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BUDGET 2018 maintained a strong emphasis on SMEs as industry observers note a bigger allocation for the sector compared with 2017. However, many also note that a cut in corporate tax was sorely lacking.

“I think there is more allocation than 2017. There were some good moves by the Government such as the RM7bil allocated under the Skim Jaminan Pembiayaan Perniagaan (SJPP), and more funds given for export activities.

“But the one disappointment is the lack of announcement on reduction in corporate tax. We were expecting a gradual rollback of corporate tax of 1% per annum from 2015 to 2020 following the introduction of the GST. But there was none this year,” says Associated Chinese Chambers of Commerce and Industry of Malaysia national council member and SME and HRD committee chairman Koong Lin Loong.

At the very least, he was expecting the threshold of taxable income for SMEs to increase from RM500,000 to RM1mil.

For 2017, SMEs with a paid-up capital of RM2.5mil and below saw a cut in tax rate to 18% from 19% for taxable income up to the first RM500,000. Corporate tax for SMEs was reduced from 20% to 19% under Budget 2016.

In a statement, the Federation of Malaysian Manufacturers (FMM) adds that reducing the rates would make Malaysia, which has a corporate tax of 24%, as competitive as neighbouring countries such as Hong Kong (17%), Singapore (18%), Thailand (20%) and Vietnam (20%).

Nonetheless, Budget 2018 promotes a conducive market for SMEs through easier access to funding and support for export and talent development.

“The manufacturing sector is pleased that a lot of emphasis has been given to industry, trade, Industry 4.0, the digital economy, education and training,” says FMM.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed said the emphasis placed on SMEs would ensure that the sector would remain competitive.

“The Bbudget continues to empower our SMEs and for the first time ever, they receive a big boost of RM23.7bil in terms of allocation, grants, soft loans and guarantees,” he said.

“This time, we can definitely see more funding for SMEs. It is a good budget, it covers every angle,” adds SME Association of Malaysia president Datuk Michael Kang.

Among the goodies dished out for SMEs include RM7bil in funds under SJPP for working capital and services sector and RM1bil in government guarantee loans under SJPP to enable SMEs to automate their production.

There was also a notable focus on exports with an allocation of, among others, RM150mil to Matrade, Mida and SME Corp for export and promotional programmes, including the much welcomed Market Development Grant (MDG). This will help SMEs expand their exports and take advantage of the favourable exchange rates.

Kang says these funds and incentives would help accelerate SME contribution to the country’s gross domestic product (GDP). It is targeted that SMEs would contribute 41% of GDP by 2020.

Last year, SME contribution was about 36.6%, only a 0.3% increase from 36.3% in 2015. Kang estimates SME contribution to GDP this year to be at about 37%.

“SMEs have been faced with challenges over the last two years so the previous budgets for SMEs did not achieve as strong a growth as hoped for. So they will definitely need the boost,” says Kang.

One of the main issues faced by SMEs, he says, is the cost of labour.

“We hope this can be helped with automation so that we don’t depend too much on labour. So it’s good that there are measures for automation and also the 70% guarantee for loans by the Government,” he adds.

Meanwhile, Secretariat for the Advancement of Malaysian Entrepreneurs (SAME) chief executive officer Neil Foo says he was expecting more funds for the MDG and more incentives to encourage SMEs to go into e-commerce, particularly with the upcoming launch of the Digital Free Trade Zone.

“But this could just be a start to build up the infrastructure for DFTZ and e-commerce. There seems to be little concrete things for SMEs in this respect at the moment but it doesn’t meant that this is not a good start,” he says.

Foo, however, welcomes the additional RM50mil funding to Koperasi Jayadiri Malaysia Bhd (Kojadi) and the attention on the tourism sector.

“With the RM50mil, we now have RM200mil. We have helped about 800 SMEs. With additional funds, we expect to help more,” he says.

The Prime Minister has declared 2020 as Visit Malaysia Year and among the allocation made for tourism include RM2bil for SME Tourism Fund with interest subsidy of 2% and tax incentive for investment in new four-star and five-star hotels extended for two years as well as tax incentive for tour operating companies extended to Dec 31, 2020.

“Budget 2018 is a continuation of the ‘SME budget’ since 2014. It’s a good continuation programme for SME.

“We encourage SMEs to utilise any grant available to digitalise their companies,” says Foo.

Source :The Star Daily