THE 2010 BUDGET SPEECH (PART 2)

85. The Government will take firm measures to strengthen the Government's financial position. Adequate revenue collection is vital to support rising expenditure requirements as well as reduce the nation's increasing debt level. 86. The Government is currently at the final stage of completing the study on the implementation of goods and services tax (GST), particularly to identify the social impact of GST on the rakyat. The purpose of this study is to ensure that if GST needs to be implemented to stabilise Government finance, it will not burden the rakyat. If the Government implements GST, it will replace the current sales tax and service tax as well as exemption will be granted to the low-income group. The GST rate to be imposed will be lower than the current sales tax and service tax rates.

87. To standardise the income tax assessment system and to ensure that the Government's cash flow reflects current economic performance, the Government proposes that the tax assessment system for petroleum upstream activities be changed from the preceding year assessment system to the current year assessment system. The formal assessment system will also be changed to the self assessment system. These systems have proven to enhance compliance and tax collection. In order to alleviate the tax burden of upstream petroleum companies, the Government proposes that income tax for year of assessment 2010 based on income derived from 2009 be allowed to be paid in instalments within 5 years.

88. The Government needs to ensure that the Malaysian tax system is equitable and able to generate revenue for development purposes. In line with this, the Government proposes that a tax of 5% be imposed on gains from the disposal of real property from 1 January 2010. However, the existing tax exemption will be retained for gifts between parent and child, husband and wife, grandparent and grandchild. This exemption will also be given on disposal of a residential property once in a lifetime.

89. Credit cards are being used extensively. The number has increased from more than 2 million in 1997 to 11 million as at August 2009, excluding 285,000 charge cards. To promote prudent spending, the Government proposes that a service tax of RM50 a year be imposed on each principal credit card and charge card, including those issued free of charge. The Government also proposes that service tax of RM25 a year be imposed on each supplementary card. This measure is effective from 1 January 2010.

90. The Government will continue to develop the nation into a more resilient and competitive economy. Local entrepreneurs need to strengthen themselves in facing competition and challenges. Following liberalisation and our international commitments, the Government will implement a more open automotive policy.

91. For this, the Government will impose a sum of RM10,000 for each approved permit (AP) to open AP holders, for the distribution of AP in 2010. This proposal will be effective from 1 January 2010. A portion of this collection will be channelled to the Bumiputera development fund in the automotive sector.

92. Efforts will also be taken to enhance Government revenue by encouraging Government agencies to rent out premises, halls, hostels, labs and training equipment to the private sector and public. This initiative must be implemented without jeopardising the core activities of agencies. As an incentive, the Government agrees to allow agencies to retain 50% of rentals received while the remaining 50% shall be remitted to the Government as revenues. This initiative will be effective from 1 January 2010 and guidelines will be prepared for this purpose.

93. In addition, the Government has identified assets including land and buildings, which can be jointly developed or sold to GLCs. Currently, the Government is in negotiations to develop Government-owned land in Ampang and Jalan Cochrane. Other areas identified include Brickfields, Jalan Stonor, Bukit Ledang and Sungai Buloh.

94. The Government will improve the structure of budget allocation and expenditure to be more efficient and effective. Accordingly, the Outcome-Based Budgeting (OBB) system will be developed in 2010. This system will be implemented during the 10MP period to replace the existing Modified Budgeting System. Under the OBB approach, emphasis will be given to the impact and effectiveness of projects and programmes, compared with expenditure and output. In addition, Government expenditure will emphasise value-for-money as well as programmes and projects with high multiplier effect.

Restructuring of Fuel Subsidy Scheme

95. Subsidised fuel is currently enjoyed by all motorists, including luxury vehicle owners and foreigners, which is a strain on Government finance. To ensure subsidies only benefit targeted groups, the Government will implement a fuel subsidy management system in early 2010. This is a more people-friendly system utilising MyKad and the existing infrastructure. This approach of providing subsidy only to the targeted group will also be used for other commodities.

Intensifying Government Delivery System

96. PEMANDU was established on 16 September 2009 to monitor the implementation of the Government Transformation Programme. The programme aims at enhancing the efficiency and transparency of Government machinery. PEMANDU, comprising officers from the public and private sectors, will cooperate with Ministries and agencies to supervise and support the implementation of 6 NKRAs and Ministries? Key Results Areas (MKRAs).

97. The Government will continue to strengthen public training institutions to groom high performing, quality and knowledgeable civil servants. To achieve this objective, the National Institute of Public Administration (INTAN), Bukit Kiara will be restructured as an international centre for knowledge excellence. For this, INTAN Bukit Kiara will be upgraded to a School of Government, with autonomy power, administered professionally, facilitated by experienced lecturers and promote collaboration with renowned international institutions.

98. On 15 September, I launched the cross-fertilisation programme between Government departments and GLCs. This programme aims to provide exposure and understanding regarding the roles and responsibilities of both parties. It further enhances the effectiveness and widens networking. This programme will be expanded with the placement of Government officers in private companies and international agencies.

99. To look after the welfare of civil servants, the Government in the 2009 Budget, increased the eligibility criteria for those with monthly household income from RM2,000 to RM3,000 to qualify for the RM180 monthly pre-school fee subsidy. To ensure more civil servants benefit from this initiative, all Ministries and Government departments are required to provide day care and education centres for children. For this, an allocation of RM200,000 will be made available for every Ministry and Government department to establish day care centres. 100. The private sector is also encouraged to take similar measures to help their employees. Currently, tax incentive is provided to employers for the provision of day care centres for children, which includes Industrial Building Allowance for day care centres and tax deductions on maintenance expenditure.

Individual Income Tax

101. In 2009 Budget, the Government reduced the maximum individual income tax rate from 28% to 27%. To ensure that the individual income tax remains competitive and to continue the economic agenda based on creativity, innovation and high value added, the Government proposes that the maximum income tax rate be further reduced from 27% to 26% effective from the year of assessment 2010. Following this, maximum tax rate for cooperatives will be reduced to 26% while the fixed tax rate for non-resident individuals will be reduced to 26%.

102. In addition, to improve the well-being of the rakyat, the Government proposes that personal relief be increased from RM8,000 to RM9,000. This means that each individual tax payer will enjoy an increase of RM1,000 in disposable income. This relief will be effective from the year of assessment 2010.

103. To attract local and foreign talent as well as intensify the development of Iskandar Malaysia, the Government proposes an innovative and radical tax incentive. The Government proposes income tax on employment income of Malaysians and foreign knowledge workers residing and working in Iskandar Malaysia be imposed at a rate of 15% compared with the maximum rate of 26% for the rest of the country.

104. Those eligible for this tax treatment must be engaged in qualifying activities such as green technology, biotechnology, education services, healthcare, creative industry, financial advisory and consultancy services as well as logistic services and tourism. They must also add value in their respective fields. This incentive will be available to those who apply and commence work in Iskandar Malaysia before the end of 2015 and they will enjoy this incentive indefinitely.

THIRD STRATEGY: FOCUSING ON WELL-BEING OF THE RAKYAT

105. The Government will continue to enhance the well-being of the rakyat in urban and rural areas as well as ensure the rakyat enjoys the benefits of development in a peaceful and safe environment. In this regard, the Government will strengthen public safety and crime prevention. In addition, efforts will be taken to improve the income and quality of life of the rakyat, including eradicating hardcore poverty. The Government will also provide housing, upgrade infrastructure in rural and remote areas as well as improve the quality of public transport.

PREVENTING CRIME

106. The prosperity of the rakyat and nation is the utmost priority to enable every individual to undertake their daily activities in a peaceful and safe environment. For this, an allocation of RM3.7 billion will be provided to increase the efficiency of the security force, including providing modern and sophisticated equipment.

107. The Government is serious in reducing the crime rate and will implement crime prevention measures. The Government targets to reduce the crime index by 5%, including reducing street crimes, such as snatch thefts and robberies by 20% by end-2010. A total of RM1 billion will be provided to further improve the services of Royal Malaysia Police (PDRM) in 2010. Among major measures include:
First: Increase police presence to instil a sense of safety and confidence among the public. For this, the Government will provide mobile police stations in 50 hot spots identified as high crime prone areas;
Second: Train and enhance the efficiency of 3,000 members of Ikatan Relawan Rakyat (RELA) and Jabatan Pertahanan Awam Malaysia to conduct joint patrols with the police; and
Third: Enhance crime prevention campaigns and implement the police integration in community and society programme.

108. Apart from this, the security of the nation's borders will be given serious focus. For this, a total of RM1.9 billion will be allocated to the armed forces for equipment as well as construct and upgrade sentry posts. In addition, the Malaysian Maritime Enforcement Agency will be provided with RM622 million to ensure that the national waters are free from smuggling and encroachment, including pirate threats.

IMPROVING INCOME AND QUALITY OF LIFE OF THE RAKYAT

109. The Government is concerned about the difficulties faced by the rakyat, particularly the rising costs of living. Towards this, the Government will implement the NKRA to eradicate hardcore poverty as well as increase the income and quality of life of the rakyat.

Eradicating Hardcore Poverty

110. The Government is committed to achieve the target of zero hardcore poverty in 2010. For this, about 50,000 hardcore poor households registered with eKasih and 4,000 Orang Asli households will be given assistance. The Government will provide opportunities for skills training and income generating programmes to overcome hardcore poverty. Among the measures to be taken include:
First: Distribute Federal welfare assistance on the first day of each month. For Peninsular Malaysia, the welfare assistance commenced on 1 September 2009, while for Sabah and Sarawak, it will commence on 1 January 2010; and
Second: Continue the Skim Program Lonjakan Mega with an allocation of RM141 million including in Batang Sadung and Batang Lupar, Sarawak; Pulau Banggi, Sabah; and Tanjung Gahai and Chemomoi, Pahang. This programme will alleviate 5,600 families from hardcore poverty.

Assisting the Poor and Vulnerable Groups

111. The Government will implement various programmes to assist the poor and vulnerable groups. Towards this, efforts will be taken to reduce poverty rate from 3.6% in 2007 to 2.8% in 2010. The Government will provide skills training and micro credit facilities for the productive group to generate sustainable income and be more independent. Among steps to be taken include: First: Continue the Skim Pembangunan Kesejahteraan Rakyat (SPKR), which covers Program Peningkatan Pendapatan, Program Latihan Kemahiran dan Kerjaya, Program Kecemerlangan Pendidikan, Program Bantuan Rumah and Program Pembangunan Masyarakat Setempat with an allocation totalling RM180 million; and Second: Provide skills training and entrepreneurship programmes to more than 3,000 women through the Department of Women's Development and Amanah Ikhtiar Malaysia.

Establishing Kedai Desa

112. To improve the income of rakyat in rural areas, the Government will create more business opportunities by providing business premises, particularly in strategic locations in rural areas. For a start, RM30 million will be allocated to UDA Holdings Berhad to build 300 units of Kedai Desa nationwide. This initiative augments programmes implemented by other Government agencies.

Eradicating Urban Poverty

113. The urbanisation rate is increasing rapidly with 63% of the population residing in urban areas. The poverty rate in urban areas continues to increase due to high cost of living, low income and housing problems. To overcome this, the Government will allocate RM48 million to implement urban poverty eradication programmes, including welfare assistance and house rental payment.

114. To address urban poverty in a holistic manner, the role of Ministry of Federal Territories will be strengthened and expanded to include urban poverty eradication nationwide, including those with monthly income below RM3,000. For this, I propose that Ministry of Federal Territories shall now be known as Ministry of Federal Territories and Urban Wellbeing. Among the main responsibilities of this Ministry include preparing a comprehensive action plan and implementing suitable programmes to address urban poverty.

Increasing Home Ownership

115. The Government will continue to provide housing facilities to ensure that the rakyat are able to afford and reside in comfortable homes. Priority will be given to the low and middle-income groups to own or rent houses provided by the Government. On 10 October 2009, I announced that more than 44,000 low-cost houses will be sold at a price of between RM21,500 and RM35,000 per unit by Kuala Lumpur City Hall (DBKL) and National Housing Department (JPN), by end-2010. As an additional measure, JPN will also provide 74,000 low-cost houses to be rented in 2010.

116. The Government is concerned with the problems faced by the rakyat, particularly those from the low-income group, as a result of abandoned housing projects. To date, a total of 148 private projects have been abandoned involving 49,913 units and 31,824 buyers. Of this, 87 projects are yet to be rehabilitated with 41 projects involving low and medium-cost houses. The Government will consider extending appropriate financial assistance to rehabilitate low and medium-cost houses based on the existing project list. For this, an allocation of RM200 million will be provided under the Ministry of Housing and Local Government.

117. In line with the objective to promote house ownership and enhance the quality of life, the Government will launch a scheme that enables EPF contributors to utilise current and future savings in Account 2. This will enable them to obtain higher financing to purchase higher value or additional houses. This scheme aims to increase the purchasing power of EPF contributors and is limited to the purchase of one house at any one time and subject to conditions stipulated by EPF. The scheme will be launched in January 2010.

Expanding Public Health Facilities

118. The Government cares about the well-being of the rakyat. For this, a sum of RM14.8 billion is allocated to manage, build and upgrade hospitals and clinics. In 2010, hospitals under construction and being upgraded include those in Kluang, Bera, Shah Alam, Alor Gajah and Tampoi. In addition, the Government will expand community clinic services, to be known as 1Malaysia Clinic, in urban areas similar to clinics in rural areas.

119. These clinics to be located in rented shopping lots of housing areas enable the local community to seek basic health treatments such as fever, cough and flu. These clinics will be manned by medical assistants and will operate daily from 10 am to 10 pm. For a start, an allocation of RM10 million will be provided to establish 50 clinics in selected areas.

Enhancing Social Safety Net

120. The Government will continue to aid the disabled, senior citizens, single mothers and children in need of welfare assistance. To ensure that assistance is channelled in a comprehensive and effective manner, as well as to avoid duplication, the Implementation and Coordination Unit (ICU), Prime Minister?s Department is in the final stage of completing a centralised eKasih database. To further strengthen the social safety net, the Government will:
First: Allocate a sum of RM224 million to the disabled for the implementation of the Rehabilitation in the Community Programme as well as construct and upgrade 4 Taman Sinar Harapan. In addition, an allocation of RM174 million is provided for senior citizens, including assistance as well as the construction and upgrading of 2 Rumah Seri Kenangan;
Second: Allocate a sum of RM15 million to Tabung Kebajikan Perubatan Malaysia, Malaysian Hospice Council and Malaysian Association for the Blind to assist poor patients and purchase medical equipment; and
Third: Increase the allowance rate from RM50 to RM150 a month for every disabled child enroled in NGO-organised special schools, effective 1 January 2010. An allocation of RM3.3 million will be provided, which will benefit almost 4,000 disabled children.

1Malaysia Sukuk

121. The syariah-based Government Savings Bond totalling RM5 billion launched under the Second Stimulus Package received overwhelming response. For individuals who were unable to subscribe earlier and to encourage additional investment, the Government will issue 1Malaysia Sukuk totalling RM3 billion. This sukuk will be offered to all Malaysians aged 21 and above, with a minimum investment of RM1,000 and a maximum of RM50,000. This sukuk has a maturity period of 3 years with a 5% annual rate of return paid quarterly.

1Malaysia Retirement Scheme

122. The Government understands the difficulties faced by the self-employed and those without fixed income, such as taxi drivers, hawkers, farmers and fishermen, who retire without pensions or EPF savings. For this group, the Government will establish the 1Malaysia Retirement Scheme to be administered by EPF. Through this scheme, they will be able to contribute voluntarily according to affordability.

123. For every RM100 contribution, the Government will contribute 5% subject to a maximum of RM60 per annum. This is in addition to the existing dividends paid by EPF.The Government?s contribution is only for a period of 5 years and contributors may withdraw their savings upon attaining the age of 55. As an example, if a fisherman aged 35 years makes a contribution of RM100 monthly for 20 years, he will have an estimated accumulated savings of RM40,000 at the age of 55 years.

EPF Contributions

124. As part of the First Stimulus Package, the Government allowed employees to reduce their EPF contributions voluntarily from 11% to 8% for 2 years effective from 1 January 2009. With the expected economic recovery, employees? contribution to EPF will be increased again to 11% on a voluntary basis, effective immediately. However, from 1 January 2011, employees? EPF contribution will revert to 11%.

125. The Government realises that it is important for the rakyat to start saving at a young age to ensure a continuous income stream during their retirement. With rising life expectancy, savings with EPF may not be sufficient to provide adequate income during their retirement years. Hence, the annuity scheme is an appropriate financial instrument for this purpose. To encourage more Malaysians to participate in this scheme, the Government proposes the existing personal tax relief of RM6,000 for EPF contribution and life insurance premiums be increased to RM7,000. This increase of RM1,000 is for relief on annuity premiums paid from 1 January 2010 for retirement schemes offered by insurance companies.

Developing Wakaf Properties

126. The Government will develop wakaf properties throughout the country for charitable purposes. For this, Yayasan Waqaf Malaysia (YWM) will implement programmes, which will focus on economic development, particularly small-scale high impact projects, as well as education, social and welfare of Muslims. The main focus of YWM is to eradicate hardcore poverty as well as enhance socioeconomic status of Muslims. Projects planned include the construction of wakaf rakyat shops at selected mosques and small business bazaars for the public, including the asnaf. Initially, a total of RM20 million will be provided.

STRENGTHENING INFRASTRUCTURE IN RURAL AND REMOTE AREAS

127. Rural development will continue to focus on balanced development to ensure the rural community enjoys adequate and quality infrastructure. For this purpose, the Ministry of Rural and Regional Development will formulate a comprehensive master plan on rural development.

128. In 2010, the Government will allocate a sum of RM2.3 billion to construct and upgrade infrastructure in rural areas. These include:
First: Construction of 510 kilometres of rural roads and 316 kilometres of village roads with an allocation of RM857 million. Among roads to be constructed are in Kapit, Lawas and Simunjan in Sarawak as well as Kinabatangan, Kota Belud and Keningau in Sabah;
Second: Priority will be given to the use of soil stabilisers in the construction of rural roads, where appropriate. This is due to its lower cost of construction and maintenance;
Third: Allocation of RM530 million to provide water supply to 16,000 houses and RM825 million for electricity supply to 30,000 houses; and
Fourth: Provision of RM88 million to implement 5,356 social amenity projects such as rural clinics, community halls and public recreational areas.

129. The Government is concerned about the Orang Asli community and aims to integrate them into main stream development. To improve the income and quality of life of the Orang Asli community, the Government will provide a sum of RM41 million. Among projects to be implemented include the construction of 55 Orang Asli settlements, provide agriculture input assistance to 800 farmers and fishermen as well as provide business equipment to 100 entrepreneurs.

IMPROVING PUBLIC TRANSPORT

130. The Government has placed urban public transport as one of the NKRAs to facilitate mobility of the people in their daily activities. An efficient and effective public transport system will improve productivity and reduce traffic congestion. For this purpose, the following measures will be taken:
First: Accelerate formation and operation of the Public Land Transport Commission (SPAD) as a single authority to monitor and enforce service standards as well as provide a long-term plan for urban public transport. SPAD is expected to be operational in 2010;
Second: Acquire 8 new Electric Multiple Units (EMUs) and refurbish 9 EMUs by KTMB. This measure will increase frequency and efficiency of commuter services;
Third: Acquire 35 units of Light Rail Transit (LRT) trains by Syarikat Prasarana Negara Berhad (SPNB) for Kelana Jaya-Taman Melati line. Four units of train have been delivered and are currently in operation, while 22 units will be delivered in 2010 and the remaining in 2011. This measure will accommodate the increasing number of commuters; Fourth: Construct covered walkways linking LRT stations to nearby activity centres. These stations are Plaza Rakyat, Pasar Seni, Bandaraya, Jalan Sultan Ismail, PWTC and Jalan Hang Tuah;
Fifth: Expand special lanes and increase the number of buses for more frequent services in Kuala Lumpur. In addition, 4 new hubs will be constructed in Pulau Pinang to enhance bus services and increase the number of routes; Sixth: Fast-track construction of the Integrated Transport Terminal in Gombak, which will significantly reduce congestion in the city centre; and
Seventh: Implement dedicated lanes for buses on underutilised expressways and modify Touch?n?Go lanes at toll booths.

2010 BUDGET ALLOCATION

131. To implement the 3 strategies and measures that I have tabled, the Government proposes an allocation of RM191.5 billion for the 2010 Budget. This is 11.2% lower than the revised allocation of RM215.7 billion for 2009. Of the total allocation in 2010 Budget, RM138.3 billion or 72.2% is for Operating Expenditure and RM53.2 billion or 27.8% is for Development Expenditure. 132. Under Operating Expenditure, RM42.2 billion is allocated for Emoluments, RM20.8 billion for Supplies and Services while RM73.9 billion is for Fixed Charges and Grants. A sum of RM524 million is provided for Purchase of Assets and the remaining RM800 million for other expenditures.

133. As for Development Expenditure, a sum of RM25.4 billion is provided for the economic sector to support the needs of infrastructure, industry and agriculture as well as rural development. A sum of RM20.3 billion is allocated to the social sector encompassing education and training, health, welfare, housing and community development. In addition, RM3.7 billion is for the development of the security sector, RM1.8 billion for general administration and RM2 billion for contingencies.

134. The Federal Government revenue in 2010 is expected to reduce 8.4% to RM148.4 billion compared with RM162.1 billion in 2009. Taking into account the estimated revenue and expenditure, the Federal Government deficit in 2010 is expected to be in a better position at 5.6% of GDP compared with 7.4% in 2009. 135. This allocation reflects prudence in Government spending and gives priority to value-for-money. This is a good opportunity to repriortise programmes, streamline processes and restructure Government machinery towards enhaning efficiency and effectiveness, whilst meeting the rising expectations of the rakyat. Civil servants must strive to increase productivity through efficient utilisation of limited resources. The Government will ensure these cost-effective measures will not affect the productivity of civil servants, while projects and programmes will be implemented according to schedule.

136. The Government appreciates the commitment and dedication of civil servants in ensuring that national development goals for the well-being of the rakyat are realised. Recently, I announced a special financial contribution of RM500 to the support staff in the civil service. This special contribution is now extended to all civil servants from Grade 41 to Grade 54 or its equivalent as well as those on mandatory retirement. The payment will be made in December 2009 and requires an additional allocation of RM400 million. This shows that the Government is concerned about the well-being of civil servants and retirees and hopes that they will make the best use of this special contribution.

CONCLUSION

137. As an ambitious and developing nation, Malaysia too faces stiff global challenges. Since independence, we faced several challenges and obstacles. With perseverance and careful planning, we were able to overcome all of them. 138. Let us start a new chapter in our journey to become a more developed and progressive nation. As it is often said, a journey of a thousand miles begins with the first step. I therefore urge everyone who loves this nation, regardless of race, culture or belief to move in unison, with one voice, one hope and one aspiration for our beloved Malaysia.

139. In conclusion, as I mentioned in the preamble of my speech, the 2010 Budget will lay the foundation that will lead us towards becoming a high-income economy. Our recent success in Bagan Pinang has sparked our zeal to embark on this journey of transformation to lift our beloved nation to greater heights. 140. Indeed, this Budget touches the hearts and souls of all Malaysians. Indeed, this is an earnest and sincere contribution from the Government to the rakyat. Let us strengthen our resolve, set our goals and uphold 1Malaysia concept. United, we can realise the impossible. 1Malaysia, Together We Prosper.

Mr. Speaker Sir,
I beg to propose.