Salient points of Budget 2012

The following are salient points of Budget 2012 which was announced by Prime Minister Najib Abdul Razak, who is also finance minister, in Parliament this afternoon.

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Total budget - RM232.8 billion, up 9.4%
Operating expenditure - RM181.6 billion, up 11.5%
Development expenditure - RM51.2 billion, up 4.1%

• Last year, Malaysia's FDI growth was the strongest in Asia and in the first six months of this year have reached RM21.2 billion.

• Government expects economic growth to remain strong - between 5 and 5.5 percent this year. Growth for 2012 is projected to be between 5 and 6 percent, despite a global economic slowdown.

• The budget deficit, the 15th in a row (since 1998), will be further reduced to 4.7 percent of the GDP in 2012.
  
  In term of amount, this deficit is the highest in history of Malaysia.

• This is slightly lower than the 5.4% for 2011. The budget deficit was slashed from 7.4% in 2009 to 5.6% in 2010.
  
  Debt servicing was RM12,8 billion in 2008. For 2012, it is RM20.5 billion - an increase of nearly 60%.

• RM29.8 billion allocated for investment in infrastructure, industrial and rural development.

• RM13.6bil allocated for the social sector, including education and training, welfare, housing and community development

• Government to further liberalise 17 services sub-sectors, including healthcare and logistics, and in places enabling 100% foreign equity.

• RM18 billion of the RM20 billion PPP Facilitation Fund will be used for high-impact projects, with RM2 billion for bumiputera entrepreneurs.

• KL International Financial District:
  
  

  - income tax break 100% for 10 years, duty stamp exemption 

  - development allowances and capital allowances

  - income tax break 50% for property developers in KLIFD

• In 2012, RM978 million allocated to accelerate the development in five regional corridors.

  
  

  The new projects are:

  
  1) Coastal Highway JB-Nusa Jaya 

  
  2) Taiping Heritage tourism project 

  
  3) Besut agropolitan project

  
  4) Lahad Datu palm oil cluster project

  
  5) Water supply in Samalaju

• Windfall for Felda settlers: Felda (Felda Global Ventures Holdings Sdn Bhd) will be listed on Bursa Malaysia by mid-2012 to raise funds for the company to become a global conglomerate.
  

  
  Felda settlers are expected to receive a windfall, and the amount will be announced before listing.

• SME revitalisation fund - RM100 million. Easy access loans of maximum RM1 million, handled by SME Bank starting from January 2012.
  
  Emergency fund RM10 million to help SMEs affected by natural disasters, funded through grant and easy access loans, through SME corporation and MIDF, for purchase of equipment and raw material and repair of premises.

• Full exemption of import duty and excise duty for hybrid and electric cars extended to Dec 31, 2013.

• Income tax exemptions for non-ringgit sukuk issuance and transactions will be extended for another three years.

• RM410 million to redevelop Langkawi, to upgrade museum, better transport and to assist in construction of more hotels.

• Real Property Gains Tax - raised from 5%, if sold within five years: 

  
  

  Sold within 2 years - 10%

  Sold between 2-5 years - 5%

  Sold after 5 year - 0%

• First time in history, all primary and secondary school fees to be abolished, beginning 2012 school term. Cost to government: RM150 million
  
  Education: Total allocation - RM50.2 billion

  
  

  - RM1.9 billion for all schools, including mission and vernacular schools.

  
  

  - RM1 billion for betterment of schools premises (RM500 million for SRK, RM100 million for SRJK (Chinese), RM100 mil SRJK (Tamil), RM10 million for mission schools, RM100 million for Sekolah Agama Bantuan, RM100 million to MRSM - Mara secondary schools).
  
  - Private schools to get 70% income tax break. 100% tax allowance for up to five years, double deduction for overseas promotional expenses to attract more foreign students and import duty and sales tax exemptions on all educational equipment.
  
  - Tax break for donations to mission schools and places of worship. Double tax break for companies that give internships, international career fairs and scholarships.

• Rural development:
  
  - RM1.1 billlion for rural electricity supply, especially Sabah and Sarawak.
  
  - RM5 billion will be given to develop rural infrastructure, including RM1.8 billion to the Rural Road Programme and Village-Link Road Project.
  
  -  RM2.1 billion allocated to expand clean water to rural 220,000 homes.

  
  

  - The government will expand the programme to supply clean water to the rural community in Sabah by RM50 million.
  
  - In Felda settlements, RM400 million upgrade of water supply system in Pahang, Kedah, Kelantan and Terengganu.
  
  - RM150 million for rural public transportation, via SME bank for bus companies in low interest loans of 4% interest.
  
  - Orang Asli: RM90 million for basic needs, including treated water and income generation, RM20 million for the community affected by Cameron Highlands landslide.

• Civil service:
  
  - Civil service pay hikes from RM80 to RM320 according to grade, up 7-13%.
  
  - More rankings for pay rise, so the maximum pay for each grade is higher than now. For example, a teacher can have a pay hike of up to 39%.
  

  
  

  - Time-based pay rise scheme, so teachers can go up the ladder faster. For example, teachers will get grade 44 at eight year and grade 48 at 16th year.

• Special bonus for Jasa and Kemas ex-employees:
  
  - One-off payment for those who have completed their contracts with Department of Special Affairs (Jasa), Ministry of Information, Communication and Culture and Jabatan Kemajuan Masyarakat (Kemas), Ministry of Rural and Regional Development involving 4,300 people.

• Retirement age will be raised from 58 to 60 years.
  
  - 600,000 government pensioners will benefit from an additional annual pension increment of 2%.
  
  - A special programme will be introduced for 175,000 army personnel who are not eligible for pensions.
  
  - Senior citizens won't have to pay outpatient fees at all government hospitals and clinics. 50% discount on LRT and monorail.

• Tax for retirees: 

  
  

  - Tax relief up to RM3,000 on contribution to a private retirement sceme and insurance annuity for 10 years.
  

  - tax deducation on employers; contribution to private retirement scheme

  
  - tax exemption for income private retirement fund.

• Increase employers’ contribution for the Employees Provident Fund from 12% to 13% for those earning RM5,000 and below.

• Tuition fee assistance for civil servants who want to study part-time - for 5,000 places for masters and 500 places for doctorate degrees. Total allocation - RM120 million. 

  
  

  20,000 places for teachers who want to upgrade to degree holders. RM80 million allocated for the first year.

• Police and army: 

  
  

  - RM200 million for upgrade to modern policing and RM442 million to upgrade housing quarters, stations and training.
  
  - RM500 million under the Army Care programme for upgrade and maintain army camps and quarters.
  
  - RM50 million for ex-servicemen retraining.
  
  - One-off cash payment of RM3,000 for each family of ex-military and police personnel who served the country during a decades long communist insurgency. 62,000 families to benefit.

• Food and power subsidies: 

  
  

  - RM0.60 per kilo of local rice

  - RMO.20 per kilo of sugar

  - RM2.25 per kilo cooking oil

  - RM0.55 per kilo for flour

  - RM0.85 per litre of RON95

  - RM0.86 per liter of diesel

  - RM21.43 per 14kg tank of cooking gas
  - Electricity bills of RM20 and below, costing RM150 million. 

  
  

  Total subsidy: RM33.2 billion

• Welfare:
  
  - RM1.2 billion for welfare programme: for senior citizens RM300 per month, poor children RM100-450 a month, disable RM150-300 per month.

  
  

  -  To open an extra 85 units Kedai 1Malaysia, costing RM40 million.

  
  

  - To open 30 Agro Bazaar Rakyat for agriculture products.

  
  

  - Extend Menu Rakyat 1Malaysia to 3,000 operators, where breakfast provided at RM2, lunch at RM4.

• First home scheme:
  
  - Ceiling for house prices under a government deposit guarantee scheme for first time house buyers to be raised to RM400,000 from RM200,000 for those earning RM3,000 and below. This is for joint income (so maximum of RM6,000). This will qualify buyers for 100 percent loans.
  - 7,700 houses to be built in Cyberjaya, Putra Heights, Seremban, Damansara, Bukit Raja. Prices are below market price, for example in Putrajaya RM150,000 for 1,100 sq ft apartment (market price - RM220,000).
  
  - Buy-then-sell development concepts, buyers only start paying installment after homes are complete, for homes costing RM600,000 and below.
  
  - RM443 million to build 8,000 units of low-cost homes for sale, while 7,000 will be built for rent.
  
  - Government will subsidise low-cost housing by SPNB, each house subsidy will be RM20,000. RM200 million allocated for this programme.
  
  - RM40 million for restoration and maintenance of public and private low-cost housing.
    
  - Expats can withdraw their EPF to buy a house.

• Health:
  
  - RM15 billion operation expenditure and RM1.8 billion for development expenditure. Upgrade of 81 rural clinics and 50 new 1Malaysia clinics.
  
  - Hospital Kuala Lumpur, the oldest in Malaysia, will be upgraded to be the country’s premier hospital. RM50 million to construct outpatient block for Hospital Kuala Lumpur. This will come from the RM300 million allocation to upgrade the hospital with new equipment.

• Taxi drivers: 

  
  

  - 100% excise duty and sales tax exemption for locally-made taxis.
  

  - No excise duty or sales tax for transfer ownership.

  
  - No road tax for individually-owned budget taxis. 

  
  - 2% subsidy on loan for new locally-made taxi.

  
  - RM3,000 assistance for disposal of old taxies exceeding seven years but less than 10 years. If 10 years old and above, RM1,000 is given.

• The National Legal Aid Foundation will ensure that every individual who is charged in court will be given free legal aid. RM15 million allocated.

• - Training for women in corporate sector: RM10 million
  
  - RM700 million to build women and children's hospital through private-public partnership. 

  
  

  - RM320mil for youth entreprenuership training. 

  
  

  - RM200 million for venture capital for pioneer projects. 

  
  

  - RM200 million for those who do not finish school. training to be provided by community colleges and Mara colleges, as well as GLCs and private companies.

• Aim to build 150 futsal courts and 30 football fields with artificial turfs. RM50 million allocated for football fields, RM15 million for futsal courts.

• Low-income household: 

  
  

  - One-off RM500 cash assistance for households earning 3,000 per month and below (costing RM1.8 billion), to benefit 3.4 milliion households.
  
  - One-off RM100 schooling assistance for primary and secondary school students from age 6 to 16, up to Form 5. (costing RM530 million).
  
  - One-off RM200 book vouchers for students of private and public tertiary institution, and Form 6. (costing RM260 million).
  
• EPF can ring fence RM1,300 from account 2 of contributors for the purpose of pilgrimage. As such, the money remains with the contributors but they can register for the Haj.

• Civil service bonus: 

  
  

  - Additional half-month salary bonus, with a minimum of RM500 and RM500 for government pensioners, paid together with the December 2011 salary. 

  
  

  - So for 2011, including earlier bonus, a total RM1,000 minimum for civil servants and RM1,000 for government pensioners.
  
  - This will benefit 1.3 million civil servants as well as 618,000 government  pensioners. (It will cost government RM4 billion).

• To raise allowance for parliamentarians, as long as "both sides of the divide, government and opposition, agree including the independents".

  
  

  The new allowance to start on Jan 1, 2012. No mention of how much.

• Not mentioned in Budget 2012
  
  - Sin tax: tobacco and alcohol
  - Income tax
  - Urban public transportation
  - Minimum wage- Goods and services (GST) tax