By Amarjeet Singh, EY Asean and Malaysia Tax Leader
On 5 June 2020, the Prime Minister unveiled the RM35 billion Short-Term Economic Recovery Plan (“Plan”). This Plan was unveiled against the backdrop of a pessimistic global economic outlook and a steep decline in Malaysia’s economic growth projections for 2020, from 4.8% to -2% to 0.5%.
Addressing the now
The previous PRIHATIN Economic Stimulus Packages was announced to preserve over 2.4 million jobs and maintain a relatively low unemployment rate and eased cash flow concerns for around 11 million Malaysians from the B40 and M40 groups as well as provided financial relief to businesses, particularly the SMEs.
Today’s announcement includes the extension of the Wage Subsidy Scheme, and an additional RM2 billion for subsidized SME financing. New initiatives include RM1.5 billion in funding for Hiring and Training Assistance for Businesses and the RM2 billion Reskilling and Upskilling Programmes.
Focusing on the next and the beyond
To facilitate and support the need for digital transformation, the Government has now introduced various initiatives and measures, including the Micros and SMEs E-commerce Campaign, matching grants and loans for technical and digital adoption.
The Government is also accelerating the digitalization of its services in areas such as stamp duty and unclaimed monies matters. It is hoped that this is the beginning of a move to substantially increase the use of technology by the Government in interactions with the public and the delivery of services in the new normal.
There are also various measures aimed at encouraging local entrepreneurship and promoting investments. Also, generous incentives were announced to encourage foreign investors to relocate large operations to Malaysia. These include a full tax exemption for 10 or 15 years and investment tax allowances for investments.
The above incentives focus on capital-intensive investments. In line with the push towards digitalization, it is also important for the Government to consider incentives for non-capital intensive businesses that also generate significant economic benefits through local spending, the creation of high level jobs and/or the development or use of cutting-edge technology.
Overall, the Short-Term Economic Recovery Plan focuses on the right priorities – saving jobs and preserving business continuity, digitalization, encouraging high-value investments and further improving Government efficiency.