WIDE-RANGING PERKS TO STRENGTHEN DOMESTIC ECONOMY IN 2012 BUDGET

KUALA LUMPUR, Oct 7 (Bernama) -- Prime Minister Najib Razak on Friday
unveiled the 2012 Budget, providing a gamut of incentives to further
strengthen the domestic economy, a RM6 billion special stimulus package, perks
to attract investments and boost the Islamic sukuk market, banking, finance and
hospitality industries, as well as much-awaited support for small-and medium-
scale enterprises. (US$1=RM3.17)

Najib, who is also Finance Minister, also announced that Felda Global
Ventures Holdings will be listed by mid-next year to raise funds for the land
development agency to emerge as a global conglomerate as well as income tax
exemptions to accelerate development of the Kuala Lumpur International Financial
District (KLIFD).

"The listing will create another blue chip plantation company besides
attracting international investors to Bursa Malaysia," he said when tabling 2012
Budget in Parliament on Friday.

In clearly keeping the wheels well-oiled in Malaysia's economic
transformation process, Najib said 17 services sub-sectors will be liberalised
besides an allocation of RM2.5 billion under the public-private partnership
(PPP) facilitation fund with RM300 million for Bumiputera entrepreneurs.

To accelerate development of the five regional corridors, the government
will allocate RM978 million inlcuding an agropolitan scheme in Besut,
Terengganu, and a palm oil industrial cluster project in Lahad Datu, Sabah, and
Samalaju water supply project in Sarawak.

In efforts to woo multinational corporations and establish treasury
management services, the government has proposed an income tax exemtpion of 70
per cent for five years, witholding tax exemption on interest payments on
borrowings and stamp duty exemtpion on loans and service agreements.

Najib said the 2012 Budget will cost RM232.8 billion, of which RM181.6
billion is for operating expenditure and RM51.2 billion for development.

Of the development expenditure, RM29.8 billion is provided for the economic
sector to support infrastructure needs, industry, agriculture and rural
development.

As for the KLIFD, Najib proposed a 100 per cent income tax exemtpion for
10 years and stamp duty exemption on loans and service agreements for KLIFD-
status companies, an industrial building allowance and accelerated capital
allowance for KLIFD marquee-status companies and income tax exemption of 70
per cent for five years for property developers in the district.

Turning to sukuk (Islamic bond) market, which has emerged as a feather in
the cap for Malaysia's Islamic finance, the Prime Minister said a tax deduction
on expenses incurred for "sukuk wakala" will be given for a three-year period
from 2012 to encourage more sukuk issuances.

"The income tax exemption given for non-ringgit sukuk issuance and
transaction is extended for another three years until the year of assessment
2014," he said.

He also said the I-VCAP, a subsidiary of Valuecap Sdn Bhd, will provide
RM200 million as seed money for shariah-compliant exchange traded funds (ETF)
which will see the fund provide a matching loan subject to a maximum of RM20
million.

The prime minister also said the full exemption of import and excise duties
on hybrid and electric cars given to franchise holders will be extended to end-
2013.

Realising the importance of small and medium enterprises to the country's
economy, Najib said a RM2 billion shariah-compliant SME Financing Fund will be
established next year, which will be managed by selected Islamic banks.

The government will finance two per cent of the profit rate.

To prevent entrepreneurs succumb to failure due to economic recession and
higher costs, he said the government will provide RM100 million for the SME
Revitalisation Fund.

In addition, he said, the goverment will also establish a RM10 million SME
Emergency Fund to help them affected by natural disasters so that they can
recover and restart their businesses quickly.

Najib said the franchise fees borne by local franchisees will be allowed tax
deduction in efforts to develop the local franchise industry and Malaysian
brands.

He said Pulau Langkawi will be redeveloped with the Langkawi Five Year
Tourism Development Master Plan to be launched with an allocation of RM420
million to be used to restructure the Langkawi Development Authority, set up a
park rangers unit, upgrade museums, beaches and small businesses as well as
provide a more efficient transportation system.

Hotel operators in Peninsular Malaysia investing in new four and five-star
hotels will be given pioneer status with 70 per cent income tax exemption or
60 per cent investment tax allowance for five years.

In efforts not to jeopardise the ability of low-and middle-income groups
to buy houses, Najib said the real property gains tax (RPGT) will be reviewed,
whereby for properties held and disposed within two years, the RPGT rate is 10
per cent and five per cent for properties held for more than two years and up to
five years.

"I am confident the revised RPGT rates are low and will not affect genuine
property owners and will curb speculative activities," he said.

He also announced a RM100 million allocation for creativity and innovation
of which RM30 million will be used to establish the Market Validation Fund to be
managed by the Malaysian Technology Development Corporation together with the
Malaysia Innovation Agency.

The Prime Minister said a Gross National Income of more than RM30 billion
will be generated by 2020 from commercialisation of some 300 intellectual
properties in the form of new products and technology from universities by the
private sector.

To enable SMEs to commercialise research products, the government will
establish a shariah-compliant Commercialisation Innovation Fund totalling RM500
million with an attractive profit margin.

"Effective 2012, this fund will be available at selected Islamic banks with
the government financing two per cent of the profit rate", he said.

Bank Simpanan Nasional (BSN) will provide RM100 million for soft loans with
four per cent interest including stamp duty exemption to encourage professionals
such as lawyers, doctors and accountants to set up firms in small towns as part
of the government's Rural Transformation Programme, he said.

Besides this, he said, the Rubber Industry Smallholders' Development
Authority (Risda) will implement new planting and rubber replanting programmes
with an allocation of RM140 million which will benefit 20,000 smallholders.

Najib also said the government will continue to implement rural
infrastructure projects with an allocation of RM500 million, which will give
opportunities for 29,000 Class "F" contractors.

To ease inflation and enhance the people's well-being, the Prime Minister
said RM1.1 billion will be set aside next year for the development of
agriculture in Peninsular Malaysia's east state of Terengganu, East Malaysia
states of Sabah and Sarawak.

A RM300 million allocation will be provided to expand the scope of the
Commercial Agriculture Fund to include innovative agriculture projects, a move
which will increase the number and income of agropreneurs.

The government plans to open 85 KR1M units next year with an allocation of
RM40 million.

He said 1Malaysia People's Housing (PR1MA), the sole agency to develop and
maintain affordable and quality houses, will develop several plots of
government-owned land around Sungai Besi and Sungai Buloh, while identifying
areas in the vicinity of mass rapid transit (MRT) and light rail transit
(LRT) areas.

"The government will also provide 100 per cent stamp duty exemption on loan
instruments to buy houses," he said.

He said the government will continue its noble efforts of rehabilitating
abandoned housing schemes with an allocation of RM63 million to revive 1,270
abandoned houses besides RM40 million apportioned for restoration and
maintenance of public and private low-cost housing.

To increase home ownership, Employees Provident Fund (EPF) withdrawals for
house purchases will be extended to expatriate working in Malaysia, he said.

Permodalan Nasional Bhd together with selected financial institutions will
implement Skim Amanah Rakyat 1Malaysia or SARA 1Malaysia for households with
income below RM3,000 a month to increase their disposable income and encourage
savings.

This is expected to benefit 100,000 households, the prime minister said.

To develop the Bumiputera community, he said, the government will allocate
RM200 million for the development of Bumiputera entrepreneurs and contractors to
the Rural and Regional Development Ministry.

Najib said the government will set aside RM10 million for training
programmes to encourage female professionals to return to work.

He also said RM2.1 billion will be made available for micro financing to
entrepreneurs, particularly women, and of this, RM100 million each will be
provided for Malaysian Indian and Chinese entrepreneurs through a special unit
under Amanah Ikhtiar Malaysia (AIM).

The government has also established MyCreative Venture Capital with an
initial RM200 million fund to encourage creative ideas among Malaysians.

"We need to ask, with the stringent financial structure, will the ideas of
people like Bill Gates, the late Steve Jobs, Michael Dell, the Wright brothers,
Thomas Edison, be successful.

"Ideas worth billions of ringgit may have been wasted," he said in
announcing the fund which will remove constraints to financing creative ideas.

The federal government's total revenue next year is expected to increase by
1.9 per cent to RM186.9 billion from RM183.4 billion this year, while the
government's deficit in 2012 is set to improve to 4.7 per cent of the gross
domestic product from 5.4 per cent this year.
-- BERNAMA