On October 13, the Malaysian Parliament announced Malaysia Budget 2024, the largest in Malaysia’s history, with a total allocation of MYR393.8 billion (USD83.2 billion) and the second budget put forward to advance the Madani economy agenda of Prime Minister Anwar Ibrahim. The proposed budget seeks to expand the national economy through the purposeful enhancement of citizen well-being with many proposed expenditures aimed at increasing workforce participation from historically underrepresented groups. Among the earmarks are incentives to expand employment and increase productivity in several strategic sectors.
The expansion of the Malaysian economy has moderated over the course of the 2023 fiscal year with predicted GDP growth down approximately 2% to an estimated 5% for the 2024 fiscal year. This moderation is caused by several factors, including slowed merchandise export growth related to problematic interest rate increases that have plagued China, Malaysia’s largest trading partner, for the past 6 months. However, this slower rate of growth may prove beneficial as the Unity Party seeks to lower deficit spending from 5% to 4.3% of GDP.
Moreover, Malaysia Budget 2024 includes a significant reduction of petrol subsidies and social assistance expenditures for the upcoming fiscal year. Down by more than a third from the 2023 fiscal year at MYR52.8 billion, the reduced subsidy expenditures are expected to generate additional revenue of approximately MYR10 billion to be channeled into a cash aid program for low-income households. Sunway University political scientist Wong Chin Huat has praised the budget’s multilateral approach to deficit reduction, noting that it is symbolic of the Unity Party’s commitment to economic management.
The Ministry of Education is set to receive the largest allocation of RM58.7 billion under Budget 2024, a notable increase from RM55.2 billion in 2023. In keeping with the framework of the New Industrial Master Plan (NIMP) 2030 implemented to stimulate the productivity of Malaysia’s manufacturing sector, the government has set aside RM6.8 billion for science, technology, engineering, and math-based vocational education and training (TVET) to ensure workers are appropriately trained for a record number of high-skilled jobs created to revitalize the productivity of Malaysia’s robust manufacturing sector.
Concerns have arisen, however, from middle-class residents regarding an increase in goods and services taxes from 6% to 8%. Malaysian United Democratic Alliance (MUDA) president Syed Saddiq Syed Abdul Rahman has called the tax increase evidence of a “forgotten promise” from legislators to maintain living costs for middle-income households. Diversification of revenue sources is a key component of Budget 2024 as extra revenue is necessary to remedy current fiscal deficits. While tax increases will benefit the Malaysian economy overall, for the middle-class, which will be dealt a double financial blow from subsidy reductions and increased taxes, the economic benefit may be difficult to discern.
More information on Budget 2024 specifics can be accessed here and here.
Reactions to Malaysia Budget 2024:
Malay Mail, “The Winners and Losers of Anwar’s Budget 2024”
The Star, “Reactions from Securities Commission and Bursa Malaysia”
The Star, “Reactions from the Banking Sector”
The Straits Times, “Enhancing food security, reducing govt subsidies key issues for Malaysia’s 2024 budget”
Key tax incentives in Budget 2024 include the following:
- Extension to December of 2027 of tax incentive period for women returning to the workforce after extensive periods of unpaid housework or care work
- Deduction of taxes up to 10% of an individual or company's aggregate income if said income contributes to institutions, organizations, or funds approved under subsection 44(6) of the Tax Act 1967 that conduct educational programs, including sports.
- Introduction of Global Services Hub tax incentive, with an income tax rate incentive of 5% or 10% to be determined based on results for a period of up to 10 years.
- Introduction of special income tax of 0-10% planned for film production companies, foreign film actors and crew who shoot films in Malaysia.
- Continuation of tax exemption for fund management companies managing sustainable and responsible investment (SRI) funds, and tax deductions on SRI sukuk issuance costs until assessment year 2027.
- Incentivization of automation through tax breaks expanded to cover the commodity sector under the Plantation and Commodities Ministry. This will increase productivity of plantation products and reduce dependence on foreign labor.
To advance sustainable development under New Industrial Master Plan (NIMP) 2030, Budget 2024 includes the following:
- Proposal for the construction of five Light Rail Transit 3 (LRT3) stations, namely the Tropicana, Raja Muda, Temasya, Bukit Raja and Bandar Botanik stations, for RM4.7 billion. Retaining these stations is expected to complement and improve the public transport network in Klang Valley that could benefit two million residents.
- Evaluation of incentives by Finance Ministry, Inland Revenue Board (IRB) and Petronas for carbon capture and storage (CCS) and hydrogen sulphide projects (to be finalized by year end).
- Provision of up to RM2,500 in income tax relief for electric vehicle (EV) charging facility expenses for a period of four years, and tax deduction for EV rental cost for two years.
- Deduction of taxes up to RM300,000 for companies that spend on measurement reporting and verification (MRV) related to the development of carbon projects. These expenses can be deducted from the sale of carbon credit traded on Bursa Carbon Exchange (BCX).
- Installation of solar panels for Putrajaya government buildings in partnership with Tenaga Nasional Bhd (TNB) and Gentari.
- Adoption by the federal government of EVs as official vehicles, following investments of over RM170 million to establish EV charging stations throughout the city.
To generate additional revenue to remedy fiscal deficits, Budget 2024 proposes the following:
- Increase in current excise duty rate for sugary drinks from 40 sen to 50 sen per liter. This excise duty revenue will be channeled to address and treat diabetes, including to support dialysis centers.
- Implementation of a global minimum tax for companies with global revenue of at least €750 million (RM3.74 billion) in 2025.
To strengthen recovery of targeted sectors, Budget 2024 includes the following:
- Allocation of RM19.7 billion to the Ministry of Defense for enhanced maritime domain awareness capacity
- Allocation of RM41.2 billion the Ministry of Health, RM5.5 billion of which is specifically designated for medical supplies expenditures
- Allocation of RM510 million for research and development (R&D) funds under Science, Technology and Innovation Ministry and Higher Education Ministry to increase skilled-work employment
- Utilization of RM1.6 billion by HRD Corp to provide 1.7 million training exercises in 2024 as part of the Madani Training Program for micro, small and medium enterprises (MSMEs)
Budget 2024 outlines the following to ensure sustained growth in the tourism sector:
- Relaxation of conditions for Malaysia My Second Home (MM2H) application. This will serve to increase the arrival of foreign tourists and investors to Malaysia.
- Introduction of new initiatives under the Malaysia Visa Liberalization Plan to facilitate approval of employment passes for strategic investors in key sectors
- Introduction of Long-term Social Visit Pass for international students who have graduated, to meet the needs of the industry's skilled workforce, and improvement of the visa-on-arrival, social visit pass and multiple-entry visa facilities to encourage the influx of tourists and investors, especially from India and China.
- Designation of 2026 as “Visit Malaysia Year,” targeting the arrival of 26.1 million foreign tourists and an estimated domestic spending of RM97.6 billion.
