
104. To ensure effective distribution of Government
funds, allocations to Government agencies will be based
on their financial positions. Agencies with high
uncommitted reserves will have to utilise their
reserves to finance their programmes.
Streamlining Budget Preparation and Implementation
105. To streamline Budget preparation, the Government
has implemented the two-year budget preparation and
examination since Budget 2002. This process has enabled
the preparation of a rolling plan, which incorporates
current and following year budgetary requirements. It
also shortens the time and reduces man-hours required
for budget examination and thus, enables agencies to
focus on implementation.
106. The adoption of the two-year budget has
contributed towards expediting the implementation of
development projects where agencies have lead time to
undertake project planning. With the speedier
implementation of development projects, there is no
shortfall in expenditure as in previous years.
Budget Allocation 2004
107. In line with the fiscal consolidation policy, the
Government proposes an amount of RM112.5 billion be
appropriated for, in the 2004 Budget. This represents a
reduction of 1.6% compared with an expenditure of
RM114.3 billion in 2003. Based on an estimated revenue
of RM95.6 billion, the overall Federal Government
deficit is expected to be reduced to 3.3% of GDP
compared with 5.4% in 2003.
108. A major portion of the proposed allocation, that
is RM80.5 billion or 71.6% is for Operating Expenditure
while RM30 billion is for Development Expenditure. A
sum of RM2 billion is allocated for contingency
reserve.
109. Under the Operating Expenditure, a sum of RM20.9
billion is for Emoluments, RM17.2 billion for Services
and Supplies and RM39.4 billion for Fixed Payments and
Grants, RM0.8 billion for purchase of office equipment
and facilities and RM2.2 billion for other
expenditures.
110. Of the proposed Development Expenditure, a sum of
RM13.8 billion or 43.1% is allocated for the economic,
infrastructure and industrial sectors as well as rural
electricity and water supply programmes. A sum of
RM11.2 billion or 34.9% is for the social sector, that
is education and training, health, welfare, community
development, youth and sports projects. In addition, a
sum of RM2.7 billion or 8.4% is for development
projects in the security sector and RM4.3 billion or
13.6% for general services.
Education
Mr. Speaker Sir,
111. The Government will continue to give priority to
the education sector with an allocation of RM20.2
billion or a quarter of operating expenditure in 2004.
Among the educational institutions, which are expected
to commence operations are 44 primary, 43 secondary and
3 technical schools as well as 59 hostels. As announced
in the Package of New Strategies, 4 education promotion
offices will be operational this year in Dubai, Ho Chi
Minh, Beijing and Jakarta.
112. Under the Development Expenditure, a sum of RM3.7
billion is provided, including RM1.8 billion for
primary and secondary schools, hostels and teachers'
quarters. A sum of RM637 million is allocated for
school computerisation programmes while RM490 million
is for financing infrastructure requirements of public
institutions of higher learning.
113. Last year, the Government decided to implement the
teaching of Science and Mathematics in English using
ICT. This programme involves an expenditure of RM5
billion for the 8thMP period. The Government will also
roll-out smart school programmes in stages and
implement the Schoolnet project to enable students to
gain wider internet access. This programme has been
implemented in almost 200 schools in remote areas of
Sabah and Sarawak.
114. In line with the Government's objective to provide
compulsory basic education for all children, a Trust
Fund for Poor Students was launched on 23 July 2003. An
amount of RM200 million is allocated to the Fund to
assist poor students to continue with their education.
115. To enhance the quality and standard of franchised
education programmes, the National Accreditation Board,
will invite lecturers or experts from public or private
institutions of higher learning to assist in
undertaking validation, moderation or accreditation of
the programmes. This is to ensure that the quality of
courses offered are at par with those from foreign
universities. For this purpose, the Government proposes
that fees or honorarium received by these lecturers or
experts who assist in validation, moderation or
accreditation, be exempted from income tax.
116. To reduce the financial burden of graduates in
loan repayment to Perbadanan Tabung Pendidikan Tinggi
Nasional (PTPTN), the Government will reduce the rate
of interest on loans from 4% to 3%. The repayment
schedule will commence on the third year after the
graduate is employed. In addition, the repayment
schedule will also be restructured to enable borrowers
to repay their loans at 5% of their monthly income for
the first 5 years and 10% for the balance of the
repayment period. This facility will also be extended
to borrowers under the Skills Development Fund. For
students who wish to pursue Islamic studies in
institutions of higher learning abroad, they will also
be able to borrow from PTPTN on the condition these
institutions are recognised by the Government and they
must enrol in academic subjects. They must also possess
qualifications recognised by the Government. The amount
of loans should not exceed the cost of similar courses
in local institutions. Apart from this, the Government
will also consider extending this loan facility to
students pursuing twinning programmes abroad for the
final year of their studies in institutions of higher
learning recognised by the Government and in courses
encouraged by the Government.
Skills Training
117. The development of technology and knowledge-based
industries requires more trained manpower. For this
purpose, the Government will continue to give emphasis
on increasing the quality and quantity of skilled
manpower by further expanding existing facilities and
building new skills training centres. An allocation of
RM319 million is provided under the Ministry of Human
Resources (MHR) for this purpose. With an additional 10
new training institutions, MHR will have the capacity
to train 17,000 trainees in various skills. A sum of
RM245.5 million is also allocated to provide additional
facilities and build 25 National Youth Skills
Institutes that can train 11,000 trainees. A sum of
RM77.5 million is provided to complete 14 existing
institutes and build 3 new institutes and RM107.3
million to meet the management costs of Mara Skills
Institutes.
118. The Government launched the Skills Development
Fund under the Package of New Strategies with an amount
of RM500 million to increase the supply of skilled
manpower. The Fund provides loans to trainees from
skills training institutes, such as Industrial Training
Institutes, MARA Skills Institutes, National Youth
Skills Institutes and other selected private
institutes. To manage this Fund, a special agency ala
PTPTN will be established. The loan condition under
this Fund is similar to that of PTPTN, with an interest
rate of 3%. The monthly repayment schedule will be made
in stages.
119. To further expand technical training facilities,
an engineering training centre for Computer Numerically
Controlled (CNC) machines has been established at the
Technology Park Malaysia. This Centre provides training
on the use and design of CNC machines for various
industries, especially components and spare parts. This
training will contribute towards the upgrading of
skills in CAD/CAM/CAE.
120. Community colleges will also provide vocational
training. Pusat Giat MARA will be upgraded as Community
Colleges with emphasis on vocational training with the
view to providing more skills training opportunities.
Government-owned companies, such as TNB and Telekom
will also provide technical and vocational training at
their training centres. Participants in these training
programmes can obtain loans from the Skills Development
Fund. In addition, to encourage employers to hire
unemployed graduates registered with the Economic
Planning Unit (EPU), the Government proposes that
expenses incurred by employers in employing these
graduates be given double tax deduction for a period of
2 years. For unemployed graduates requiring retraining,
they can obtain financing from the Retraining Fund
under the Package of New Strategies.
Research and Development (R&D)
Mr. Speaker Sir,
121. The Second National Science and Technology Policy
was formulated to achieve R&D expenditure of at least
1.5% of GDP by 2010. Towards this end, the Government
has provided substantial allocation to develop
expertise and expand R&D facilities. To continue with
these efforts, a sum of RM183.6 million is allocated
for the Intensification of Research in Priority Areas
(IRPA) programme, specifically for public research
institutions in collaboration with the private sector.
In addition, three new research institutions will be
established in the BioValley, Cyberjaya, specifically
in biotechnology. The Government will encourage large
companies to locate in the BioValley to undertake
contract research as part of the efforts to further
develop the services industry.
122. Our R&D efforts have contributed significantly to
increases in yield of commodities, especially oil palm
and rubber. The yield of commodities per hectare has
doubled and their maturity period shortened. Apart from
increasing output, research institutions have also
undertaken downstream research, such as biodiesel from
oil palm and rubber thermoplastic.
123. In the light of declining contribution of
commodities to the economy, it is timely that R&D
institutions refocus their efforts towards greater
demand and market-driven R&D that emphasise value-added
or value creation, with the view of commercialising
their research findings. For example, the global market
for healthcare and life sciences products and services
is expected to reach 4 trillion euros while
pharmaceuticals 30 billion euros by 2006. In Malaysia,
biotechnology is still an infant industry. Although
currently there are about 60 biotechnology companies,
they are still small and have yet to reach world-class
status.
124. The Government will restructure SIRIM to become
the focal point to match R&D with market demand. SIRIM
will identify the requirements for new products and
technology for both the domestic and global markets. It
will also study the whole R&D value chain to create
value, including niche activities to be developed, such
as logistics, packaging and marketing.
125. The Government through SIRIM will also identify
R&D requirements based on market demand and match them
with R&D capacity in universities and research
institutions. As this represents a long-term investment
in developing our local technology to produce high
quality Malaysian brands, the Government will provide
adequate funds for this purpose. The nation has the
expertise and capacity to undertake R&D to meet market
demand. For example, we have more than one thousand
doctorates, apart from adequate facilities and funding
for R&D.
126. To promote the commercialisation of research
findings, the Government proposes that income received
by researchers from such activity be given tax
exemption of 50% for 5 years. At the same time, the
Government will not impose charges on patents
registered by local researchers.
Tourism
Mr. Speaker Sir
127. The tourism sector, especially hotel and tour
operators, has been adversely affected by the Iraq war
and the outbreak of SARS. To assist them, the
Government had implemented prompt measures under the
Package of New Strategies, such as the deferment of
income tax payment by tour agencies, discounts on
electricity bills to hotel operators and the provision
of the Special Relief Guarantee Facility.
128. To encourage operators in the tourism industry,
including hotel operators, to undertake expansion,
modernisation and renovation, the Government proposes
that a second round of Pioneer Status or Investment Tax
Allowance be given.
129. Hotel operators should work together to set up
tourism information centres at all entry points,
including airports as well as major railway stations to
enable tourists to make hotel reservations upon
arrival. They are also encouraged to provide on-line
reservation facilities. For this purpose, the
Government will develop portals and provide access to
these portals at airports, railway and bus stations
throughout the country.
130. The Government will continue to undertake more
effective tourism promotion efforts together with
Malaysia Airlines and AirAsia as well as tour agencies.
For this purpose, the Malaysian Tourism Promotion Board
(MTPB) will be restructured to undertake a more
systematic and effective marketing and communications
programmes. In addition, promotional efforts will focus
on regional markets, especially China, Taiwan, Hong
Kong, India and ASEAN countries. Promotional efforts
will also be intensified in the West Asian market and
new markets such as Pakistan, Indo-China and New
Zealand. In this respect, a sum of RM215 million will
be allocated for promotional activities.
131. The Government has also established tourism funds
amounting to RM1.1 billion, that is RM400 million under
the Special Tourism Fund and RM700 million under the
Tourism Infrastructure Fund. Both these funds are
managed by Bank Pembangunan dan Infrastruktur Malaysia
(BPIMB). Priority will be given to the financing of new
tourism products. To increase its effectiveness, the
Government through the Ministry of Finance will monitor
its implementation with respect to approvals and
disbursements of the funds.
132. Malaysia Truly Asia. This theme does not only
reflect the multi-ethnic and multi-cultural society but
also the variety of Malaysian cuisine, which has become
a tourist attraction. We have Bintang Walk, Bangsar
Baru and Mon't Kiara, where tourists spend their time
along sidewalk cafes. Such places have also become the
happening place. In this regard, we must also ensure
our food traders have stalls that are attractive, clean
and hygienic. Towards this end, the Government has
provided micro-credit facilities to enable them to
replace their stalls with new pushcarts made of
stainless steel as well as colourful canopies and
proper tables and chairs ala Bintang Walk. In this
regard, traders will only be allowed to use stalls or
pushcarts approved by Local Authorities.
Health
Mr. Speaker Sir,
133. The Government will continue to provide quality
medical services to all Malaysians. Hence, the
Government will allocate a sum of RM9 billion, an
increase of 20.5% from 2003. Of this, RM6.4 billion is
for operating expenses and RM2.6 billion for
development expenditure. This allocation is for the
provision of essential medical treatment services, such
as dialysis, intensive care and programmes to reduce
morbidity and mortality among children. To increase the
diagnosis and monitoring of infectious diseases, such
as SARS, tuberculosis, leprosy and dengue, the
Government will provide a sum of RM3 million.
134. The cost of medical treatment is rising. The
Government subsidises health services to ensure
Malaysians are charged at minimum rates. However, this
has become an increasing financial burden for the
Government. To assist the Government to reduce this
burden, the health insurance industry is encouraged to
widen its coverage by providing lower premiums, which
are affordable to a majority of Malaysians. In
addition, companies must also bear the medical costs of
their employees.
135. The Government has built many hospitals with
modern and sophisticated equipment, including the
application of ICT for the paperless Total Health
Information System (THIS). This includes Hospital
Selayang, Serdang and Pandan in Johor. The Government
is not able to provide high remunerations for medical
specialists. As such, the Government has agreed to set
up private commercial wings in Government hospitals, to
enable serving doctors to enjoy better remunerations
and thereby, continue to serve with the Government.
Through these measures, the Government also hopes to
attract specialists who have left the service to return
and serve in Government hospitals. In addition, this
will enable those seeking better medical treatment to
obtain such treatment at reasonable charges in
Government hospitals. It will also enable our
Government hospitals to be promoted abroad, in line
with the objective to encourage health tourism.
136. Healthcare is vital to ensure the well-being of
the people. To improve healthcare, the Government
proposes that import duty of 10% on health supplements
be abolished. The Government shall also ensure prices
of selected medicines be provided at a discount to
pensioners. In this matter, Pharma Niaga will provide a
special counter for this purpose.
137. At the same time, to encourage healthy lifestyle
among Malaysians, the Government proposes that import
and excise duties on cigarettes and other tobacco
products be increased by 20%, from RM216 to RM259 per
kilogramme and from RM48 to RM58 per kilogramme,
respectively. This increase is in line with World
Health Organisation's proposal to discourage smoking.
To curb smuggling of cigarettes, the Government is
implementing the use of special stickers or banderol
and security ink.
138. The Government also proposes that import and
excise duties on liquor be increased by 10%. In
addition, the Government will also implement the use of
banderol and security ink on liquor.
139. The Government would like to take this opportunity
to congratulate and record our appreciation to all
medical staff who had sacrificed and took risks during
the screening of visitors and treating SARS patients.
The special allowance provided is only a small token of
the Government's appreciation. It cannot compare with
their untiring efforts and unwavering dedication in
carrying out their duties. We all should emulate them.
140. Even though the SARS outbreak has ended, we must
continue to be vigilant and be prepared in case of
recurrence. The Government will continue with its
efforts to put in place measures to prevent such
diseases. In this regard, the Government will expedite
the establishment of the Centre for Disease Control
(CDC), as announced in the Package of New Strategies. A
sum of RM20 million is provided for this purpose.
Rural Development
Mr. Speaker Sir,
141. Efforts to enhance the standard of living of the
rural community will be continued. A sum of RM2.27
billion is provided for rural development, of which
RM450 million is for the construction of village roads,
while a sum of RM260 million for the completion of 74
continuation and new projects. An amount of RM267.1
million is provided for the completion of rural
clinics.
142. A sum of RM225.4 million and RM272 million is
allocated for the rural water and electricity
programmes, respectively to benefit almost 140,000
households throughout the country. An allocation of
RM7.9 million is provided for water projects as well as
programmes to ensure clean environment in rural areas.
The coverage of potable water supply has reached 99.9%
for Peninsular Malaysia. In addition, RM242 million is
allocated to provide water supply to rural schools.
143. To reduce the financial burden of low-income
groups, the Government proposes that motorcycles of
engine capacity not exceeding 150 c.c. be exempted from
road tax. This will also reduce the financial burden of
youths and students in institutions of higher learning.
The Government also proposes that road tax on buses for
workers, be reduced by 50%. Employers are expected to
pass on this benefit to their employees.
Development of Sabah and Sarawak
Mr. Speaker Sir,
144. As in previous budgets, the development of Sabah
and Sarawak will continue to be given emphasis. A sum
of RM5.9 billion and RM5.5 billion is allocated to
Sabah and Sarawak, respectively. These states will have
wider road networks connecting major towns. Presently,
several towns in Sabah can only be reached by air or
river transport. However, with the completion of these
projects, all towns will be connected by road. In
Sarawak, major road networks are being constructed to
facilitate communications not only in Sarawak but also
between Sabah and Sarawak. New bridges will also be
built to replace old ones to ensure greater safety.
Apart from this, the implementation of rural and
village roads is being accelerated and being undertaken
by local contractors of all classes.
145. Given that Sabah and Sarawak are large states,
several air and sea transportation projects are being
implemented. Apart from the newly completed airports of
Tawau, Bintulu and Miri that can accommodate Airbus
330, the Kuching airport will also be upgraded. The
Bintulu and Kuching ports are also being expanded. The
Government will also build a new port in Semalanjau to
cater for the aluminium smelting plant. The plant, an
investment from the Middle East, will also utilise a
large portion of electricity produced from the Bakun
Hydroelectric project.
146. In the education and health sectors, Sabah and
Sarawak will also be given significant allocations to
implement projects, such as Phase 2 of the Universiti
Malaysia Sabah and the construction of the UNIMAS
permanent campus in Samarahan. The Government has taken
over the Sabah Medical Centre from the private sector,
which will be upgraded to become a major hospital in
Kota Kinabalu. In addition, with the view to increasing
the number of doctors and allied health services
personnel, the Kuching hospital will be upgraded to
become a teaching hospital for UNIMAS.
147. Sabah and Sarawak have not enjoyed full coverage
of rural water supply. As an interim measure, the
Government has implemented rural water supply
programmes, especially in schools, using rain
harvesting and tube well system. To date, almost 700
schools in Sabah and Sarawak have been identified to
benefit from these facilities, with a cost of RM242
million.
Agriculture
148. The Government will continue to give emphasis to
further modernise the agriculture sector, in particular
programmes to increase food production. Towards this
end, large-scale mixed farming will be promoted,
including animal husbandry, intensive farming as well
as the use of modern technology and management. To
further promote greater value-added chain in the
agriculture sector, activities such as processing,
logistics, packaging, developing brand names and
securing new markets will be supported and encouraged.
Towards this end, all activities in the value chain,
including delivery system, will be strengthened,
particularly the provision of cold storage chain
facilities for perishable agricultural products.
149. Companies which provide these facilities and
services can also utilise venture capital funds
available from MTDC. In addition, new companies which
provide cold chain facilities and services for
perishable agricultural produce are given Pioneer
Status or Investment Tax Allowance. To promote
reinvestment in this field, the Government proposes
that existing locally owned companies be granted the
following incentives:
i. Pioneer Status with tax exemption of 70% on the
increased income from reinvestment for 5 years; and
ii. Investment Tax Allowance of 60% on the additional
investment for 5 years.
150. The Government has already established the Fund
for Food totalling RM1.3 billion under BPM to finance
the production and processing of food products. To
date, this Fund has been fully utilised. In view of the
good response, the Government has provided an
additional RM1 billion under the Package of New
Strategies, bringing the total Fund to RM2.3 billion.
151. To further stimulate rural economic activities and
assist small entrepreneurs in villages, the Government
will establish the Village Micro-Credit Scheme
amounting to RM1 billion under BPM. To ensure efficient
and effective implementation of this programme, this
credit will be provided on group basis through the
Village Development Committee for villages, which are
involved in the one product one village programme. The
implementation of this Scheme will be supervised by the
District Development Committee and the Implementation
and Coordination Unit, Prime Minister's Department. The
objective of the Scheme is to provide opportunities to
farmers to gainfully utilise their free time and
increase their income.
152. An allocation of RM3.3 billion is provided for
operating and development expenditure for the
agriculture sector. Of this, RM885 million is for the
provision of basic agricultural facilities. In
addition, aquaculture farming will be expanded, with an
allocation of RM70.6 million, while RM165 million is
for the construction of an Integrated Deep Sea Fishing
Port and a Fisheries Training Centre in Tanjung Manis,
Sarawak.
Increasing Orang Asli Participation in Mainstream
Development
153. The Government continues to undertake programmes
with the view to enhancing greater participation of
orang asli in national economic development. As a
measure to increase their income, the Village Micro-
Credit Scheme will also be extended to enable them to
undertake economic activities, including agriculture
and small businesses. In addition, they will also be
provided with hire-purchase facilities for boats and
outboard engines under the Package of New Strategies.
To enable orang asli to purchase comfortable and
ffordable homes, they will also be given priority under
the SPNB low and medium-cost housing scheme as well as
the provision of soft loans to acquire these homes.
154. An allocation of RM156.5 million is provided for
the implementation of programmes for orang asli. These
include Rancangan Pengumpulan Semula, Penyusunan Semula
Kampung, and economic development activities, such as
entrepreneur and skills training. In addition, for
orang asli children, assistance such as school
uniforms, textbooks and bus fares have been provided.
Increasing Security
Mr. Speaker Sir,
155. Recently, there has been a spate of hijacking,
piracy and gangsterism, including "tonto" activities as
well as robberies and thefts. To overcome these
problems, the Government will increase and strengthen
security and enforcement. The police force will step up
their security surveillance throughout the country. The
Government will review several departments of the Royal
Malaysian Police with the view to increasing their
capacity and effectiveness through the provision of
equipment and special training. Apart from this, the
Government has also established the Malaysian Maritime
Enforcement Force (APMM) in its efforts to increase
surveillance in our waters, such as the Straits of
Malacca.
156. It is the responsibility of the Government to
provide a safe environment for the public and
businesses. To ensure the safety of enforcement
officers in various agencies, they will be supplied
with appropriate equipment while on duty. In
appreciation of their services, the benefits and
remunerations provided to security personnel and their
families will also be extended to enforcement officers
if they are injured or die in the line of duty.
157. A sum of RM4.4 billion for operating expenditure
is provided for internal security while RM6.5 billion
is allocated to the Ministry of Defence for 2004. For
development expenditure, allocations of RM750.5 million
and RM2.1 billion have been provided, respectively to
equip and modernise the defence and security systems of
the nation.
Third Strategy:
Monetary Policy to Support Private Consumption and
Investment
Mr. Speaker Sir,
158. Accommodative monetary policy will continue to be
implemented to promote domestic activities, in
particular consumption and investment. The Government
will continue to maintain this policy, especially given
the low interest rate regime in the world. In addition,
there exists high liquidity in the system that can be
mobilised to finance domestic economic activities. As
such, measures to manage this liquidity will be put in
place so as to ensure it will be utilised more
efficiently to stimulate domestic investment and
consumption.
Easier Access to Financing for SMIs
159. Small and medium industries (SMIs) need to be
further promoted to generate greater domestic
investment activities. To further strengthen their
role, it is imperative for financial institutions to
provide greater access to finance and credit facilities
to the SMIs. In addition to financial facilities
provided by the Government under the Package of New
Strategies, banking institutions must be pro-active in
providing loans, especially to small and medium
businesses.
160. Given the good response from small businesses to
the Micro-Credit Scheme of BPM and BSN, the Government
will provide an additional RM1 billion to the Scheme.
161. The Government is also concerned over small and
medium businesses, which are facing difficulties in
servicing their loans with financial institutions.
Under the Package of New Strategies, Bank Negara
Malaysia has established the Scheme to Restructure and
Reschedule Loans for all types of loans and credit
facilities by borrowers in the tourism sector. To date,
loans amounting to RM3 billion have benefitted from the
Scheme.
162. In addition to this Scheme, the Government will
also assist SMIs to address their non-performing loans
with financial institutions, using a mechanism ala
CDRC. Towards this end, BNM will establish the SMI Debt
Restructuring Committee. It is the Government's hope
that this mechanism will help to resolve the debts of
SMIs.
Issuance of Merdeka Bonds
163. The Government is aware of the impact of the low
interest rates regime on groups whose income depend on
savings in financial institutions, that is pensioners
aged 55 years and above who do not have permanent jobs.
To ensure that they receive higher returns, BNM will
issue serial bonds for this group with a maturity
period of 2 years and a return of 5% per year, higher
than the interest rates on savings. The Government
proposes that the returns from these bonds be exempted
from income tax. In appreciation of the services and
sacrifices of uniformed personnel, this bond will also
be extended to those who have gone on mandatory
retirement.
Expanding the Capital Market
164. The capital market continues to play an important
role in financing economic development, especially in
terms of raising funds from the market. Since 2001,
more than RM99 billion have been sourced from the
capital market through the issuance of bonds and
equities. In addition, 13 asset-backed securities (ABS)
valued at more than RM7 billion have been approved.
This encouraging performance has been the result of the
implementation of initiatives under the Capital Market
Master Plan as well as the 10 new measures introduced
by the Government in March this year to strengthen the
capital market.
165. Currently, there is no specific income tax
provision for ABS. As a measure to promote financing
through the issuance of ABS, the Government proposes
that ABS be given equal tax treatment as other
conventional securities. At the same time, the
Government proposes that expenses incurred in the
issuance of ABS be granted tax deduction for 5 years.
166. One of the 10 measures implemented to strengthen
the capital market is to encourage large companies to
be listed on the KLSE. Towards this end, FELDA which is
not only the largest plantation company in this region
but also in the world, will also be listed on the KLSE.
FELDA shares are expected to become one of the blue
chips on the KLSE and FELDA has the potential to be
promoted as an international brand. With the listing,
FELDA will be able to tap funds from the capital market
and therefore, will no longer depend on the Government
for its financial requirements. At the same time, the
Government will be able to reap returns from this
listing, while the FELDA Group of companies, settlers,
cooperatives as well as state governments, which have
provided land to be developed as FELDA plantations,
will also benefit. FELDA settlers will have the
opportunity to hold equity in the listed company as
members of the cooperative and as settlers.
167. The proposal is in line with the objective of the
NEP to enable Bumiputera to own at least 30% of the
equity in the corporate sector. It is hoped that
Bumiputera will not divest their shares.
168. After 46 years of independence, we must take
cognisance of our weaknesses and work towards
rectifying them. As a measure to further expand
investment opportunities through trust funds,
especially for Bumiputera, a Second Unit Trust Fund or
Dana Harapan (HARAPAN) will be established. This Fund
will be managed by professional and experienced
managers to mobilise Bumiputera savings and capital.
169. The Government has significant high-value assets,
which have not been fully utilised. To optimise
returns, the Government will undertake to unlock these
assets so as to enhance its financial position. It will
also provide investment opportunities for investors to
utilize these assets to generate returns and contribute
to economic growth.
Expanding the Islamic Financial System
170. Since its introduction in Malaysia in 1983,
Islamic banking has brought a new facet to the nation's
financial system. Malaysia is one of the nations that
has a comprehensive Islamic financial system. We began
with the establishment of Bank Islam and now Malaysia
has two Islamic banks and 33 conventional banks
offering Islamic banking services. The growth of
Islamic banking also serves as a catalyst to the rapid
expansion of the Islamic financial system, comprising
banking, insurance and the capital market. Total assets
of the Islamic banking system increased almost four-
fold to RM68 billion in 2002 from RM17.9 billion in
1997.
171. Islamic insurance or takaful industry has emerged
as another Islamic financial product, which has
expanded rapidly since its introduction in 1986, with
total assets increasing from RM200 million to RM4
billion this year. Islamic private debt securities
(PDS) have also received encouraging response with
issuance exceeding RM34 billion since 2001. The net
asset value of Islamic funds has also increased more
than two-fold to RM4.3 billion.
172. At the international level, Malaysia was the first
country to issue global Islamic bonds, Sukuk Al-Ijarah.
The US$600 million bond was twice over-subscribed.
Another significant achievement was the establishment
of the Islamic Financial Services Board in Kuala Lumpur
to ensure stability and strengthen the global Islamic
financial industry. With these achievements, Malaysia
has now become a model in the expansion of the Islamic
financial system among Islamic countries.
173. As a measure to increase financing through the
issuance of Islamic securities, the Government proposes
that a more comprehensive tax treatment be provided
similar to conventional securities. In addition,
deductions will be given on expenses incurred in the
issuance of Islamic securities based on the principle
of Istisna' for 5 years, where property under
construction can also be used to back such bonds.
174. To encourage companies and financial institutions
which practice Syariah principles to invest in Labuan,
the Government proposes that Labuan offshore companies
be given tax rebate equivalent to the total zakat paid,
not exceeding RM20,000 or 3% of net profit.
Fourth Strategy:
Enhancing the Nation's Competitiveness
Mr. Speaker Sir,
175. Measures undertaken by the Government as well as
initiatives by the private sector to enhance efficiency
and productivity have contributed towards further
strengthening the nation's competitiveness. Based on
the 2003 World Competitiveness Yearbook, among
countries with 20 million and above population,
Malaysia is ranked fourth after the United States,
Australia and Canada. This placing is an improvement
compared with the sixth position in 2002 and tenth in
2001. This improvement reflects the nation's ability to
compete in the international market, attributable to
the concerted efforts made by the Government and the
private sector since two decades ago.
176. The use of IT has become an integral part of
business, particularly high-speed internet access to
enable the nation to become more competitive. In
addition more Malaysians, in particular the younger
generation are surfing the internet to acquire
knowledge and obtain current information. To ensure
wider access to the internet at low cost, Telekom
Malaysia will reduce the internet access charges. In
addition, this reduction will promote e-commerce
through wider and cheaper access to broadband internet.
Telekom Malaysia will provide 50% discount for
industrial and corporate package, beginning with 30%
for phase 1 and a further 20% for phase 2. For other
users, a 30% reduction will be given for consumer
broadband internet charges.
177. To ensure wider and more efficient internet
services, JARING will be merged with TMNet. As
Cyberjaya will become the hub for selected services,
accessibility and quality of broadband services will be
improved while the cost will be reduced to a more
competitive level compared with other countries.
178. In our efforts to further improve the nation's
competitiveness, the private sector must continue to
reduce the costs of doing business to enable them to
compete with lower cost manufacturers in other
countries. For this purpose, the Government has
provided various incentives, particularly in the
Package of New Strategies. As a continuous effort to
achieve this, the Government proposes the following:
i. allowing full deduction on entertainment expenses
incurred in sales promotions and deduction of 50% on
other entertainment expenses;
ii. abolishing the limit on the exemption period for
import duty and sales tax on spares and consumables for
the manufacturing and services sectors, which is due to
expire on 31 December 2003;
iii. extending deduction on incorporation expenses to
companies with authorised capital up to RM2.5 million,
currently enjoyed by those with authorised capital up
to RM250,000 only;
iv. reducing or abolishing import duties on selected
goods such as computer batteries, wooden and plastic
goods, from the current rates of between 5% and 30% to
between 0% and 20%; and
v. reducing or abolishing export duties on several
agricultural produce and commodities, such as fish,
fruits and certain minerals, from the present rates of
between 2.5% and 10% to between 0% and 5%.
179. The mass media industry has become an important
sector to create a knowledge society. It is proposed
that local publishing and printing companies be given
exemption of anti-dumping duty on imported newsprint on
the quantity that cannot be supplied by local producer.
This exemption will render the cost in the publishing
and printing industry to be more competitive.
Fifth Strategy:
Strengthening Social Agenda And Caring Society
Mr. Speaker Sir,
180. Recently, almost every day, we read and hear about
incidences of social ills in the mass media, including
the militant groups, cold-blooded murders, kidnappings,
secret societies, merciless acts of loan sharks,
incest, drugs and HIV/AIDS. Of greater concern are
moral decadence and incidence of crimes among youths,
particularly school children. We also hear of murders
committed by under-aged children, runaways among
teenagers, extortion, truancy and gangsterism among
students.
181. Previously, we see such incidents only happening
abroad, through TV and newspapers. But they are now
happening before our own eyes, in our country. These
are social ills resulting from the unrestrained
influence of television and the internet. Such
influence has adversely affected some segments of the
Malaysian society as well as destroyed our cultural
values. Modern technology has been misused,
particularly by illegal VCD producers, who are only
interested in reaping profits without any regard for
the negative influence on society.
182. The Government is determined to step up efforts to
curb social ills, particularly among the youths.
Towards this end, the National Social Policy has been
launched, with the objective to promote social
development based on noble values and self-enrichment
to achieve unity and stability, national resilience as
well as the well-being of Malaysian society. To enable
a more integrated, strategic and comprehensive approach
to address social problems, the Government will
establish 50 community service centres in areas with
high incidence of crimes and social problems. The
Government urges NGOs and members of local communities
to work together to ensure the successful
implementation of the Policy.
Harmonious Families Basis for High Moral Values
183. We must intensify our efforts to combat social
ills, particularly among the youths, the potential
leaders of the future. Efforts in building a Malaysian
society with high moral values are not the sole
responsibility of the Government. The family,
particularly parents and the society must share this
responsibility in moulding youths with good behaviour,
practise healthy lifestyle, are disciplined and
knowledgeable as well as the assimilation of religious
values. These values provide a strong foundation to
curb social problems and build a society that is truly
successful in all aspects of life.
Recognising the Role of Women
Mr. Speaker Sir,
184. The role of women in moulding happy families and
their contribution in national economic and social
development has always been recognised. The success of
women in balancing this dual role cannot be denied and
is indeed admirable. The responsibility of women in
nurturing families based on My Home My Heaven, begins
from the birth of a child till adulthood. Mothers play
the key role in moulding and inculcating good values in
children so as to become knowledgeable and devoted to
family and willing to serve for the betterment of race,
religion and country. Youths imbued with high morals
and strong resilience will stand the challenges of our
time and prevent them from being dragged into the
miseries of social ills. It is their generation that
will continue with our aspirations and strive to uphold
the nation's dignity. Parents must give greater
attention to their role in nurturing a responsible
generation.
185. Unfortunately, there are some who undermine the
status and dignity of women. There are some husbands
who divorce their wives through SMS. Marriage is a
noble event involving all family members, especially
parents of the bride and groom, kadi and witnesses as
well as close friends. Although Islam allows husbands
to divorce their wives by mere utterance of the words,
divorce should not be taken lightly. It should be
carefully thought through as children often become
victims. Using SMS does not reflect respect for the
sanctity of marriage and family institutions, including
children. In addition, SMS is not secure as anybody can
use it to send divorce messages without the knowledge
of the husband. The resultant social problems will not
reflect the true character of Islam.
186. There are also some who restrict the contribution
of women in development by only allowing them to become
teachers and welfare officers and preventing them from
becoming judges, Government administrators or joining
the security forces. For the Barisan Nasional
Government, women stand equal with men in the
mainstream of development. Female workforce has
increased to more than 45%. In the history of Islam,
women had fought alongside Prophet Muhammad in war,
while in business, Saidatina Khadijah was involved in
cross-border trade. Remember, heaven lies beneath the
mother's feet. Behind every successful man is a wife.
The hand that rocks the cradle shakes the world.
187. In the light of fewer male students in
institutions of higher learning, restricting the role
of females will only result in reducing the human
resources of Muslims by more than half. As such,
Muslims in Malaysia will have to depend on others for
everything. Do not be disappointed when this happens.
Do not blame the women if men are unable to control
their desires. Islam does not place the responsibility
of restraining desires solely on women.
188. Programmes for the development of women and family
institution will be further enhanced and a sum of
RM105.4 million has been allocated. This includes
training, guidance and counseling to instil greater
confidence and encouragement to women, especially
single mothers, the elderly and the disabled.
189. To enable single mothers in rural areas to
increase their income from their businesses, a sum of
RM100 million from the Village Micro-Credit Scheme will
be set aside to provide loans to those with own
businesses. Single mothers in the low-income group will
also be given priority to purchase low and medium-cost
houses from SPNB with a 20% price discount.
190. The Government has provided several tax incentives
to employers to establish childcare centres at the
workplace. However, the response from private employers
has not been encouraging. In this regard, the
Government may consider the establishment of such
facility as a condition in the development order of
Local Authorities.
191. The Government is aware of the rising costs of
bringing up and educating children. To assist parents
in reducing the burden of expenditure on children, the
Government proposes an increase in tax relief from
RM800 to RM1,000 per child.
Youths as Future Generation
Achieving Excellence in Sports
Mr. Speaker Sir,
192. The youths, who represent the future generation,
that will continue to strive to develop the nation,
must be imbued with strong self-resilience. Towards
this end, the Government will implement the National
Service Programme involving some 100,000 youths. This
programme will include basic military training, civics
education, character building and social services,
aimed at nurturing the spirit of cooperation, national
unity and integration as well as healthy lifestyle. An
allocation of RM300 million is provided for this
programme.
193. The Government is proud of the success of our
national athletes who have brought fame and glory to
the nation at the international level. The most recent
accomplishment is our national marathon swimmer who has
become the first from South-East Asia to successfully
swim across the English Channel. Physical resilience
and mental strength as well as endurance have enabled
him to swim against waves as high as 3 meters and to
withstand the icy cold waters. Our badminton players
have also succeeded to become the All England Champion
as well as the first runner up in the World Badminton
Championship. Let these spur us to greater heights in
sports. This achievement is not merely another success
of our national heroes, but shows that with discipline,
dedication and strong determination, Malaysians too can
attain success in all fields. These achievements should
inspire and strengthen our determination to achieve
excellence in sports.
194. The Government values the contribution of all,
including state governments, corporate sector and NGOs
in rewarding our sports champions. I hope our athletes
will not be distracted by these rewards, but continue
to improve their performance. In appreciation of our
athletes who have brought fame and glory to the nation
and enabled Malaysians to walk tall, the Government
will provide scholarships for those athletes who wish
to further their studies locally or abroad to become
coaches or managers in the sports of their choice.
195. Our young men are the nation's hope and our young
women the nation's pillar. Healthy bodies make for
active minds. A sum of RM657.9 million is provided to
the Ministry of Youth and Sports for 2004. We are
actively training our athletes for their participation
in the 28th Olympic Games in Athens, Greece. In
addition, Malaysia will once again host the Extreme
Sports for the third year.
196. To provide greater recreational facilities to the
public, especially the youths, the Government will make
the provision of such facilities a prerequisite in new
housing development projects. In addition, all local
authorities must provide facilities, such as parks and
playgrounds as well as recreational areas for
activities, including jogging. For this purpose, the
Government will provide an initial sum of RM50 million.
Providing Support to the Disabled
Mr. Speaker Sir,
197. The Government is concerned with the well-being of
the disabled and will ensure that they continue to
benefit as well as participate in the mainstream of
development. Several financial assistance have already
been provided for them, including financial aid of
between RM80 to RM350 a month. As of mid-2003, a total
of 122,543 disabled persons has registered and received
financial aid, amounting to RM88.5 million.
198. To encourage the disabled to continue working to
support themselves and their families, a Disabled
Worker Allowance of RM200 per month has been provided
if their monthly income ceiling does not exceed RM500.
The assistance is provided to meet the cost of
transport to the workplace as well as other expenses.
To enable more disabled workers to enjoy this financial
aid, the Government proposes that their income ceiling
be raised from RM500 to RM750 a month.
199. As a measure to ensure that the disabled also have
access to job opportunities, the Government has
allocated 1% of public service posts for the disabled.
In addition, a special unit will be established at the
Ministry of Human Resources to assist the disabled in
getting jobs.
200. The Government sympathises with the heavy
responsibility of parents with disabled children and
the high cost of sending them to special schools. To
help these parents and their children, the Government
proposes that a monthly allowance of RM25 per person be
given to disabled students in primary and secondary
schools to encourage them to receive education. For the
disabled in institutions of higher learning, the
Government proposes that the present monthly allowance
of RM300 per person for those with impaired hearing,
also be extended to them.
201. For civil service employees with disabled
children, the Government will allow them to work on
flexi-hours to facilitate them in caring for their
children. The Government also proposes that the private
sector provides similar facility.
202. In the 2003 Budget, the Government had announced a
fund of RM100 million to finance treatment of those
suffering from chronic diseases. The Government now
proposes that a special fund of RM10 million be
established for the disabled suffering from chronic
diseases.
203. Job opportunities for the visually impaired, such
as typists, stenographers and telephone operators are
declining. As such, they need to be provided with
skills in new areas, such as IT, physiotherapy and
others. In this regard, the Association for the Blind
is encouraged to establish a network of Franchise Shops
to provide opportunities for them to become
entrepreneurs as well as create more job opportunities.
They can also obtain financing from the Government's
Micro-Credit Scheme and will be given suitable
locations to establish a network of Franchise Shops. In
addition, the Government will also bear the full
expenses for the purchase of white canes and Braille
machines for the visually impaired.
204. The Government will also ensure that the disabled
can own comfortable and affordable homes. For this
purpose, the disabled in the low-income group will be
given priority to purchase low and medium-cost houses
from SPNB, with a price discount of 20%.
205. To help reduce the cost of transport for the
disabled, Syarikat Prasarana Negara Berhad will give a
50% discount on travel fares. Private transport
companies are encouraged to extend the same facility.
In addition, the Government proposes that road tax be
exempted on locally manufactured cars, vans and
motorcycles owned by the disabled.
206. To ensure the disabled also benefit from the use
of ICT, a Pioneer ICT Resource Centre will be
established in Sungai Buloh to train the visually and
hearing impaired in ICT skills. The Government will
also provide ICT enabler to facilitate them to use ICT
as a communications tool, particularly at zebra
crossings and during emergencies, especially on the
highways. In addition, all Government buildings will be
provided with appropriate facilities to help the
disabled in their dealings with Government departments,
including facilities in lifts. The Government hopes the
private sector will also provide such facilities for
them.
Meeting the Need for Low and Medium-Cost Housing
Mr. Speaker Sir,
207. The Government is sensitive to the need for
housing, particularly for the low and medium-income
group. Based on the national population profile,
especially those in the age group of 20 to 24 years,
the demand for low and medium-cost houses is expected
to increase by 500,000 units in the next 5 years. To
ensure this group will have the opportunity to own
houses, the Government will take over the construction
of low and medium-cost houses, particularly through
Syarikat Perumahan Negara Berhad (SPNB).
208. To reduce the burden of private housing
developers, they will be given the choice of either
implementing the construction of 30% of low-cost houses
or allowing SPNB to undertake its construction.
However, they are required to pay a contribution in
return. EPF contributors who purchase low-cost houses
built by SPNB will be provided with end financing from
MBSB. This will ease their financial burden as well as
reduce the administrative red tape in obtaining
financing from commercial banks. As the provision of
low-cost housing is a social responsibility of the
Government, state governments are requested to exempt
land premiums for the construction of low-cost houses.
All utility companies providing facilities, such as
electricity, water and telephone will also be requested
to charge only basic costs.
209. A pilot project based on a new concept will be
implemented as a showcase on 1,000 acres of land owned
by the Rubber Research Institute of Malaysia (RRIM) in
the Klang Valley for the construction of 10,000 units
of affordable homes. The project will also be provided
with public transport facilities, religious centres,
commercial facilities, shopping centres, retail shops,
recreation facilities, such as parks and playgrounds
and community halls as well as other facilities.
210. For 2004, the Government will provide a sum of
RM558.8 million for several low-cost public housing
projects. Of this, RM484 million is for the
construction of 62,672 units of low-cost houses under
Programme Perumahan Rakyat and will be rented out to
squatters in the Federal Territory of Kuala Lumpur and
major towns. The balance of RM74.5 million is allocated
as loans to state governments to continue the
construction of 28,541 low-cost houses.
211. For the armed forces, a sum of RM418.1 million is
provided to continue the construction of 2,500 units of
houses, while RM251 million is provided to complete 44
housing projects for the police force. A sum of RM38
million is provided for the construction of common use
quarters in the KLIA area and Kuala Lumpur.
212. To solve the problem of abandoned housing
projects, the Government will undertake measures to
expedite the rehabilitation of such projects.
Currently, there are 204 abandoned projects throughout
the country involving nearly 66,000 units valued at
RM5.6 billion. The rehabilitation of more than half of
these projects involving 36,000 units valued at RM3.4
billion is being undertaken by SPNB. To overcome the
delay resulting from problems between creditors,
developers and banks, Danaharta will manage the non-
performing loans of the relevant financial institutions
and task SPNB to complete the projects. In addition,
SPNB will also take over and manage housing projects
under Tabung Pusingan Perumahan Kos Rendah (TPPKR),
which is currently under TPPT Sdn Bhd.
213. The Real Estate Investment Trust and the Property
Trust Fund will be established to enable small
investors to invest in the real property sector. The
funds will be managed by professional managers to
generate more attractive returns. To encourage the
development of these funds, the Government proposes:
i. exempting the real property gains tax on gains from
disposal of property by individual or company to these
funds; and
ii. exempting stamp duty on instruments of transfer of
real property from individual or company to these
funds.
Clean Environment Makes Healthy Citizens
Mr. Speaker Sir,
214. A clean environment is paramount in preventing
infectious diseases, such as SARS which had recently
affected the country. The Government is serious in
preventing contagious diseases that can be fatal. As a
measure to ensure cleanliness in our environment, an
appropriate waste disposal system, particularly in
towns is essential. For this purpose, the Government
proposes to build a modern and safe waste incinerator
plant. The plant, which is expected to cost RM1.5
billion, is better than most waste incinerator plants
even in developed countries. In these countries, waste
incinerator plants have been built in industrial or
housing areas without any opposition from residents.
215. To ensure the environment remains clean, an
allocation of RM1.9 billion is provided under several
ministries and agencies. Of the amount, a sum of RM680
million is provided for flood mitigation programme,
particularly in overcoming flash floods, which often
occur in Kuala Lumpur. In addition, a sum of RM462
million is provided for the management of solid waste
and RM422 million for sewerage projects.
Non-governmental Organisations (NGOs)
Mr. Speaker Sir,
216. The Government acknowledges the contribution of
NGOs in carrying out welfare activities as well as
appreciates their spirit of volunteerism, even risking
their own safety in undertaking their missions. We have
witnessed the courage and bravery of MERCY during their
peace missions to provide assistance to war victims in
Afghanistan and Iraq. In addition, several NGOs have
supported and worked together with the Government in
dealing with social problems, such as drug addiction,
HIV/AIDS as well as caring for the less fortunate, such
as the elderly and destitute, disabled and those
suffering from chronic diseases.
217. NGOs must strengthen understanding and cooperation
through smart partnership with the Government towards
building a responsible and caring Malaysian society.
Towards this end, they must set standards in evaluating
their performance, especially with respect to effective
leadership as well as their activities and financial
management. This will enable them to become more
ethical, efficient and accountable in discharging their
duties as NGOs.
218. The Government will continue to provide support
and contribution to NGOs to undertake their activities.
A sum of RM96.4 million has been provided, including
RM6 million for AIDS prevention, RM20 million for women
and family development, RM20.8 million for health
programmes and RM26.6 million for the disabled.
Fostering Arts and Culture
219. Arts and culture depict the identity of a society.
In this regard, local works of art and culture must be
nurtured to enable them to thrive and flourish and to
further cultivate the interests of art enthusiasts. The
lack of quality works of art and culture has resulted
in promoters bringing in performances from abroad. The
Government has provided several facilities, such as
Istana Budaya, Philharmonic Hall in KLCC, Kuala Lumpur
City Hall Auditorium and several experimental theatres
as well as the National Arts Academy training centre.
To achieve excellence in arts as well as promote the
teaching of arts, the Government has allocated a sum of
RM80.3 million, especially for the training of arts and
culture.
220. The Government has provided several tax incentives
to encourage arts and cultural activities, including
exemptions on entertainment duty on stage performances,
income of music composers as well as contributions by
private sector for the sponsorship of arts and culture.
To encourage production of arts and cultural shows
involving local artistes, the Government proposes that
deduction on contributions by private sector be
increased from RM200,000 to RM300,000. This increase is
specifically to sponsor performances by local artistes.
221. To encourage the local production of quality
films, producers can access loans and venture capital
from MTDC. With this, the Government hopes that there
will be better quality films produced locally to
substitute imported films to be screened in local
cinemas and TV channels.
Promoting Excellence in the Civil Service
Mr. Speaker Sir,
222. The public sector delivery system has often been
raised in budget dialogues. In this regard, the
Government continues to improve its delivery system to
ensure the efficient and effective implementation of
national development policies and strategies. The
process of approval as well as the issuance of permits,
licences and CFOs will be streamlined and expedited.
The Government will promote the use of ICT through the
implementation of e-Government. In the Ministry of
Finance, services such as e-perolehan, e-SPKB and e-
stamping have been implemented. In addition, the
issuance of patents and copyrights will be expedited by
increasing the number of highly skilled personnel.
223. The Government appreciates the support and
commitment of the civil service for their efforts and
services in ensuring efficient, effective and
successful implementation of development policies,
strategies and programmes. For the security forces,
including the Police and Armed Forces, the Government
values their contribution and sacrifices in maintaining
national security and public order. In appreciation of
their services in defending the country, the Government
will extend free medical treatment facilities to ex-
Sarawak Ranger personnel and wives as well as the wives
of ex-personnel of Force 136 and the British Army. The
Government will also extend to them the benefits of
hospital ward charges currently provided to families of
ex-reserve personnel of Malaysian Armed Forces.
224. The Government is also concerned with civil
servants without immediate beneficiaries, to benefit
from pension upon death prior to retirement. To ensure
that the beneficiaries also enjoy similar benefits of
pensioners with immediate beneficiaries, the Government
will extend the derivative pension benefits, apart from
gratuity to either one of their parents.
225. The Government is confident civil servants will
strive to provide excellent services and are fully
committed in their work and responsibilities. In
appreciation of the increase in their productivity and
services and after taking into consideration the
improved economic conditions, the Government has agreed
to pay an additional half-month bonus, making the bonus
payment for the whole year to one-month salary.
Appreciating the True Teachings of Islam
Mr. Speaker Sir,
226. Presently, Islam has been associated with
backwardness and poverty. Since the 11 September
incident, Islam has also been associated with
terrorism. In reality, Islam has high regards and
respects for its followers who are diligent, possess
skills and capable of achieving progress and prosperity
in line with the principles of Islam. Indeed, Islam
emphasises on civilization or Islam hadari, which
propagates excellence as a way of life. Islam also
promotes peace, stability and prosperity and is against
terrorism, aggression and brutality. The international
community should get to the root causes of terrorism
and not accuse Islam and labelling them as terrorists.
227. Islam as ad-din or a way of life encompasses all
aspects of life. If we stay with the basic teachings of
Islam as in Al-Quran and Hadith sahih, and not
influenced by certain ulamas with their own
interpretations and teachings, which are against the
true teachings of Islam, there is no reason for the
Islamic community to be weak, demeaned and oppressed by
others. Allah commands, as in surah Ar-Ra'd verse 1:
"Verily never, will God change the condition of a
people until they change it themselves." To uplift
oneself requires diligence, knowledge and special
skills. As such, we in Malaysia do not only pray for
help from the Almighty but also seek knowledge and
skills as well as implement our development plans and
defence to ensure security for the nation. In this
regard, many leaders and ulamas including Sheikh Al
Azhar have openly proclaimed Malaysia as an Islamic
country that should be emulated by other Islamic
nations.
228. The perception that Islamic nations must be poor,
backward, with a government that is always asking for
aid and weak, as in states governed by those who are
not competent in administration, indeed humiliates
Islam. These states cannot become the model of Islamic
nations capable of bringing back the past glory of
Islamic civilization.
229. The Government will continue to emphasise measures
to instil the true teachings of Islam to ensure Muslims
are imbued with noble values and not be misguided by
wrong teachings by those who have worldly political
interests. Towards this end, Jabatan Kemajuan Islam
Malaysia (JAKIM) will implement additional programmes
to enhance understanding and appreciation of the
teachings of Islam. A sum of RM228 million will be
allocated for these programmes. The Government also
provides RM105 million to undertake the construction of
training complexes, religious schools, mosques as well
as the development of an Islamic information system.
230. As an Islamic nation, the Government is concerned
with the rising costs of performing the Haj. As such,
the Government is committed to ensure that such cost is
contained. Otherwise, we are concerned that in the
future, many Malaysians in rural and urban areas will
be unable to perform the Haj.
231. A major portion of the costs in performing the Haj
is for air travel and accommodation in Mekah and
Madinah. As such, Syarikat Penerbangan Malaysia Bhd
(PMB) will acquire two aircrafts with the view to
reducing the high lease cost to Tabung Haji. In
addition, Tabung Haji will increase the construction
and acquisition of accommodation in Mekah and Madinah
to contain the increase in the cost of accommodation.
The Government is pleased to announce that the cost of
performing the Haj through muasasah in 2004 will be
reduced by 5%.
ECONOMIC PROSPECTS IN 2004
Mr. Speaker Sir,
232. The external environment is expected to further
improve in 2004, particularly for several developed
countries. This is attributed to the expansionary
fiscal policy, low interest rate regime, wealth effect
from the bouyant stock markets as well as lower
petroleum prices. In addition, consumer confidence
remains strong while private investments have also
recovered.
233. The economic prospects for the region are also
expected to strengthen following the end of the spread
of SARS as well as the increase in private consumption
and regional trade. China is expected to continue to
record high growth, with Korea, Taiwan and Hong Kong
also registering stronger growth in GDP.
234. The Malaysian economic performance in 2004 is
projected to continue to expand strongly supported by
robust domestic economic activities as well as the
recovery in external economies. In line with this
development and the positive impact of the Package of
New Strategies, GDP is forecast to further expand
between 5.5%-6% in 2004. The private sector is expected
to spearhead economic growth with private investment
expanding strongly by 9.9%. Private consumption has
also responded positively to the stimulus measures and
is projected to expand at a higher rate of 7.7%.
235. The manufacturing sector will continue to be the
main contributor of growth and is expected to increase
by 7.2%, while the services sector by 5.5%. With the
policy emphasis and strategies on the agriculture
sector as well as high commodity prices, the sector is
expected to expand steadily by 3%. The mining sector is
also expected to grow by 3.5%, following the increase
in the production of LNG and natural gas.
236. In line with fiscal consolidation policy, the
Federal Government financial position is expected to
improve with the budget deficit declining from 5.4% to
3.3% of the GDP. If global recovery is stronger in the
near term, the objective of attaining a balanced budget
is expected to be achieved in 2006. Higher world
economic growth will contribute towards strengthening
the public sector account, which is expected to
register a surplus of 0.4% of the GDP in 2004 compared
with a deficit of 1.5% in 2003.
237. Consistent with GDP growth, the per capita income
is expected to increase to RM14,954 while the
purchasing power parity of Malaysians will rise to
almost US$10,000. Prices are expected to remain low,
with the Consumer Price Index forecast at 1.3%.
CONCLUSION
Mr. Speaker Sir,
238. Since Independence, the nation has gained
considerable success and achieved significant progress.
In a span of almost half a century, we have been able
to sustain prosperity in an environment of peace and
harmony as well as unity among Malaysians. We have also
succeeded in maintaining political stability, on
account of the strong solidarity of the Barisan
Nasional Government, which upholds the principles of
equitable collaboration, sincerity in our efforts as
well as willingness to sacrifice for the nation. This
has been our tradition. This is the uniqueness of our
political collaboration that has strengthened and
fostered unity among all races under one nation.
239. However, we cannot be complacent of continued
success. The external environment continues to remain
difficult, with increasing threats and intimidations as
well as aggression and oppression. The peace that we
hope for is still far away, while the acts of terrorism
that we abhor, still have not subsided. As a small
nation in the global community, we are not spared the
impact of the difficult external environment.
240. We must be brave to face all these challenges. We
must be prepared to undertake strategic shifts in our
drive to safeguard and sustain the progress and
prosperity that we have painstakingly worked for. I had
urged all Malaysians to make this paradigm shift when I
tabled the Budget 2003. We must undertake this shift
with greater vigour, determination and perseverance. We
cannot be complacent, neither can we waver in our
efforts to effect changes. We must be courageous and
steadfast to face all obstacles and constraints. We
must be willing to sacrifice, set aside our self-
interests and avoid discord and conflicts among us. We
must be more tolerant, reinforce our cooperation and
foster unity towards building a prosperous and
harmonious Malaysian society.
241. I pray to the Almighty that our beloved nation
will continue to be bestowed with prosperity and
dignity. God willing, I am confident that this nation
will continue to progress, that Malaysians will be
blessed with continued prosperity and well-being as
well as respected by the world community.
Because of you Malaysia
We uphold the nation, unite the people
We set a thousand steps forward
Together we strive in darkness, riding the waves
Seeking for the light, reaching for the dream
Defying a million obstacles
Though we may fall
We shall persevere to achieve our vision
Peaceful is my country
Blessed with success, bestowed with prosperity
United we stand, resolute in determination
Glow the spirit of patriotism
The world has acknowledged
Our dignity has been upheld
No more aggression
No more humiliation
Our independence enshrined
Peaceful is my country.... Malaysia
Mr. Speaker Sir,
I beg to move.
Sumber : Pejabat Perdana Menteri
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