MALAYSIA’s Budget 2020 has been tabled and announced by the current government last Friday (11 Oct) and everyone is looking at it to see what’s in it for them.
As everyone is aware, every time the government announces the budget, that means there will be changes in policies as well as governmental directions as well as emphasis would be for the country
If you are an entrepreneur and business owner or you are intending to go into business, it is very important that you might want to be aware of what are some of the things in the budget that may affect you or provide you with opportunities.
The Budget 2020 emphasises on spurring growth and investments into the country, with a myriad of incentives for all levels of businesses, from MNCs to SMEs; employers to employees; women, youths and returning job seekers.
A Very SME-focused Budget
This year’s budget further favours SMEs, startups and newer forms of entrepreneurship like social enterprises and digital entrepreneurs. What are the business opportunities that you can grab in the Budget 2020?
Here are some ideas shared below by KC See, CEO of Quest MasteryAsia Group Sdn Bhd, a serial entrepreneur and business consultant for many businesses in Asia with over 35 years experience in the industry.
For supporting the SMEs, the government looks to have 5 broad strategies: attracting foreign investments, growing local SMEs into global businesses, easy access for financing, lower tax rates and helps SMEs to digitise their operations to improve their business operations.
They’re looking at how to boost SME contribution to the GDP from the present 38% to 50% by 2030.
Strategy 1: Attracting foreign investments to support the local SMEs
The government will make available up to RM1 billion worth of customised packaged investment incentives annually over 5 years, as part of the strategic push to attract targeted Fortune 500 companies and global unicorns in high technology, manufacturing, creative and new economic sectors.
In order to qualify, companies must invest at least RM5bil each in Malaysia to generate additional economic activities.
It would support small and medium enterprises (SMEs), create 150,000 high-quality jobs over the five years and strengthen manufacturing and service ecosystems.
Strategy 2: Growing local SMEs into global businesses to compete in the global export markets
The government will allocate RM1bil in customised packaged investment incentives annually over 5 years to transform Malaysia’s best and most promising businesses into the most competitive enterprises in global export markets.
The government expects this measure to significantly strengthen our local supply chain ecosystem and create an additional 100,000 high-quality jobs for Malaysians over the next 5 years.
Strategy 3: Providing easier access for financing
Financing has always been a challenge for SMEs in Malaysia. Recognising this challenge, the government will facilitate access to financing for SMEs with these incentives:
- An allocation of an additional RM50 million to My Co-Investment Fund (MyCIF) under the Securities Commission Malaysia to leverage such platforms to help finance the underserved SMEs. MyCIF will co-invest in equity crowdfunding (ECF) and P2P (peer-to-peer) financing campaigns to help the SMEs to raise funds.
- The Skim Jaminan Pinjaman Perniagaan (SJPP) will be enhanced to better facilitate access to financing for SMEs. The government guarantee will increase from 70% to 80% for Bumiputera SMEs, export-oriented SMEs, and SMEs investing in automation and digitalisation.
Also, to further encourage alternative sources of funding for startups companies and attract more foreign investment to Malaysia, tax incentives given to venture capital and angel investors will be extended until the year 2023.
Strategy 4: Lowering tax rates
For small-medium enterprises, the income tax rate for chargeable income up to the first RM500,000 was reduced by 1% to 17% in 2019.
To further support the growth of SMEs, the chargeable income subjected to 17% rate will be increased to RM600,000, subject to the SME having a paid-up capital of not more than RM2.5 million and annual sales of not more than RM50 million.
Strategy 5: Helping SMEs digitise & automate their operations to improve their business operations
The Malaysian government is encouraging SMEs to adopt digitalisation measures for their business operations, including electronic Point Of Sale systems (e-POS), Enterprise Resource Planning (ERP) and electronic payroll system.
They will provide a 50% matching grant of up to RM5,000 per company for the subscription of the above services. This matching grant will be worth RM500 million over 5 years, limited to the first 100,000 SMEs applying to upgrade their systems.
Also, the Government will allocate RM550 million to provide Smart Automation matching grants to 1,000 manufacturing and 1,000 services companies to automate their business processes. This grant will be given on a matching basis of up to RM2 million per company.
KC believed the purpose of these schemes is to push the SMEs to digitise & automate their operations.
“As you know, if you are not doing that, you will be a dinosaur and be out of play very soon.”
“It’s quite important for you if you are an SME business owner to latch on to this to increase and fasten the adoption of productivity tools and automation process that can improve your business operations,” he added.
Today, many companies are still running operations the old way, for example, using paper to apply for leave. Many still struggle to pay payroll online.
SMEs should act quickly to digitise and automate their businesses. They are intended to transform and bring businesses to a new way of doing businesses that most Malaysian companies are not.
Now here is a very quick financial way for you to move into the digital age.
This year is a great time for you to transform and bring your business to a new level and do things that the whole world is working towards.
If you want to meet KC, in order to know how to grab the opportunities from the latest Budget, click here to find more information.
Increasing women participation in business
This year, there is a huge emphasis on women entrepreneurs with a lot of incentives to spur women participation in business.
In Malaysia, women-owned businesses constitute 20.6% of the total 907,065 SMEs in Malaysia. This is significantly lower than their male counterparts and of this figure, 97.2% of women are in the service sector.
Some incentives provided by the government in Budget 2020 include:
- Women entrepreneurs will receive RM500m in government guarantee facility which will be distributed by Skim Jaminan Pinjaman Perniagaan (SJPP).
- SME Bank will introduce new funds of RM200mil dedicated to women entrepreneurs with the potential to become regional champions.
Incentives for startups and newer forms of enterprises
The government is also focused on startups and newer forms of enterprises like social enterprises and digital entrepreneurs, in order to tap into a growing global trend in an ever-connected digital marketplace and an eco-conscious new market segment.
In this Budget 2020, the Government will provide RM20 million to Cradle Fund for the provision of training and grants to seed companies.
Other than that, the government also place a strong focus on social enterprises with these incentives:
- The government will provide RM10 million to the Malaysian Global Innovation & Creativity Centre (MaGIC) to support the growth of social enterprises, which help to improve the socio-economy of local communities.
- Provide additional RM10 million to MyCIF specifically for social enterprises to fundraise via P2P Financing platforms.
Social enterprises are becoming a hot topic within the Malaysian startup scene. Social entrepreneurs leverage the use of entrepreneurial principles to plan, develop and manage a sustainable business to achieve social goals.
Examples are like Kaki Seni, who advocate for the performing arts in Malaysia & PT Foundation, that advocates for HIV/AIDS education and support programs for communities in Malaysia.
Digital enterprise is another key area that the government is very keen to grow in the near future.
The government provides funds of RM10 million to MDEC to train micro-digital entrepreneurs and technologists to leverage on e-Marketplaces and social media platforms to sell their products.
100 of these micro-digital entrepreneurs, a majority of whom are women and youth, were able to generate RM23 million in revenues over just 6 months, unleashing life-changing experiences.
KC said it’s very clear that the government is very keen to assist startups and youths to get into the business, especially in new areas like micro-digital and technology sector.
“So many of you out there have some great ideas and are working on your online platforms, looking into digital businesses, this is a big opportunity for you.”
Surprise for employers in Budget 2020
Employers are also able to enjoy certain benefits with some attached conditions when they employ certain segments of the population.
In this Budget 2020, the government proposes employers will receive a hiring incentive up to RM300 per month for 2 years if they hire:
- graduates who have been unemployed for more than 12 months
- returning women workers who have stopped working for a year or more & are between 30-50 years old
Besides that, employers will receive a hiring incentive up to RM250 per month for 2 years if they hire Malaysians to replace foreign workers within the business.
However, the Government has enhanced the benefits given to employees with some additional costs to the business.
- An increase in maternity leave from 60 days to 90 days effective 2021;
- Extending the eligibility to overtime from those earning less RM2,000 to those earning less than RM4,000 per month;
- The Government proposes to increase the minimum wage rate only in major cities to RM1,200 from RM1,100 per month, effective 2020.
Preparing Yourself To Grab The Opportunities From Budget 2020
With the new budget benefits and incentives, how are you taking advantage of the new schemes offered?
You need to study this and take proper advantage.
One of the things that KC talk about in his Building Smart Business Programme is to look into changes.
He says this very often:
The more changes there are, the more opportunities.
Some of these changes in the budget will provide an opening for something that you may not realise but if you study it closely, could open up a whole opportunity for you to look into and for you to grow your business or for you to get into the business sector.
With challenging times ahead of us, the budget will increase the contribution of businesses to the local economy.
This budget is a very SME-focused budget. There’s a lot of things for SMEs.
A good business strategy backed with the new incentives offered will drive your business to higher levels.
So what are these important strategies that you need?
Now if you need more information, meet KC at the Building Smart Business seminar.
He will share with you how to run your business the smarter way and how to take your business to a higher level.
The budget will provide the impetus, the rest is just doing things the smarter way.
For more information, click on this link: www.masteryasia.com/building-smart-business-seminar/?ls=2421