The Malaysian government has announced its budget for next year, pledging to provide a conducive environment to enhance the nation's competitiveness, boost human capital and grow broadband adoption.
Delivering the Budget 2008 speech in parliament last week, Malaysian prime minister Abdullah Ahmad Badawi said private investment is anticipated to grow 7.1 percent this year.
"The government is confident that this momentum will accelerate in the coming years," said Abdullah, who is also the country's minister of finance. "An important step in this regard is to ensure that the nation's corporate tax regime remains competitive."
To improve the efficiency and simplify the administration of corporate tax, Abdullah said the government will implement a single-tier tax system, allowing for dividends to be more easily distributed.
He added that the government will further reduce the corporate tax for 2009 by one percent to 25 percent, in a bid to enhance Malaysia's competitiveness and spur the growth of its private investment. The corporate tax for 2008 had been set at the tabling of last year's budget at 26 percent.
"I am confident that this reduction will have spill-over effects in terms of economic growth and employment opportunities," Abdullah said.
Enhancing human capital
Abdullah also outlined the government's strategy for enhancing the nation's human capital by stepping up efforts to intensify home-grown research, development and commercialisation activities. The government is also aiming to ensure there is an adequate supply of highly skilled workers, he said.
To support this initiative, the Malaysian government is allocating a sum of 230 million ringgit (£32m) to the Science Fund, 300 million ringgit (£42m) to the Techno Fund, and 546 million ringgit (£76m) to research institutions, Abdullah said.
The government is also setting up two new entities to drive the supply of highly skilled ICT workers. The first will be named the Knowledge Workers Development Institute, while the second will be the Multimedia Super Corridor (MSC) Malaysia Digital Animation Centre. Both facilities will be based in Malaysia's "Silicon Valley", Cyberjaya.
Abdullah also acknowledged that the quality of human capital, especially of professionals and skilled workers, is critical in attracting greater investment in the country.
The government is also hoping to encourage and facilitate the entry of knowledge workers who can add value to the nation's economy.
"The Immigration Department will introduce a new category of visa for business travellers, which will provide for a longer validity period," the prime minister said. "Beginning January 2008, the process for obtaining professional visit passes for knowledge workers will be streamlined by enabling applications to be made in Malaysian embassies and consulates overseas."
The government is also targeting to increase the country's broadband penetration rate to 50 percent by 2010, from its current 12 percent.
Abdullah noted that there needs to be an effective public-private partnership for the nation to achieve this goal. "[As such], the government proposes that last-mile network facilities providers be given investment allowance of 100 percent on capital expenditure incurred for broadband up to 31 December, 2010," he said.
"Import duty and sales tax exemptions will also be given on broadband equipment and consumer-access devices," he explained. "Tax deductions will be given to employers on benefits, in the form of new computers and payment of broadband subscription fees for employees, and such benefits in kind received by the employees will also be tax exempt."
The Association of the Computer and Multimedia Industry of Malaysia (Pikom) lauded the government's incentives, which it said appear to encourage IT usage, specifically the continual push for broadband penetration across the country.
Pikom chairman David Wong said the initiatives outlined in the budget will make it possible to achieve a broadband penetration of 50 percent by 2010.
"However, we feel that the government should extend the investment allowance beyond 2010 to further spur broadband penetration," Wong said in a statement. "Also, while broadband devices will be more affordable now with the proposed tax exemption, we feel the crux of the matter still revolves around broadband subscription cost, which is still high."
He said it was necessary for the Malaysian government to directly intervene, and lower the cost of broadband subscription to make such services more affordable to the average Malaysian.
Research agency Mimos noted that the government's effort to ensure an adequate supply of domain expertise through the establishment of the Knowledge Workers Development Institute is a step in the right direction.
"A country's performance in the knowledge-driven economy is not simply measured by outputs in science and technology, but must also be judged in relation to increasing its overall competitiveness," Mimos chief executive Abdul Wahab Abdullah said in a statement.