BUDGET 2010 – FAIR & EQUITABLE ALLOCATION OF THE COUNTRY’S RESOURCES
KUALA LUMPUR, 23 October 2009 – Malaysian Industrial Development Finance Berhad (“MIDF”) said today that it is confident that Budget 2010 will provide the necessary momentum to the economy amid signs that a revival is under way. It is also a precursor to the new economic model that the government is formulating.
“The stimulus programme has been an effective response to the global financial crisis and the government appears to be building an orderly exit framework. It is important to ensure that such a programme does not become a permanently entrenched feature of the public sector as it is definitely not sustainable over the long term,” said Encik Mohd. Najib Hj. Abdullah, Group Managing Director of MIDF.
Although total government spending in 2010 is budgeted to be 11.3% lower than that this year, most of the cutback will come from operating expenditure and not development expenditure.
“This is a clear indication that the government is focused on enhancing the management of public services, rooting out operational inefficiencies. It is about increasing productivity and channelling precious resources towards capability building and more strategic purposes,” said Mohd Najib. “An indictment of this is the fact that total government’s subsidies budgeted next year is only RM20.9 billion, down from the RM24.5 billion spent in 2009 and RM35.2 billion in 2008. The message is clear – moving forward, subsidies will be more discriminating and targeted, rather than inefficiently spread across the board,” added Mohd Najib.
Through its Development Finance Division, MIDF was allocated RM50 million and RM125 million under the First and Second Stimulus Package respectively to be extended to SMEs and non-SMEs in the form of soft loans. Soft Loan Scheme for Services Capacity Development (SLSCD), provided in the first stimulus package was aimed at improving the productivity of the services sector while the Soft Loan Scheme for Automotive Development (SLSAD) is to assist the automotive parts and components manufacturers to rationalise their operations. He further elaborated that to date, the allocations under the SLSCD has been fully committed. As for SLSAD, RM86.2 million has been approved. MIDF has sufficient applications in the pipeline to take-up the balance of SLSAD and we foresee the funds will be exhausted by the end of the year.
From MIDF‘s standpoint, the Budget is conducive for the business community given the focus on the services sector as the GDP growth driver in 2010. The 20101 budget has laid the foundation for a new and holistic economic model.
As a strategic business enabler to the 548,267 Small and Medium Enterprises (SME) companies in Malaysia, which make up 99.2% of all established businesses in the country and contribute 32% of the national Gross Domestic Product (GDP), MIDF is pleased to note that the interests of the SMEs are addressed in the Budget. This is in consonant with the overall objective to raise the contribution of SMEs to GDP to 37% by 2010, from the 32% estimated in 2005. The move to rationalise the number of funds and grants, as well as enforcing the deadlines for micro financing approvals and disbursements are positive for the growth and development of the SMEs in Malaysia.
The 2010 Budget announcement is timely since the previous SME funds allocated to MIDF through SME Corp. had all been fully committed. MIDF lauds the announcement on the additional RM350 million SME funds, of which RM200 million will be made available in the form of soft loans. These soft loans will give access for SMEs to tap for funding at concessionary interest rates. MIDF’s role is to facilitate the accessibility of these funds to SMEs and provide continuous effort aimed at building their capabilities and capacities to stay resilient and competitive, thus contribute to the country’s drive towards high income economy.
The Malaysian capital market is experiencing a recovery currently with the FBM KLCI index closing the week at 1,267 points, its best performance this year. The move to liberalise the commission structure with effect from 2011 in the equity market will carry positive long-term benefits, as it will create more robust competition. This also applies to the move to allow full foreign ownership in corporate finance and financial planning firms. MIDF welcomes further moves to liberalise the financial services sector as it believes that competition and market forces are necessary ingredients for a robust capital market and more importantly the rakyat.
“In the final analysis, the Budget has painted a generally cautious optimistic macro scenario next year, with GDP growth projected to be at only 2.5%, a pace which is slower than the world’s output growth as projected by the IMF. It reflects conservative baseline expectation with regard to the economic performance in the U.S. and major Europe. Should there be a meaningful turnaround in those economies, MIDF expects Malaysia to stand ready to reap the benefits and growth could be more robust than anticipated” added Mohd. Najib.
About MIDF
MIDF is now a diversified group with substantial investments in the financial services industry. Following its merger with Amanah Capital Partners Berhad in 2003, the acquisition of Utama Merchant Bank Berhad in 2004, and the emergence of MIDF Amanah Investment Bank Berhad, MIDF Group has evolved into a stronger and bigger entity, offering a competitive and diversified range of financial services to include Investment Banking, Development Finance and Asset Management.
MIDF is a subsidiary of Permodalan Nasional Berhad (PNB).
