Mini budget will benefit both large and small firms

KUALA LUMPUR: Companies big and small found themselves recipients of the measures contained in the RM60bil mini budget, which focused on addressing the credit woes faced by the private sector.

In helping to overcome the tight credit market, the Government announced it was setting up a Financial Guarantee Institution and a Working Capital Guarantee Scheme and reducing the time companies take to raise funds from the capital markets.

The investment funds of Khazanah Nasional Bhd were increased by RM10bil to be invested over two years, while the tourism industry was given a RM200mil boost.

Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak also announced several tax measures which experts said were progressive and would help smaller companies.

AmResearch Sdn Bhd research head Benny Chew said the mini budget was a step in the right direction.

“The key challenge is the multiplier effect, especially for listed companies, which may take some time to filter through,” he said.

For businesses, the centrepiece of the RM60bil stimulus package was arguably the plan to get credit flowing again.

“Under current market conditions, even companies with investment-grade ratings are unable to access the capital market, particularly the bond market,’’ Najib said in his speech.

To that end, the Financial Guarantee Institution, which will eventually have a capital of up to RM2bil, aims to help guarantee bonds worth RM15bil.

In addition, the Government will set up an Industry Restructuring Guarantee Fund Scheme, totalling RM5bil, to increase productivity and value-added activities, as well as give a lift to green technology.

Under the scheme, companies with shareholders’ funds of less than RM20mil can have their loans guaranteed on a 80:20 split between the Government and the financial institution.

Transparency International Malaysia president Tan Sri Ramon Navaratnam said the raising of debt and guaranteeing of loans was good but the Government should take the opportunity to restructure the economy.

“I heard from the speech that the Foreign Investment Committee (FIC) regulations will be relaxed but more needs to be done,” he said.

Ramon said transparency in the implementation process of the package was important.

“A high proportion of the funds (allocation for projects) are lost through leakages because the contracts are not put out through open tenders and this will affect output and efficiency,” he added.

To help the motor vehicle sector, where sales are slowing and the supply chain is facing difficulties, the Government will increase its allocation for the Automotive Development Fund by RM200mil.

It will also help part finance a discount of RM5,000 given to owners of cars that are more than 10 years old who trade in their cars to buy a new Proton or Perodua vehicle.

The mini budget also contained tax measures for accelerated capital allowance, which tax experts said would help spur investments should an economic recovery take place before the end of next year.

“Normally, once introduced it is there to stay and enhanced in the future,’’ said Deloitte Touche Tohmatsu Tax Services Sdn Bhd managing director Ronnie Lim.

The Government also allowed expenses for office renovations undertaken before the end of next year to be given accelerated capital allowance up to RM100,000.

“The idea behind the refurbishment scheme is to create activity in the construction sector and encourage businesses to expand,’’ said Ernst & Young Tax Consultants Sdn Bhd national director of tax Kenneth Lim.

Hai-O Enterprise Bhd managing director Tan Kai Hee said the size of the stimulus package did not matter as long as the implementation was timely.

“We’re rather disappointed that there’s no reduction in personal income tax as this will help boost spending,” he said.

Tan said if the country could start a campaign to buy Malaysian products, it could help small and medium-scale enterprises.

“Our exports will be affected badly by the crisis so we have to prevent industries from failing by boosting domestic consumption,” he said.

Source: http://biz.thestar.com.my/news/story.asp?file=/2009/3/11/business/3451123&sec=business