Malaysia's Budget 2020: Must knows for the marketing and digital industry

 

The Malaysian government is allocating RM297 billion for Budget 2020, an increase of RM19.5 billion compared to RM277.5 billion in 2019. The theme for this year's budget is driving growth and equitable outcomes towards shared prosperity, and it is anchored by four main thrusts. They are driving economic growth in the new economy and digital era; levelling up human capital; creating a united, inclusive and equitable society; and the revitalisation of public institutions and finances.

Finance minister Lim Guan Eng also reiterated that the Digital Services Tax will be implemented with effect from 1 January 2020, to include services such as, but not limited to downloaded software, music, video or digital advertising.

 

From 8 October to 14 October, there were a total of 17.8k individuals talking about Budget 2020 online, 41.3k mentions, 934.6k social interactions, and an estimated reach of 9.4 million, according to statistics from Digimind. According to Digimind, mentions of Budget 2020 peaked at 16,450 on 11 October. The topic started gaining online momentum on 11 October, with an approximate 40 times jump in volume of mentions on 10 October. Dicussions over the weekend can be mostly attributed to media outlets such as BERNAMA, Astro AWANI and The Star, and the resharing of infographics created by the Malaysian government.

Key conversation topics surrounding Budget 2020 include "Cuti Bersalin", "Infografik Mengikut", "Kbs Kementerian", "Majikan Perlu", "Mengikut Kementerian", "Kementerian Belia", "Thread Berserta" and "Belanjawan2020".

Overall, East Malaysia (38%) had the most number of mentions followed by Taxes (13%), digital development and infrastructure (11%), economic development and trade (10%), digital consumption and use (8%), business support and development (7%), tourism (7%), esports (4%), communications (1%) and innovation and creativity (1%). Digimind's statistics showed 78% of the mentions were positive while 14% were negative. The positive mentions mainly centred on East Malaysia, digital consumption and use, digital development and infrastructure, business support and development, taxes, esports, tourism, and economic development and trade.

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Meanwhile, Meltwater's data showed that the general trending themes were "lot of traction", "terrible work ethic", "creatives idea", warning", "cheap labour", "tired drs", "interns", and "Tambah staff hospital". When it comes to topic-specific trending themes, some of the popular ones include "government", "insta-shop owners", "budget 2020", and "government grants". Interestingly, contrary to Digimind's statistics, Meltwater found that 54% of the sentiments regarding Budget 2020 were negative while 13% were positive.

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Here are a list of key takeaways about Budget 2020 concerning the marketing and digital industry:

1. Visit Malaysia 2020

To realise the aspirations of Visit Malaysia Year 2020 (VMY2020), the government has allocated RM1.1 billion to the Ministry of Tourism, Arts and Culture - including an allocation of RM90 million to drive awareness, promotions and programmes for the VMY2020 campaign. A substantial portion of the departure levy collected will be allocated for tourism infrastructure projects.

The government will also continue to allocate 50% of tourism tax to respective state governments to support their efforts in conjunction with VMY2020. Meanwhile, to amplify the economic benefits of VMY2020, the government will roll out a host of tax incentives targeted at the arts and tourism sector. These include:

  • Income tax exemption be given for organisers of approved arts and cultural activities, approved international sports recreational competitions, and conferences organisers;
  • New investments in international theme park projects will be given income tax exemption of 100% of statutory income or Investment Tax Allowance of 100% to be set off against 70% for five years;
  • Increasing tax deductions given to companies sponsoring arts, cultural and heritage activities in Malaysia from RM700,000 to RM1,000,000 per year;
  • Accelerated Capital Allowance for expenditure incurred on the purchase of new locally assembled excursion bus to be fully claimed within two years;
  • Excise duty exemption of 50% for locally assembled vehicles be given to tour operators for the purchase of qualified new tourism vehicles.
 

The government has also set aside RM100 million towards the construction of a new cable car system to Penang Hill, with any additional costs to be financed by the state government. The budget allocation comes as the service is expected to achieve more than two million passengers each year, exceeding its capacity.

Also, RM5 million will also be set aside for the Cultural Economy Development Agency to support Malaysian visual art galleries and exhibition organisers in holding art exhibitions. In addition, RM10 million will be allocated to Think City to preserve culture and urban heritage.

2. Healthcare tourism

The government will set aside RM25 million to the Malaysian Healthcare Tourism Council (MHTC) to strengthen the position of Malaysia as the preferred destination for health tourism in ASEAN for oncology, cardiology and fertility treatment.

Medical tourism is a rapidly expanding sector in Malaysia, Lim said during his recent speech, growing 17% annually from 2015 until 2018.

In 2018, it generated RM1.5 billion revenue receipts from 1.2 million healthcare travellers. To solidify Malaysia's leading position as a medical tourist destination in the region, the government also launched the Malaysia Year of Healthcare Travel 2020 campaign as part of VMY2020, targeting ASEAN markets and the Middle East.

 

(Read also: Medical tourism: How Malaysia can make its mark as a hub)

 

3. Championing digital content and esports

The Malaysian Digital Economy Corporation will receive RM20 million to grow local champions in creating digital content, especially in e-Games, animation and digital arts. Meanwhile, the government is also increasing the budget allocation for esports by RM20 million for 2020 as it recognises the potential of the industry.

Lim also wished the Malaysian team best of luck for the upcoming Southeast Asian Games in December.

4. Training micro-digital entrepreneurs

The Malaysia Digital Economy Corporation (MDEC) will receive RM10 million to train micro-digital entrepreneurs and technologists to leverage on e-marketplaces and social media platforms to sell their products. Lim said that about 100 of these micro-digital entrepreneurs, a majority of whom are women and youth, were able to generate RM23 million in revenues over just six months.

Meanwhile, the government is providing RM20 million to Cradle Fund for the provision of training and grants to seed companies. According to Lim, programmes such as the Coach and Grow Programme by Cradle Fund for high impact technology entrepreneurs involving 469 companies to date have generated RM2.3 billion in revenue, including RM300 million in exports.

To ensure gains arising from successful digital companies are shared with the Rakyat, the government will introduce the concept of digital social responsibility (DSR). DSR is the commitment by businesses, to contribute to digital economic development while improving the digital skills of the future workforce with initiatives such as technology scholarships, training and upskilling for digital skills for communities in need. Contributions towards DSR by the companies will be given tax deduction.

5. Building digital enhancement centres

MDEC will also receive a budget of RM70 million to set up 14 one-stop digital enhancement centres in all states to facilitate access to financing and capacity building of businesses, especially SMEs in line with the Fourth Industrial Revolution.

The centres are created as an extension of MDEC's "100 Go Digital" programme, which aims to enable traditional Malaysia businesses in key sectors move towards digitalisation, improving efficiency and customer experience.

To also promote knowledge sharing and education through digital enabled content, the government proposes to establish three new digital libraries in Kedah, Perak and Johor.

6. Boosting the use of e-wallets

 

The government is offering a one-time RM30 million digital stimulus to qualified Malaysians aged 18 and above with annual income less than RM100,000, to significantly increase the number of Malaysians, participating merchants and SMEs to use e-wallets.

The one-time digital stimulus per person can be redeemed and used for a two-month period commencing 1 January 2020 and expiring on 29 February 2020. The government will allocate up to RM450 million to Khazanah Nasional to implement this digital stimulus, which will benefit up to 15 million Malaysians.

7. 5G Ecosystem Development Grant

 

Worth approximately RM50 million, the 5G Ecosystem Development Grant aims to seed technological developments by Malaysian companies to ride the global 5G wave. Additionally, an allocation of RM25 million will be given to set up a contestable matching grant fund to spur more pilot projects on digital applications such as drone delivery, autonomous vehicle, blockchain technology, and other products and services that leverage on our investments in fibre optics and 5G infrastructure.

8. Implementing the National Fiberisation and Connectivity Plan

The National Fiberisation and Connectivity Plan (NFCP), which will offer comprehensive coverage of high speed and quality digital connectivity nationwide, will be implemented over the next five years. The NFCP will adopt a public private partnership approach involving a total investment of RM21.6 billion. Through the Malaysian Communications and Multimedia Commission (MCMC), the government will finance at least half of the required investment with corresponding investments by the private sector telecommunications players via a matching grant mechanism.

MCMC will also set aside RM250 million to leverage on various technologies, including via satellite broadband connectivity. This is to ensure connectivity in remote areas of Malaysia, especially in Sabah and Sarawak. The government will also allocate RM210 million to accelerate the deployment of new digital infrastructure for public buildings particularly schools and also high impact areas such as industrial parks. Priority will be given to locations within states that are able to facilitate and expedite the implementation of the NFCP.

9. Attracting Fortune 500 companies

The government will make available up to RM1 billion worth of customised packaged investment incentives annually over five years, as part of the strategic push to attract targeted Fortune 500 companies and global unicorns in creative, high technology, manufacturing and new economic sectors.

To qualify, these companies must invest at least RM5 billion each in Malaysia which will generate additional economic activities that will support the country's SMEs, create 150,000 high quality jobs over the next five years and strengthen the nation's manufacturing and service ecosystems.

10. Focus on the halal market

The government will allocate RM10 million to the Ministry of Entrepreneur Development to focus on advocacy and awareness for halal certification, halal product development and providing platforms for local players to tap on the US$3 trillion global halal market. Last year, it set aside RM100 million to upgrade the capability of SMEs in the halal industry via various programmes, in a bid to increase exports and make Malaysia a global halal hub by 2020.

11. New funds for women entrepreneurs and Bumiputera SMEs

The government is allocating RM50 million to encourage SMEs to engage in more export promotion activities. Additionally, to further support up and coming entrepreneurs, SME Bank will introduce two new funds where the government will provide an annual interest subsidy of 2% to reduce borrowing costs. They are a RM200 million fund specifically for women entrepreneurs, offering loans of up to RM1 million per SME, and a RM300 million fund to support Bumiputera SMEs with the potential to become regional champions, with priority given to producers of halal products and manufacturers with high local content.

It is also implmeneting enhancements to the Skim Jaminan Pinjaman Perniagaan (SJPP), a a wholly-owned company of Minister of Finance which manages and administers funding schemes to SMEs. For Bumiputera SMEs, export-oriented SMEs and SMEs investing in automation and digitalisation, the government guarantee will be increased from 70% to 80%. In addition, it will reduce the guarantee fee to only 0.75%. A new SJPP allocation of RM500 million in guarantee facility will also be launched, earmarked for women entrepreneurs.

 

12. Helping underserved SMEs

The government will further allocate an additional RM50 million to My Co-Investment Fund under the Securities Commission Malaysia to leverage such platforms to help finance the underserved SMEs. The government is building on the early success of new digital financial innovations such as Equity CrowdFunding and Peer-to-Peer platforms, which collectively raised more than RM430 as of June 2019. As a result, more than 1,200 SMEs benefited from this.

 

To further encourage alternative sources of funding for start-ups companies and to attract more foreign investment to Malaysia, tax incentives given to venture capital and angel investors will be extended until the year 2023. To support Bumiputera entrepreneurial development, grants amounting to RM445 million will be provided in terms of access to financing, provision of business premises and entrepreneur training.

They include RM150 million for overall entrepreneurship development and upskilling by Perbadanan Usahawan Nasional; RM75 million by SME Corporation for capacity building and export focus for Bumiputera SMEs, which includes enhancing marketing, packaging, and financial literacy; RM170 million in total for access of financing via TEKUN, SME Bank and Pelaburan Hartanah; and RM50 million for entrepreneurship under Unit Peneraju Agenda Bumiputera, Ministry of Economic Affairs.

(Photo courtesy: 123RF)