KUALA LUMPUR: Minister of Finance YB Lim Guan Eng has announced the Budget 2019 in Parliament on the 2nd November 2019. The 2019 Budget will allocate a total of RM314.5 billion in expenditure compared to an estimated RM290.4 billion in 2018. The Budget 2019 holds the theme “A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society” that will have three focus areas with twelve key strategies to map out a goal to restore the Malaysian economy as an Asian Tiger.
The three focus areas are as followed:
1) To Implement Institutional Reforms;
2) To Ensure The Socio-Economic Wellbeing Of Malaysians;
3) To Foster An Entrepreneurial Economy.
We have summarised and highlighted some of the major developments in the employment sector followed by the resource allocations during the speech below:
Improving Employment and Employability
Despite the unemployment rate of only 3.4%, the employment rate is still an all-time high. With that said, there are structural problems that could lead to long-term unemployment especially among the youths.
- The Human Resource Development Fund(HRDF) will launch 2 new programmes, “Apprenticeship” and “Graduate Enhancement Programme for Employability”(GENERATE) to provide skills to school-leavers as well as to improve the marketability of graduates from the institutions of higher learning. RM20 million will be allocated by the HRDF in matching grants for these programmes which will benefit at least 4,000 youths.
- New policies will also be introduced to encourage the employment of those past the retirement age of 60. It is estimated that 1 million Malaysians aged between 61 and 65 years old will still be active and productive by the year 2020.
- The employer portion of Employee Provident Fund (EPF) contributions will be reduced to 4% from the current 6% effective 1 January 2019. This is to enhance the disposable income of working retirees. The current mandatory employee contribution for post-retirees will also be reduced to zero. The reduction should incentivise employers to hire or retain senior workers while continuing to leverage their skills and knowledge. Additional tax deduction to employers who employ this group up to a monthly salary of RM4,000 was proposed as well.
- To ensure every Malaysian citizen are given an opportunity to progress with the country, there will be an additional tax deduction provided for companies who employ ex-convicts up to a monthly salary of RM4,000 to contribute to the economic growth.
- For government pensioners who are receiving pensions of less than RM1,000 per month, a one-off RM500 assistance will be provided by the Government to support qualified recipients that are retired from work.
- To ensure ‘contract of service’ officers will enjoy most of the benefits extended to the civil service the Government will allocate RM10 million per annum to provide available healthcare services for the parents. Additionally, the officers may apply for ‘Quarantine Leave’ when their children are inflicted with infectious diseases commencing 12 November 2018.
- The Government currently approves Unrecorded Leave for Muslim officers to perform their umrah(pilgrimage and functions) for up to 7 days for the entire duration of service.
- The minimum wage will be raised to RM1,100 per month for the whole of Malaysia starting 1 January 2019. In hopes of maintaining the need and importance of a living wage in an environment of rising costs.
- To reduce wage disparity amongst public listed companies in Malaysia, regulations will be implemented to publicly disclose key pay metrics yearly in their company annual report. This will cover ‘the lowest wage paid’, ‘average wage per worker’, the ‘highest and lowest wage ratio’ as well as a statement by the company on how they intend to improve their employees’ average pay.
Improving Welfare and Quality of Life
- To assist those who have lost their job during the full implementation of the Employment Insurance System (EIS) starting 1 January 2019. The Social Security Organisation (SOCSO) will pay compensation to those who have lost their employment. That includes employment-seeking and skills training allowance. Advices will be provided to assist these workers to seek new jobs at the fifty-four SOCSO offices around the country.
- Government retain their support for the B40 household through the “Bantuan Sara Hidup” (BSH) cash grants. Starting January 2019, each household with a monthly income of RM2,000 and below will receive the sum of RM1,000. Households with a monthly income between RM2,001 and RM3,000 will receive RM750. Whereas, for those earning between RM3,001 to RM4,000 monthly will receive RM500.
- In partnership with the private insurance industry. The Government will oversee the national B40 Health Protection Fund to provide free protection against the top 4 critical illness for up to RM8,000 and up to 14 days of hospitalisation income over at RM50 per day starting 1 January 2019. Primarily, hospitalisation income of RM700 per annum will be available.
- To support Malaysian households in tackling financial emergencies such as critical illness in the family can lead to severe financial stress. Insurance and takaful will be the safety net by providing financial support. Enabling households to get back on their track, especially for the lower income groups.
Education for a Better Future
The Education Ministry retained the single largest recipient of Budget allocation at RM60.2 billion or 19.1% of the total Budget 2019. In hopes of building a sustainable and guaranteed mechanism through better quality education at all levels to achieve higher income growth.
- A total of RM2.9 billion will be provided to support students from lower income groups in terms of food, textbooks and cash assistance.
- RM652 million for the purpose of upgrading schools and RM100 million to reconstructing dilapidated schools.
- RM206 million will be allocated towards the development and provision of training programs in Polytechnics an Community Colleges. Whereas, RM30 million will be allocated to the Training and Vocational Education and Training. Further allocation of RM20 million will be provided to raise youth competency via a TVET sponsored Bootcamp. Additionally, RM400 million will be allocated to institutions of higher learning.
- The Government will retain their funding towards scholarships and lending to all Malaysians with a total allocation of RM3.8 billion. Additional RM2 billion will be allocated to provide scholarships for Bumiputeras under the sponsorship of MARA.
- The Government will allocate RM210 million as part of the Bumiputera Empowerment Agenda to strengthen education and human capital development programs which will be managed by Yayasan Peneraju Pendidikan Bumiputera.
Accelerating Adoption of Industry 4.0
With the aim to make Malaysia develop into the prime destination for high-tech industries. The Government will initiate the following actions to support Industry 4WRD:
- Allocation of RM210 million from 2019 to 2021 to assist the transition and migration to Industry 4.0. The Government will support the first 500 SMEs to carry out the Readiness Assessment to migrate to Industry 4.0 platforms through Malaysia Productivity Corporation.
- Allocation of RM2 million to the Knowledge Resource for Science and Technology Excellence (KRSTE.my) to instil greater collaboration between public and private sector based on existing resources.
- To encourage SMEs to invest in automation and modernisation which develops part of the Industry 4.0. The Government will allocate RM2 billion under Business Loan Guarantee Scheme (SJPP).
- To accelerate the integration of smart technology comprise driving automation, robotics and artificial intelligence in the industry. A total of RM3 billion Industry Digitalisation Transformation Fund with a subsidised interest rate of 2% will be offered by the Bank Pembangunan Malaysia Berhad.
- MIDA will continue to provide matching grants through its High Impact Fund (HIF) with a specific emphasis on Industry 4.0 initiatives. This covers activities such as R&D, initiatives to obtain international certification and standards, modernizing and upgrading of facilities and tools and licensing or purchase of new or advanced technology.
- Khazanah will spearhead and develop an 80-acre development in Subang as an aerospace industry hub. Additionally, Khazanah will work with all relevant agencies, especially MARA to produce high-skilled workers to meet the demands of the industry.
- On top of these action plans, the Government intends to upgrade the marketability of Malaysian graduates and the skill level of the Industry 4.0 related workforce by providing double tax deductions:
For scholarships and bursaries provided by companies to students enrolled for technical and vocational training, diploma and degree courses in engineering and technology.
Company expenditures linked to participation in the National Dual Training Scheme for Industry 4.0 and other relevant programmes approved by the Ministry of Human Resources, or the Malaysia Investment Development Authority.
For company expenses in carrying out structured training programmes for students in the fields of engineering and technology which are approved by the Ministry of Human Resources.
Women in the Workforce
With the current female participation rate in the labour force is only 53.5% in 2017 compared to 77.7% for men. Of the number who are not employed, 60% or 2.6 million women cited housework as the reason why they did not join the labour force. Based on Khazanah Research Institute recently published a report. Raising women’s employment level by 30% would raise Malaysia’s GDP by around 7 to 12%. Hence, it is necessary for the Government to employ policies to encourage women to engage in the workforce:
- RM10 million will be allocated to set up another 50 childcare facilities in Government buildings to ease the burden of working mothers. Private sectors are encouraged to follow suit to ensure equal employment opportunities for women.
- The Government is committed towards increasing women involvement to 30% at leadership and decision-making levels in companies and organisations.
- More women will be encouraged to participate among the public listed companies. As only 23.2% of the appointed Board of Directors are women among the top 100 largest companies on Bursa Malaysia. The Government is reaching out to the private sector to emulate them. To ensure the objective of 30% women participation in the Board of Directors is achieved by 2020.
With the revelation of the budget, these changes are aligned with the necessary legislative changes that have been affecting the country’s economic progress for years. The Budget 2019 is part of a long-term plan by the government that strives to restore the country’s fiscal health and the planning will escalate slowly, that includes future planning such as the proposed digital tax coming in 2020.
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