THE 2010 BUDGET SPEECH (PART 1)

Mr. Speaker Sir,

I beg to move the Bill intituled "An Act to apply a sum from the Consolidated Fund for the service of the year 2010 and to appropriate that sum for the service of that year" be read a second time.

INTRODUCTION
In the name of Allah, the Most Gracious and the Most Merciful.

2. Praise be to Allah, for enabling me to present the 2010 National Budget in this august House. This is my maiden budget since taking office as the Minister of Finance.

3. I would like to begin my first Budget by reciting verse 32 in Surah Al-Zukhruf, "Is it they who would portion out the Mercy of your Lord" Is it We Who portion out between them their livelihood in this world, and We raised some of them above others in ranks, so that some may employ others in their work. But the mercy (Paradise) of your Lord (O Muhammad) is better than the (wealth of this world) which they amass.?

4. Taking the lesson from the verse, the Government has great responsibility to ensure that the nation?s wealth is enjoyed by the rakyat in a fair and equitable manner. We are in the midst of a difficult environment following the global economic crisis, which adversely affected the country. To date, the global economy and trade have yet to show strong signs of recovery. This requires us to plan wisely as well as make firm and bold decisions, given the limited resources available to stimulate the economy.

5. Although the 2010 Budget is the last budget for the 9th Malaysia Plan (9MP), it is the foundation for the development of the new economic model and a precursor to the 10th Malaysia Plan (10MP).

6. We are now at a critical juncture, either to remain trapped in a middle-income group or advance to a high-income economy. As such, we must be the agent of change and seek solutions in addressing global economic challenges.

7. We were successful in the past in transforming the economy from agriculture to industrial-based. We now have to shift to a new economic model based on innovation, creativity and high-value added activities. Only then, we will be able to remain relevant in a competitive global economy.

8. Innovation is an important national agenda. The Government will transform Malaysia through a comprehensive innovation process, comprising innovation in public and private sector governance, societal innovation, urban innovation, rural innovation, corporate innovation, industrial innovation, education innovation, healthcare innovation, transport innovation, social safety net innovation and branding innovation. Part of this innovation initiative is being implemented, through measures such as 1Malaysia Concept, National Key Result Areas (NKRAs), Key Performance Indicators (KPIs), new economic model and the establishment of PEMUDAH, PEMANDU and NEAC. The Government is committed and serious in undertaking total innovation to elevate the nation to a more advanced economy. Innovation Leadership for 1United, Innovative Malaysia.

9. Since assuming leadership of the Government, I have introduced several important initiatives to stimulate the economy for the well-being of the rakyat. Among these are:
i. Introducing the 1Malaysia Concept, People First, Performance Now;
ii. Liberalising 27 services sub-sectors and the financial sector;
iii. Implementing NKRAs and KPIs;
iv. Abolishing the Foreign Investment Committee guidelines and establishing
Ekuiti Nasional Berhad (Ekuinas);
v. Implementing programmes to ease the burden of the rakyat including
Program Perumahan Rakyat and rural infrastructure; and
vi. Launching Amanah Saham 1Malaysia to encourage investment and increase
income.

10. The 1Malaysia concept, People First, Performance Now, is a continuous effort in strengthening unity among the rakyat. This concept is based on positive values centred on social justice and acceptance of a multiracial society. This means the needs of the rakyat and the nation must always take precedence. Therefore, every step requires sacrifice and strong cooperation from every segment of the society.

11. I have announced the KPIs for the administration and the civil service. This is a bold step, which has never been implemented by any other country in the world. It is a clear testimony of the culture of responsibility and commitment of the administration and the civil service in discharging their duties, giving importance to
the well-being of the rakyat.

12. To effectively achieve KPI targets, I have also announced six NKRAs namely, reducing crime rate; combating corruption; expanding access to quality and affordable education; raising the standard of living of the low-income groups; strengthening infrastructure in rural and remote areas; and improving public transport.

ECONOMIC PERFORMANCE

13. The Malaysian economy is an open economy, with total trade about 200% of GDP. Therefore, we are vulnerable to uncertainties in external trade and international capital flows. As a result of the global crisis, our exports fell sharply by 23.4% in the first half of 2009 compared with an increase of 15.5% in the same period last year. Similarly, the Industrial Production Index declined 12.7% compared with an increase of 3.3%. Total net foreign direct investment (FDI) decreased to RM3.6 billion, compared with RM19.7 billion during the same period.

14. As a proactive measure, the Government responded swiftly with the implementation of two Economic Stimulus Packages totalling RM67 billion. These stimulus packages are among the biggest and comprehensive in terms of value and coverage compared with other countries. The implementation of these packages has prevented the economy from sliding into a deeper recession. As at 16 October 2009, more than 48,000 projects were completed and almost 40,000 projects are being implemented. The implementation of the packages is on schedule.

15. Following the Government?s proactive measures, the economy has begun to show signs of recovery. This is evident with the GDP contracting at a slower pace of 3.9% during the second quarter of 2009, compared with -6.2% in the first quarter. This improved performance was supported by the construction sector, which grew 2.8% in the second quarter, as a result of projects implemented under the stimulus packages. In addition, the agriculture and services sectors recorded increase of 0.3% and 1.6%, respectively. Private consumption expenditure rebounded 0.5%, following improvements in household sector confidence and labour market sentiment.

16. On 1 October, the International Monetary Fund (IMF) projected the world economy to contract at a slower rate of 1.1% in 2009 compared with its earlier projection of -1.4% in July. In fact, in 2010, the global economy is expected to grow strongly at 3.1%. World trade is expected to record -11.9% in 2009 and recover at 2.5% in 2010. Taking into account the performance of the global economy and international trade as well as improved domestic economic environment, the nation?s GDP in 2009 is projected at -3.0%, better than the earlier projection of -4.0% to -5.0% announced on 28 May 2009.

17. In 2010, the economy is expected to expand 2.0% to 3.0%. All sectors of the economy are projected to record positive growth, with the mining sector at 1.1%, manufacturing 1.7%, agriculture 2.5% and construction 3.2%. The services sector remains the main driver, expanding 3.6%. Economic growth will be supported by private consumption at 2.9% and private investment recovering 3.4%.

18. In addition, the rebound in exports at 3.5% is expected to contribute towards economic growth. Inflation remains low between 1.5% and 2.5% and unemployment at below 4.0%. Per capita income of the rakyat is projected to increase 2.5% to RM24,661 and income in terms of purchasing power parity to USD13,177.

2010 BUDGET STRATEGIES

19. The 2010 Budget will be the foundation for the development of the new economic model and the formulation of the 10MP. In tandem with the 1Malaysia concept, the focus of this Budget is the well-being of the rakyat and gives importance to the achievements of the NKRAs. This Budget will also emphasise on advancing the role of the private sector as the driver of economic growth, developing high-skilled human capital and enhancing the efficiency of the public service. With the theme 1MALAYSIA, TOGETHER WE PROSPER this Budget focuses on three strategies, namely:
First: Driving the Nation towards a High-Income Economy;
Second: Ensuring Holistic and Sustainable Development; and
Third: Focusing on Well-being of the Rakyat.

FIRST STRATEGY: DRIVING THE NATION TOWARDS A HIGH-INCOME ECONOMY

20. In advancing towards a high-income economy, the Government will take a new approach based on innovation, creativity and high value-added activities. These measures will more than double the per capita income of the rakyat in the next 10 years.

INCREASING PRIVATE INVESTMENT

21. The private sector was once the main driver of economic growth, with investment contributing almost 30% of GDP. However, the situation has changed since the 1997/98 Asian financial crisis. In recent years, private investment declined significantly to below 10% of GDP. Total domestic direct investment decreased from RM72 billion in 1997 to RM56 billion in 2008.

22. Hence, the private sector contribution in driving the economy will be intensified. Towards this end, the Government will give priority to enhance domestic investment and encourage local companies abroad to remit their profits and reinvest in the country. Currently, the nation faces stiff competition from neighbouring countries in attracting limited FDIs. As such, aggressive and innovative measures must be taken to attract and increase FDI inflows.

Providing business-friendly environment

23. The Government will address structural issues to provide a more conducive business environment and create a more market-oriented economy. Towards this, local authorities will take immediate steps to facilitate registration of businesses and expedite issuance of Development Orders. The Government has established 2 new Commercial Division Courts to expedite the hearing of commercial cases and resolve them within 9 months compared with a longer duration prior to this.

24. To ensure an effective delivery system, individuals and companies are only required to use a single reference number in their dealings with Government agencies. For individuals, the initiative known as MyID, uses MyKad number, while for companies, MyCoID utilises the Companies Commission of Malaysia (CCM) business registration number.

25. Both initiatives were introduced on 1 September 2009. Under phase one, MyID will be used in the Road Transport Department, Immigration Department, Employees Provident Fund (EPF) and Inland Revenue Board (IRB). MyCoID will be used in IRB, EPF, Pembangunan Sumber Manusia Berhad and Social Security Organisation (SOCSO). MyID and MyCoID will be extended to other Government agencies in stages beginning early 2010.

26. Concerted efforts to attract highly talented and skilled individuals from abroad are critical. Towards this, the Government will simplify the granting of Permanent Resident (PR) Status to highly talented and skilled individuals to accelerate technology transfers and the transformation process. In addition, visas will be automatically granted to working and dependent expatriate family members within 14 days. PR status will also be extended to foreign men married to Malaysian women.

27. A business-friendly environment requires uninterrupted electricity supply to ensure smooth business operations. For this, Tenaga Nasional Berhad (TNB) will spend RM5 billion to implement electricity generation, transmission and distribution projects in 2010. These include the Hydroelectric Project in Ulu Jelai, Pahang and Hulu Terengganu. Sabah Electricity Sendirian Berhad will increase its electricity generation capacity as well as strengthen delivery and distribution system in Sabah. This will reduce the System Average Interruption Duration Index to 700 minutes by
2010.

Implementation of Privatisation Initiatives

28. The Government will gradually reduce its involvement in economic activities, particularly in areas where it competes with the private sector. For this, the Government will privatise companies under Ministry of Finance (MOF Inc.) and other viable Government agencies. The second wave of privatisation aims to enable the companies and agencies to operate more efficiently and expand their activities. This will reduce their financial dependence on the Government.

Enhancing Implementation of Public-Private Partnership Initiatives

29. Public-private collaboration will be enhanced to enable the private sector to spearhead economic growth. High-impact projects by the private sector will be undertaken jointly with the Government. The role of the Government is to facilitate the provision of basic infrastructure to ensure project viability. Among projects to be implemented in 2010 include the development of an Integrated Immigration, Customs and Quarantine Complex (CIQ) in Bukit Kayu Hitam, construction of 6 UiTM campuses and the development of MATRADE Centre.

Intensifying Foreign Direct Investment

30. Malaysia faces stiff competition from regional countries in attracting FDI inflows. In this regard, the Government has relaxed conditions and simplified procedures for foreign companies to operate in Malaysia.

31. Khazanah Nasional Berhad and Permodalan Nasional Berhad will enhance collaboration with foreign investors in education, tourism and infrastructure. The Government will further intensify efforts to attract FDI by allowing equity ownership in companies and joint ventures in local projects.

32. We have taken aggressive steps to attract investors from Middle East, China and India. This initiative has yielded positive results. Following my recent visit, a company from Saudi Arabia has invested USD1.5 billion in a high-impact project in collaboration with 1Malaysia Development Berhad (1MDB), a Government-owned sovereign wealth fund, which also invested USD1 billion in the project.

33. I often remind the private sector and Government-linked companies (GLCs) not to neglect their social responsibilities in their quest for profits. In line with this, for a start, 1MDB will establish a corporate social responsibility fund totalling RM100 million as a start to finance community activities.

INTENSIFYING RESEARCH, DEVELOPMENT AND COMMERCIALISATION

34. Currently, expenditure on R&D activities is at 0.6% of GDP, well below the United States at 3%, South Korea 3.5% and Taiwan 2.4%. To shift towards a high income economy, we need a strong foundation in research, development and commercialisation (R&D&C) activities. Therefore, to strengthen R&D&C activities, the Government will undertake the following measures:
First: Rationalising all research funds and grants to be more effective to achieve set targets;
Second: Establishing a National Innovation Centre supported by a network of innovation excellence centres under the Ministry of Science, Technology and Innovation and in collaboration with the Ministry of Higher Education;
Third: Integrating R&D activities with patents, copyrights and trademarks registration to ensure R&D&C processes are implemented more effectively. The cooperation between patent and research agencies will expedite the commercialisation of research findings; and
Fourth: Providing small and medium enterprises with tax deduction on expenses incurred in the registration of patents and trademarks in the country.

LEVERAGING FULLY ON NICHE AREAS

35. We must intensify efforts to fully leverage on the potential of sectors in which we have the advantage, including the services sector. To date, the contribution of the services sector to GDP is 58% and has the potential to be developed further. Thus, we have to focus on niche areas with potential and move up the value chain as well as generate higher returns. The areas include tourism, information technology and communication (ICT), finance and Islamic banking, halal and green technology industries.

Boosting Tourism Industry

36. The tourism industry has the potential to be further developed, given its high value-add, particularly ecotourism, agrotourism, edutourism and health tourism. Despite the weak global economic environment and the outbreak of influenza A (H1N1) pandemic, tourist arrivals remain high, averaging 2 million per month. As at August 2009, tourist arrivals increased 4.4% to 15.4 million compared with 14.7 million during the same period in 2008.

37. To further intensify the tourism industry, the Government will allocate a total of RM899 million in 2010. Among the main programmes to be implemented are:
First: Attracting more participants from United Kingdom, Japan, Republic of Korea, Middle East, India and China to participate in the Malaysia My Second Home (MM2H) programme;
Second: Upgrading the quality of infrastructure in tourism centres throughout the country, such as ecotourism development and upgrading homestay facilities;
Third: Ensuring front liners are locals. In this regard, the service of foreign workers currently employed as front liners will be terminated in stages;
Fourth: Utilising internet-based advertising to promote tourism activities; and
Fifth: Providing more attractive tourism products and events including KL Grand Prix Fest, National Water Festival, Rain Forest EcoChallenges and Malaysia International Golf Exhibition as well as launching a largescale shopping mall for branded items based on the factory outlet concept.

38. To further promote the medical tourism industry, the Government will enhance tax incentives for healthcare service providers who offer services to foreign health tourists. Income tax exemption of 50% on the value of increased exports will be increased to 100%. This enables healthcare service providers to offer high quality health services and attract more health tourists.

Strengthening ICT Industry

39. To strengthen ICT, the Government will expedite the implementation of High Speed Broadband (HSBB) at a total cost of RM11.3 billion, of which RM2.4 billion is from the Government and RM8.9 billion from Telekom Malaysia. Initially, broadband services with the speed of 10 mega bytes per second (Mbps) will be provided in selected areas in Kuala Lumpur and Selangor by end-March 2010. Subsequently, these services will be extended to other selected areas nationwide between 2010 and 2012.

40. Broadband penetration is currently at 25%. This rate is far lower compared to 95% in the Republic of Korea, 88% in Singapore, 64% in Japan and 60% in the United States. In order to attain developed nation status, computer ownership and broadband penetration should be enhanced. Various tax incentives have been given to augment the supply of broadband services in Malaysia, in respect of infrastructure development and capacity. To further enhance broadband penetration, the Government proposes that individual taxpayers be given tax relief on broadband subscription fee up to RM500 a year from 2010 to 2012.

41. Civil servants are eligible to apply for computer loans up to a maximum of RM5,000 from the Government once in every 5 years. To encourage computer ownership, civil servants can now apply for computer loans once in every 3 years.

Intensifying Halal Industry

42. The world Muslim population exceeds 1.8 billion while the demand for halal products and services continues to grow, reaching USD2.1 trillion annually. In addition, halal products are increasingly popular among non-Muslims. In this context, as a rapidly developing Islamic country, Malaysia is recognised as a hub for halal food and products. To further advance the halal industry, the Government will:
First: Formulate the Halal Act in collaboration with state Majlis Agama Islam, which will be the basis for the development, regulation and enforcement of halal industry activities;
Second: To corporatize the Halal Industry Development Corporation (HDC) as an agency under the Ministry of International Trade and Industry (MITI). This agency will prepare and implement an action plan for the development of halal industry;
Third: Intensify Halal Certification by Department of Islamic Development Malaysia (JAKIM) by collaborating with international institutions to obtain standards certification, such as Hazard Analysis and Critical Control Point and Good Manufacturing Practice. This will enable JAKIM Halal certificates to be internationally recognised; and
Fourth: Developing the halal products anti-smuggling system at 3 entry points and 3 main ports to facilitate agencies, such as Royal Customs Malaysia, Department of Veterinary Services and JAKIM to prevent smuggling activities as well as reduce risk of pandemic diseases. An amount of RM24 million will be provided.

ADVANCING AGRICULTURE SECTOR

43. The agriculture sector has contributed significantly to the income of the people in rural areas and to economic growth. The Government is confident that the sector has the potential to be upgraded and play a significant role in generating income for the rakyat. The transformation of the sector needs to be intensified from cultivation to marketing the products. This process involves programmes aimed at attracting more young entrepreneurs, encourage best agricultural practices and upgrade agriculture infrastructure. For this purpose, the Government will allocate RM6 billion for the agriculture sector, among others:
First: Upgrade and improve drainage and irrigation infrastructure in paddy fields involving 180,000 farmers with an allocation of RM137 million;
Second: Implement the Paya Peda Dam Project in Terengganu, which will increase water supply capacity to Skim Pengairan Padi in Besut. For the year 2010, a sum of RM70 million will be provided;
Third: Modernise the aquaculture industry and implement entrepreneurship training scheme for aquaculture breeders with focus on production of fish fry and ornamental fish. The scheme will benefit 1,150 participants, involving an allocation of RM82 million;
Fourth: Develop food farming industry such as fruits, vegetables, organic farming, herbs, seaweeds and swiftlet nests with an allocation of RM149 million;
Fifth: Develop basic infrastructure of livestock farms and establish supply chains for production of beef and mutton with an allocation of RM58 million; and
Sixth: Implement the incubator programme to train and guide youths and graduates to be successful agro-entrepreneurs. This programme will be jointly undertaken by the Ministry of Agriculture and Agro-based Industry, Ministry of Youth and Sports, Universiti Putra Malaysia, AgroBank and Regional Economic Corridors.

44. Efforts are being undertaken to establish Federal Land Development Authority (FELDA) settlements for large-scale food production and as a national food storehouse. Vacant land in FELDA settlements will be used to plant chillies, brinjals, bunga kantan and bananas. FAMA will facilitate the marketing of these products. On 23 August, I proposed that FELDA, Federal Land Consolidation and Rehabilitation Authority (FELCRA) and Rubber Industry Smallholders Development Authority (RISDA) cooperate in establishing a consortium to implement various highimpact projects in downstream and upstream industries.

45. The consortium will be established by the end of 2009, with a paid-up capital of RM300 million and, with each agency contributing RM100 million. This consortium involves technology sharing, plantation management, business partnerships, including supply and processing of agriculture products.

46. To ensure agriculture products are marketed abroad effectively and expeditiously, efforts to upgrade cargo facilities will be intensified. For this, MASKargo will upgrade air cargo facilities for export of perishable agriculture products. This measure will assist entrepreneurs to export more agriculture produce.

47. The Government is concerned with the plight of farmers and fishermen. To safeguard their interest, the Government will provide subsidies, incentives and assistance amounting to almost RM2 billion.

48. Among subsidies and incentives to be provided in 2010 include paddy price subsidy of more than RM400 million and paddy fertiliser subsidy of almost RM300 million. Meanwhile, incentives to increase paddy yield, production and rice subsidy account for almost RM220 million. In addition, a sum of RM170 million is allocated to provide cost of living allowance and incentives to fishermen.

PROMOTING CONSTRUCTION INDUSTRY

49. The construction industry recorded positive growth despite the difficult economic environment. This sector has the potential to be further developed with the implementation of various Government development projects. These measures also reinvigorate building materials related industries and intensify the services sector. In 2010, allocation totalling RM9 billion is provided to finance infrastructure projects including:
First: Provision of RM4.7 billion for road and bridge projects as well as RM2.6 billion for water supply and sewerage services; and
Second: Provision of RM899 million for rail facilities, RM820 million for ports and sea services as well as RM276 million for airport projects.

STRENGTHENING SMALL AND MEDIUM ENTERPRISES

50. The Government continues to focus on the development of local entrepreneurs, particularly small and medium enterprises (SMEs). Currently, there are 79 SME funds and grants totalling RM8.8 billion administered by various agencies. To further simplify access to SME financing, the Government is taking steps to consolidate these funds to 33. Subsequently, these funds will be coordinated by SME Corp.

51. The Government will also allocate a sum of RM350 million to SME Corp., of which RM200 million is for SME soft loans, RM100 million for capacity enhancement, while the balance is for branding and promotion. The interest rate on soft loans offered by SME Corp will be similar to rates offered by development finance institutions.

52. In addition, there are 6 SME funds administered by Bank Negara Malaysia (BNM) totalling RM13.4 billion. These funds have benefitted 46,000 SMEs with approved total financing of RM20 billion. To ensure faster and easier disbursement of funds, the Government will ensure financial institutions approve micro financing at an average of 6 days and disbursements at an average of 4 days.

53. The Government will also allocate RM538 million for the implementation of various SME development programmes. These include:
First: An allocation of RM281 million to state economic development corporations;
Second: An allocation of RM200 million to Tabung Kumpulan Usaha Niaga (TEKUN). This includes RM20 million for small-scale Malaysian-Indian entrepreneurs, which is an addition to the existing allocation of RM15 million. To enhance TEKUN?s management efficiency, loan approval and repayment processes will be restructured to improve effectiveness to benefit more entrepreneurs; and
Third: An allocation of RM57 million, among others for the purchase of business premises, provision of infrastructure outside industrial areas and Skim Kilang Bimbingan through the SME Bank.

DEVELOPING GREEN TECHNOLOGY

54. Green technology has the potential to become an important sector in economic development. Towards this, the Government launched the National Green Technology Policy in August. The objective of the policy is to provide direction towards management of sustainable environment. To further promote the development of green technology activities, the Government will:
First: Restructure the Malaysia Energy Centre as the National Green Technology Centre tasked with formulating a green technology development action plan. This Centre will function as the focal point to set standards and promote green technology. To intensify green awareness activities and practise environment-friendly lifestyle, an allocation of RM20 million will be provided;
Second: Organise an international exhibition on green technology in April 2010. The exhibition is expected to attract internationally renowned companies and experts in green technology;
Third: Develop Putrajaya and Cyberjaya as pioneer townships in Green Technology, as a showcase for the development of other townships; and
Fourth: Give priority to environment-friendly products and services that comply with green technology standards in Government procurement.

55. To promote green technology, the Government will establish a fund amounting to RM1.5 billion. This fund will provide soft loans to companies that supply and utilise green technology. For suppliers, the maximum financing is RM50 million and for consumer companies RM10 million. The Government will bear 2% of the total interest rate. In addition, the Government will provide a guarantee of 60% on the financing amount, with the remaining 40% by banking institutions. Loan applications can be made through the National Green Technology Centre. This scheme will commence on 1 January 2010 and is expected to benefit 140 companies.

Promoting Construction of Green Buildings

56. To expand the use of green technology, the Government launched the Green Building Index (GBI) on 21 May 2009. GBI is a green rating index on environmentally friendly buildings. Green buildings save utility costs and preserve the quality of the environment. To promote green technology, the Government proposes that:
First: Building owners obtaining GBI Certificates from 24 October 2009 until 31 December 2014 be given income tax exemption equivalent to the additional capital expenditure in obtaining such Certificates; and
Second: Buyers purchasing buildings with GBI Certificates from developers be given stamp duty exemption on instruments of transfer of ownership. The exemption amount is equivalent to the additional cost incurred in obtaining the GBI Certificates. This exemption is given to buyers who execute sales and purchase agreements from 24 October 2009 until 31 December 2014.

PROMOTING CREATIVE INDUSTRY

57. The creative industry has the potential to be further developed and contribute to economic growth. This industry encompasses performing arts and music, design, animation, advertisement and content development. To coordinate the development of the various segments of the industry, the Government will:
First: Formulate a comprehensive Creative Industry Policy for the development of creative industry;
Second: Establish a RM200 million Creative Industry Fund to finance activities, such as film and drama productions, music, animation, advertisements and local content development. The fund managed by Bank Simpanan Nasional will provide soft loans. The loan application procedures will also be simplified; and Third: Establish Tabung Kebajikan Penggiat Seni to ensure the welfare of artistes. For this, a launching grant of RM3 million will be provided.

SECOND STRATEGY: ENSURING HOLISTIC AND SUSTAINABLE DEVELOPMENT

58. Holistic and sustainable development must be emphasised to enable the country to become a high-income economy. The development of each economic sector requires high quality human capital with suitable skills. There is a need to ensure balanced development to narrow the gap between urban and rural areas. In addition, economic development requires a strong financial and banking system. An efficient and professional Government machinery with integrity and positive values is also needed to achieve development goals

ENHANCING HIGHLY SKILLED HUMAN CAPITAL

59. High quality human capital is a prerequisite to support the national development agenda. Therefore, the Government will ensure human capital development is implemented comprehensively, encompassing efforts to increase skills and knowledge. Apart from this, measures will be taken to develop intellectuals in science and technology, groom entrepreneurial capabilities as well as nurture positive and progressive values.

Expanding Access to Quality and Affordable Education

60. In line with the objective to develop high quality human capital, the Government will allocate RM30 billion for primary and secondary education, which will benefit 5.5 million students nationwide. This allocation includes emoluments amounting to RM19 billion, RM2.8 billion for student assistance and scholarship programme, RM1.6 billion for the construction of 80 new schools as well as 1,100 additional blocks and 347 school replacement projects. This allocation is for the construction of national primary and secondary schools, Government-aided religious schools, national-type Chinese and Tamil schools and mission schools. In addition, a sum of RM1.1 billion is provided to refurbish and upgrade schools nationwide, especially in Sabah and Sarawak.

61. In addition, the Government announced the NKRA with focus on widening access to quality and affordable education. It aims to ensure the rakyat receives the best education, from foundation to the highest level. For this, focus will be given on 4 NKRA sub-components, namely:

First: Strengthening pre-school education

62. The Government will incorporate pre-school education as part of the mainstream national education system. To date, the participation rate of children, between 5 and 6 years old in Government and private pre-schools, is at 67%. The Government aspires to increase the participation rate to 87% by 2012.

63. To achieve this, all pre-school facilities and curriculum under KEMAS and other agencies will be revamped, in line with the policy and standards stipulated by the Ministry of Education. Private pre-schools are also given the opportunity to participate in this initiative. In addition, the Government will establish centralised preschools in existing school premises as well as provide training and courses to Government and private pre-school teachers. For this, an allocation of RM48 million will be provided in 2010.

Second: Increasing literacy and numeracy rate

64. A number of normal school-going children in primary schools are yet to be proficient in basic literacy and numeracy skills. The Government aims to ensure that 100% of all normal school children will master basic literacy and numeracy after 3 years of schooling. Among the programmes that will be implemented include provision of special modules for students and teachers, student screening according to capabilities as well as special training programmes for teachers. This measure will commence in 2010, involving all Year 1 school children with an allocation of RM32 million.

Third: Creating high performance schools

65. We need to enhance the quality of education and grant autonomy to the school management in producing excellent students. For this purpose, the Government will classify identified schools as high performance schools (SBT). SBT will focus on academic excellence, overall students? achievements, including discipline and cleanliness, curriculum activities as well as competency in schools? specialisation areas. The Government targets 20 schools to be recognised as SBT in 2010 with an allocation of RM20 million.

Fourth: Recognising school principals and head teachers

66. The Government will ensure that schools are managed and administered professionally by principals and head teachers as well as their management teams. For excellent performing schools, the Government will introduce the New Deal or Bai?ah as an appreciation of the contribution and performance of principals and head teachers. The Government will determine the performance targets that must be achieved, as agreed by principals and head teachers. If the targets are achieved, rewards in the form of monetary and non-monetary incentives, as well as autonomy in school administration will be accorded. However, for those who fail to meet the targets for 2 consecutive years, necessary action will be taken.

Safeguarding Welfare of Students

67. The Government intends to reward students who excel in their studies. For this, the Government will:
First: Award National Scholarships to 30 crème de la crème students strictly based on merit. These scholarship recipients will further their education in world renowned universities;
Second: Convert the National Higher Education Fund Corporation (PTPTN) loans to scholarships for students who graduate with first class honours degree or equivalent, beginning 2010;
Third: Provide a 50% discount on fares for long-distance services of Keretapi Tanah Melayu Berhad (KTMB) to students aged 13 and above. A complimentary 1Malaysia student discount card can be obtained from KTMB. This discount will commence 1 January 2010; and
Fourth: Offer a netbook package, including free broadband service, to university students for RM50 per month for 2 years. This package is cheaper than the current market price. Priority will be given to first year students and those from low-income families. For a start, this package will be offered by Telekom Malaysia to 100,000 local university students, effective 1 January 2010.

Enhancing Skills of the Workforce

68. Continuous efforts will be taken to train and improve the skills of the workforce to meet market demand. The quality of the workforce will be enhanced through education and appropriate training. For this purpose, the Government will:
First: Provide RM1.3 billion for management and upgrading of polytechnics and community colleges as well as provide an education loan fund to benefit 32,000 students;
Second: Allocate RM504 million to build and upgrade as well as maintain equipment at the Industrial Training Institutes and Advanced Technology Training Centres;
Third: Provide RM438 million to Institut Kemahiran MARA and Kolej Kemahiran Tinggi MARA as well as Institut Kemahiran Belia Negara and Institut Kemahiran Tinggi Belia Negara for training and upgrading;
Fourth: Provide RM110 million to state skills development centres and selected training institutions for industrial training programmes, particularly in technical, hospitality and culinary areas as well as furniture making; and
Fifth: Accredit Sijil Kemahiran Malaysia (SKM) level 4 and above as equivalent to the academic stream. With this accreditation, SKM level 4 holders are eligible to apply for employment in the public sector, while those in the private sector can draw salaries equivalent to diploma holders.

Expanding PERMATA Programme

69. The PERMATA Programme emphasises early childcare and education in an integrated and organised manner. This programme will contribute towards the development of knowledgeable and high performing individuals. To date, the programme has been introduced in 457 childcare centres and successfully nurtured 17,565 children. To further enhance the programme, the Government provides an allocation of RM100 million to implement the following:
First: PERMATA Negara involves early childcare and education programme for children under five years old. Guidelines will be provided to coordinate curriculum, training and qualifications of trainers at all childcare centres;
Second: PERMATA Seni involves training intelligent and talented students in performing arts. This programme will be implemented by the Ministry of Information, Communication and Culture;
Third: PERMATA Pintar aims to guide exceptionally intelligent students to excel. This programme will be implemented by Universiti Kebangsaan Malaysia (UKM) in collaboration with the University of Johns Hopkins, United States. The first intake will be in 2011; and
Fourth: PERMATA Insan aims to educate students to understand, internalise and practise the fundamentals of al-Quran. This programme will be administered by Universiti Sains Islam Malaysia for students between 9 to 12 years old.

70. In addition, PERMATA will also implement the Perkasa Remaja programme to train and guide youths between 18 and 25 years old to discourage them from getting involved in social ills. The programme administered by UKM will enable youths to be more responsible and useful to the society and nation.

Strengthening Public Higher Education Institutions

71. In efforts to strengthen public higher education institutions (IPTA) to be more competitive and improve their world ranking, the Government will consider granting IPTA greater autonomy in managing finance, human resources, administration, student intake and income generation. With greater autonomy, for example, IPTA will be allowed to establish subsidiaries to generate revenue.

72. To achieve this objective, the Government will consider relaxing rules and regulations, which hinder IPTA from generating their own income. This will enable IPTA to reduce their financial dependence on the Government. However, the Government will ensure that income generation activity by IPTA will not jeopardise their core business of producing quality human capital for economic development.

STRENGTHENING BANKING AND FINANCIAL SYSTEM

73. A strong banking and financial system is vital for the development of the economy. The insurance industry will be improved to meet market demand. In addition, liberalisation and modernisation of the capital market will be further intensified to stimulate stock market activities.

74. The current structure of motor insurance scheme is rigid as it fails to take into account rising business costs and claims. To ensure the rakyat continues to have access to motor insurance protection, a basic insurance and takaful scheme will be offered. Premiums for the insurance protection scheme will be determined at an appropriate level, which does not burden the rakyat and commensurate with the level of protection. This scheme will provide mandatory basic insurance coverage for third party bodily injuries and death as well as enable claimants to obtain compensation expeditiously. This scheme is expected to be introduced by mid-2010.

75. Small businesses often encounter financial problems due to unexpected events, such as accidents, fire and loss of property. To ensure this group continues to benefit from better financial protection, the micro insurance and takaful coverage will be expanded. With premium as low as RM20 per month, small-scale businessmen will benefit from coverage ranging from RM10,000 to RM20,000. The Government will support the insurance and takaful industry?s initiatives in developing financial products to meet the needs of the low-income group. This effort will contribute towards improving financial protection of the rakyat.

76. The Government views seriously the activities of moneylenders, who disregard laws and burden borrowers, especially the illegal moneylenders or ?ah longs?. The inhuman treatment of ah long victims is totally unacceptable. To curb such abuses, the Government will enforce the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 to prosecute those involved. The Government will also review the Moneylenders Act 1951 to improve its effectiveness and enforcement on licensed money lenders.

Invigorating the Stock Market

77. The stock market will be further liberalised to enhance its efficiency as well as attract domestic and foreign investments. For this purpose, the Government will undertake the following measures:
First: Liberalise the commission-sharing arrangements between stockbrokers and remisiers in 2 stages to encourage retail participation in the stock market. The first stage, which takes effect immediately, allows flexible brokerage sharing at a minimum rate of 40% for remisiers. The commission-sharing will be fully liberalised in the second stage, effective 1 January 2011;
Second: Allow 100% foreign equity participation in corporate finance and financial planning companies compared with the present requirement of at least 30% local shareholding; and
Third: Require all public listed companies to offer e-Dividend to their shareholders in an effort to increase efficiency of the payment system. Stock broking companies will also provide e-Payment options for clients to receive and make payments.

Further Developing Islamic Finance System

78. Islamic banking assets account for 18.8% of Malaysia?s total banking assets while takaful industry assets contribute 7.7% of total insurance and takaful industry assets. Malaysia is the world?s largest sukuk issuer with USD94.7 billion or 62% of outstanding global sukuk in 2008. To ensure rapid development of financial services, particularly Islamic finance, the Government proposes that the existing tax incentives be extended to 2015. Whilst the scope of the incentives will be extended to include the following:
First: Stamp duty exemption of 20% on Islamic financing instruments;
Second: Tax exemption on banking profits derived from overseas operations. The exemption is also extended to profits of insurance and takaful companies derived from overseas operations;
Third: Double deduction on expenditure incurred in promoting Malaysia as an International Islamic Financial Centre;
Fourth: Deduction on expenditure incurred in the establishment of Islamic stock broking companies;
Fifth: Deduction on expenditure incurred on the issuance of Islamic securities approved by the Securities Commission (SC). The incentive is also extended to expenditure incurred on the issuance of Islamic securities approved by Labuan Offshore Financial Services Authority (LOFSA);
Sixth: The tax treatment accorded to Special Purpose Vehicle (SPV) established under the Companies Act 1965 be extended to SPV established under the Offshore Companies Act 1990 electing to be taxed under the Income Tax Act 1967; and
Seventh: The tax exemption on profits received from non-Ringgit sukuk originating from Malaysia approved by the SC be extended to profits received from non-Ringgit sukuk originating from Malaysia approved by LOFSA.

Ar-Rahnu Micro Credit Programme

79. The Ar-Rahnu micro credit programme is an important instrument to assist those unable to secure financing from financial institutions, to obtain business capital expeditiously. Using gold as collateral, the programme is well-received among Malaysians. As at 13 October 2009, this programme involved an accumulated financing of RM4.7 billion and benefited 3.7 million clients. To expand the Ar-Rahnu scheme, the Government will encourage all syariah-compliant financial and banking institutions, such as Bank Muamalat and Bank Islam to offer this scheme.

COMBATING CORRUPTION

80. Combating corruption is an important NKRA. This effort aims at enhancing confidence and public perception, eliminating corruption among enforcement and public officers, as well as ensuring Government Procurement processes and procedures are adhered to. This measure will ensure the country is better ranked in the Corruption Perception Index. To implement this NKRA, the Government will:
First: Formulate a Whistle Blower Act to encourage informers to disclose corruption and other misco
Second: Establish 14 Special Corruption Sessions Courts and 4 Special Corruption Appeal High Courts. Currently, there are only 2 special courts in Kuala Lumpur and 2 in Shah Alam; and
Third: Increase efforts to enhance the image of Malaysian Anti-Corruption Commission including organising international conferences on combating corruption, awareness campaigns through mass media as well as promoting better public relations.

DEVELOPMENT OF REGIONAL ECONOMIC CORRIDORS

81. The Government launched five development corridors to narrow economic growth disparities between regions, increase income and ensure equitable wealth distribution. In addition, these efforts will generate business and job opportunities as well as improve the quality of life of the rakyat. The Government will ensure that the regional corridors are developed according to schedule. To date, 126 out of 195 planned projects are at various stages of implementation. Planned investments totalling RM221 billion have exceeded the 9MP target of RM145 billion.

82. To support the implementation of private sector projects in regional corridors, the Government will allocate RM3.5 billion in 2010 for infrastructure and basic amenities as well as implement training programmes and socioeconomic projects. Among projects to be implemented include Projek Perumahan Awam and Pembersihan Sungai Segget in Iskandar Malaysia, Projek Pertanian Bersepadu and Pusat Latihan Usahawan Tani in Northern Corridor Economic Region (NCER), Projek Pelebaran Jalan Persekutuan Kuala Krai-Gua Musang and Kuala Lipis-Raub- Bentong in East Coast Economic Region (ECER), Projek Kluster Industri Minyak Sawit Sandakan and Keningau Integrated Livestock Centre in Sabah Development Corridor (SDC) as well as Projek Jalan Akses Empangan Murum and Projek Jalan Akses Empangan Baram in Sarawak Corridor of Renewable Energy (SCORE).

Developing Putrajaya and Cyberjaya

83. The Government will continue to develop Putrajaya and Cyberjaya into more lively and vibrant townships. Efforts will be intensified to increase business, commercial and recreational activities. Among projects to be implemented in Putrajaya include the construction of a hypermarket, international school, art gallery, historical museum, vehicles repair complex and recreational centre. Meanwhile, in Cyberjaya, among projects to be implemented are the construction of affordable houses, hypermarket, business complex, parking lots, recreational centre and school. In addition, a more efficient public transport system will be provided. The development of the two townships will complement each other.