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Singapore Investment


Mother of all budgets to the rescue
7-9 minutes

WITH about RM322.5bil allocated under Budget 2021 – RM69bil of which is for development expenditure, the government is hoping to accelerate the country’s still-fragile economic recovery and boost sentiment among households and businesses.

Dubbed as the mother of all budgets, the expansionary Budget 2021 is an “indirect stimulus package” for the economy, which continues to be affected by the Covid-19 pandemic and its containment measures.

In the efforts to fuel the economic recovery further, the government has announced a slew of incentives and increased allocation for various sectors of the economy. These include healthcare, technology, defense, construction and properties, among others.

Below we list some of the projects or incentives and the listed companies which could potentially be involved.

> RM1bil to fight third wave of Covid-19

To stem the third wave of Covid-19 from extending into 2021, the government has allocated RM1bil for containment measures.

Of the amount, a total of RM318mil was allocated for the purchase of personal protective equipment (PPE) and hand sanitisers.

Among the potential beneficiaries would be the listed companies that have previously announced plans to diversify into the production of PPE.

These include Komarkcorp Bhd, Notion VTEC Bhd, Prolexus Bhd, Caely Holdings Bhd as well as hand sanitiser maker Nova Wellness Group Bhd.

In addition, RM475mil was allocated for the purchase of Covid-19 test kits, reagents and consumables and this could potentially benefit Hong Seng Consolidated Bhd, ACO Group Bhd and Nexgram Holdings Bhd.

> RM15bil transport infrastructure development

The government has allocated RM15bil next year to continue mega infrastructure projects, which include the Johor Baru-Singapore Rapid Transit System Link and the Mass Rapid Transit Line 3.

A total of RM3.8bil out of the RM15bil allocation will go towards these new projects such as a new alignment of the Central Spine Project from Kelantan to Pahang, construction of the second phase of the Klang Third Bridge and the Pan Borneo Highway Sabah from Serusop to Pituru, among others.

The government has also channelled an additional RM2.7bil for rural infrastructure development, of which RM1.3bil will go towards building rural roads spanning 920km.

Beneficiaries for these allocations are likely to be the construction-related players such as Gamuda Bhd, MMC Corp Bhd, George Kent (M) Bhd, Gabungan AQRS Bhd, Pansar Bhd and Bina Puri Holdings Bhd.

> RM7.4bil to build and upgrade broadband services

In the government’s pursuit to enhance the country’s digital connectivity, a total of RM7.4bil was allocated to the Malaysian Communications and Multimedia Communications and Multimedia Commission for the 2021-2022 period.

This was in addition to the RM500mil allocation to implement the National Digital Network initiative or Jendela to ensure the connectivity of 430 schools throughout Malaysia covering all states.

Telecommunication-related companies are expected to be potential beneficiaries and these include Telekom Malaysia Bhd, Maxis Bhd, Digi.com Bhd and Axiata Group Bhd.

> Measures to increase home ownership

Considering the weak property market and the pressing need to promote home ownership, the government has announced several measures under Budget 2021 especially for first-time home buyers and the low-income group.

A key measure would be the extension of stamp duty exemption on residential properties for first time buyers until end-2025. The measure was first introduced under the Home Ownership Campaign.

The limit of duty stamp for first residential home has also increased up to RM500,000. This exemption is effective for sale and purchase agreement executed from Jan 1,2021 to Dec 31,2025.

Property developers are expected to benefit from the full stamp duty exemption and these include Eco World Development Group Bhd, S P Setia Bhd, Sime Darby Property Bhd, IOI Properties Group Bhd, Mah Sing Group Bhd and Titijaya Land Bhd.

> Strengthening national defence

The government, which said it was very concerned about issues relating to national sovereignty, has allocated RM16bil for the Defence Ministry and RM17bil for the Home Ministry in 2021. In line with this, the government increased the allocation for maintenance of the assets of the Malaysian Armed Forces to RM2.3bil in 2021, as compared with RM2bil earlier.

Among the potential beneficiaries of the increased maintenance spending would be Destini Bhd and Boustead Heavy Industries Corp Bhd. It is noteworthy that both companies have bagged Defence Ministry-related contracts before.

> Incentives for high tech and value-added firms

In an attempt to further boost the growth of the domestic high-tech industry, the government has introduced a special RM1bil incentive package. Among others, this fund aims to support R&D investment in aerospace as well as electronic clusters such as in Batu Kawan, Penang and Kulim, Kedah industrial parks.

In addition, a High Technology Fund worth RM500mil will be provided by Bank Negara to support high technology and innovative companies. The government expects the fund to help Malaysia remain competitive in the global supply chain ecosystem and protect high skilled jobs.

Potential beneficiaries would include listed semiconductor-related companies such as Inari Amerton Bhd, Vitrox Corp Bhd and UWC Bhd, all of whom are located in the Batu Kawan Industrial Park.

> Sales tax exemption for purchase of buses

With the objective to reduce the burden of bus operators who have been affected by movement restrictions and the slump in the tourism industry, the government announced that the sales tax exemption for the purchase of locally assembled bus including air conditioner will be extended.

This will be in effect for a period of two years from Jan 1,2021 until Dec 31,2022. Listed bus operators on Bursa Malaysia such as Konsortium Transnasional Bhd and GETS Global Bhd may benefit from the sales tax exemption.

> Stricter regulation, removal of tax-free status on cigarette

Effective from Jan 1, the government will implement six measures affecting the tobacco industry.

These include the freezing of the issuance of new import license for cigarette, tightening the renewal of import license for cigarette and limiting the transhipment of cigarette to dedicated ports only.

Other measures are the imposition of tax on the importation of cigarettes with drawback facilities for re-export, allow transshipment of cigarettes and re-export of cigarettes only in ISO containers as well as making cigarettes and tobacco products as taxable goods in all duty-free islands and any free zones.

As the only listed tobacco company on Bursa Malaysia, British American Tobacco (M) Bhd could be affected by the measures especially the removal of tax-free status on cigarette.

However, the company may benefit from the government’s ongoing efforts to combat the smuggling of cigarettes.


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