Budget2020: Over RM1 Billion Boost for SMEs and Entrepreneurs

• By CompareHero.my
• October 18, 2019

The latest business and entrepreneurship allocations from Budget 2020.

We have compiled the salient points on Government funding, entrepreneurship and tax scheme from the full text of Budget 2020, delivered by the Finance Minister on 11 October 2019 in the Parliament of Malaysia (click here for the full text of the speech) :

Read also: Full Budget2020 Summary

In Support Of Entrepreneurship

1. 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.
2. The Government will provide RM20 million to Cradle Fund for the provision of training and grants to seed companies.
3. The Government will continue providing funds of RM10 million to MDEC to train micro-digital entrepreneurs and technologists to leverage on e-Marketplaces and social media platforms to sell their products. 100 of these micro-digital entrepreneurs, a majority of whom are women and youth, were able to generate RM23 million in revenues over just 6 months, unleashing life changing experiences.
4. To further support our 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 as follows:
   • 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.
5. The government will further allocate an additional RM50 million to My Co-Investment Fund (MyCIF) under the Securities Commission Malaysia to leverage such platforms to help finance the underserved SMEs.
6. The Government will provide a RM1 billion 1:5 matching guarantee for dedicated private equity funds to invest in Malaysian consortiums.
7. The Government will continue to support strategic projects through financing programmes under Bank Pembangunan Malaysia Berhad, offering a 2% interest subsidy per annum via:
   • the Sustainable Development Financing Fund size increased from RM1 billion to RM2 billion;
   • the RM1 billion Maritime & Logistics Fund; and
   • the RM2 billion Industry Digitalisation Transformation Fund which will now also support the implementation of connectivity projects.
8. The Government has provided RM100 million for Small Business Loans (Program Pembiayaan Usahawan Perusahaan Kecil Komuniti Cina) for the Chinese community via Bank Simpanan Nasional with more than 380 branches throughout the country, at an interest rate of 4%.
9. For the palm oil sector, the Government intends to support this industry with the following measures:
   • RM550 million palm oil replanting loan fund for smallholders collateral-free at an interest rate of 2% per annum, with a tenure of 12 years including a 4 year moratorium on repayment. The replanting will be undertaken using the latest seedlings and also in compliance with Malaysian Sustainable Palm Oil (MSPO) standards to ensure better productivity and marketability;
   • An allocation of RM27 million to support Malaysian Palm Oil Board’s (MPOB) efforts to market palm oil internationally and counter anti-palm oil campaigns;
   • Enhance implementation of biodiesel, with the B20 biodiesel for the transport sector to be implemented by the end of 2020. This is expected to increase palm oil demand by 500,000 tonnes per annum.
10. To better facilitate access to financing for SMEs in priority segments, the Government will implement enhancements to the Skim Jaminan Pinjaman Perniagaan (SJPP). For Bumiputera SMEs, export-oriented SMEs and SMEs investing in automation and digitalisation, the Government guarantee will be increased from 70% to 80% and in addition, 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.
11. 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. This includes:
    • RM150 million for overall entrepreneurship development and upskilling by Perbadanan Usahawan Nasional Berhad (PUNB);
    • RM75 million by SME Corporation (SMECorp) 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 Berhad; and
    • RM50 million for entrepreneurship under Unit Peneraju.
12. The Government will continue to support strategic projects through financing programmes under Bank Pembangunan Malaysia Berhad, offering a 2% interest subsidy per annum via:
    • the Sustainable Development Financing Fund size increased from RM1 billion to RM2 billion;
    • the RM1 billion Maritime & Logistics Fund; and
    • the RM2 billion Industry Digitalisation Transformation Fund which will now also support the implementation of connectivity projects.
13. For Indian entrepreneurs, the Government will provide RM20 million under TEKUN Nasional’s Skim Pembangunan Usahawan Masyarakat India (SPUMI) which is expected to benefit 1,300 entrepreneurs at an interest rate of 4%.
14. The Government has embarked on a comprehensive review and revamp of the existing incentive framework, comprising the Promotion of Investments Act 1986, Special Incentive Package and incentives under the Income Tax Act 1967. This new framework is expected to be ready by 1 January 2021.
15. The Government will also provide tax incentives to further promote high-value added activities in the Electrical and Electronics (E&E) industry to transition into 5G digital economy and Industry. These incentives include:
    • income tax exemption up to 10 years to E&E companies investing in selected knowledge-based services; and
    • special Investment Tax Allowance to encourage companies in E&E sector that have exhausted the Reinvestment Allowance to further reinvest in Malaysia.
16. The Government is increasing the allocation from RM5.7 billion in 2019 to RM5.9 billion in 2020 on the Technical & Vocational Education & Training (TVET), including to:
    • further strengthen the public and private sectors’ synergy on the TVET programme through increased funding of the State Skills Development Centres (SSDCs). The Government will provide RM50 million through Perbadanan Tabung Pembangunan Kemahiran (PTPK) to fund TVET courses conducted by SSDCs;
    • promote greater industry collaboration by Public Skills Training Institutions (ILKA) by allowing ILKAs to utilise surplus revenues generated from TVET courses provided to the industry for expenditures such as upgrading equipment and hiring trainers from industry and providing matching grant fund of RM20 million to support customised TVET courses undertaken in collaboration with industries.
17. The Human Resource Development Fund (HRDF) will collaborate with the industry to provide TVET training linked to employment opportunities. For this purpose, the Government will provide RM30 million to train more than 3,000 youths from low income households.
18. Additionally, to assist farmers in their time of need, the Government will establish a RM100 million Disaster Assistance Fund to provide loans at an interest rate of 4%.
19. The Government will allocate RM10 million towards a joint Government-UN Sustainable Development Goals (SDG) fund to co- finance SDG initiatives in Malaysia. In addition, the Government will allocate RM5 million to support the convening of Parliamentary Select Committee meetings and also for greater engagement by Members of Parliament with civil society, including to address the Sustainable Development Goals at the local level.
20. Contributions towards Digital Social Responsibility (DSR) by the companies will be given tax deduction. Effective date hasn’t been provided.
21. To further encourage alternative sources of funding for startups 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.
22. The current tax deductions on the cost of issuance and additional deductions on sukuk issuance costs under the principle of Wakalah will be extended for 5 years until year of assessment 2025.
23. To further promote Islamic fund and Sustainable and Responsible Investment (SRI) fund management activity, the tax exemption for fund management companies managing Shariah compliant funds and SRI funds, and the tax deduction on the cost of issuing SRI Sukuk will be extended for another 3 years until year of assessment 2023.
24. The Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) incentives will be extended to 2023. A 70% income tax exemption of up to 10 years will be given to companies undertaking solar leasing activities.
25. It is proposed that qualifying intellectual property income derived from patent and copyright software of qualifying activities be given tax exemption for a period of up to 10 years. The Modified Nexus Approach (MNA) will be adopted to ensure this.
26. To amplify the economic benefits of VMY2020, the Government will roll out a host of tax incentives targeted at the arts and tourism sector, such as:
    • 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 5 years;
    • Increasing tax deductions given to companies sponsoring arts, cultural and heritage activities in Malaysia from RM700,000 to RM1,000,000 per year.
27. The Government will also extend double tax deduction on expenses incurred by companies participating in Skim Latihan Dual Nasional (SLDN) for another two years. In addition, the double tax deduction currently given to companies undertaking Structured Internship Programme (SIP) approved by Talent Corporation Malaysia Berhad (TalentCorp) will be expanded to include students from all academic fields rather than just engineering and technology.
28. 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.
29. To further encourage the private sector to donate as part of their corporate social responsibility, effective 5 September 2019, the Government has increased the donation reporting threshold from RM5,000 to RM10,000 under Subsection 44(6) of the Income Tax Act 1967. This will subsequently be increased to RM20,000 beginning 2020.
30. The SME income tax rate for Chargeable Income up to the first RM500,000 was reduced by 1% to 17% in 2019. To further support the growth of the SME, the chargeable income subjected to 17% rate will be increased to RM600,000, subject to the SME having paid-up capital of not more than RM2.5 million and annual sales of not more than RM50 million.

Read also: Ministry of Finance – Economic Outlook 2020

Information source: GLT Law – Gan, Lee & Tan
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Budget 2020: What Has Been Implemented?

• By CompareHero.my
• October 17, 2019

Phew!

Anticipation was through the roof as we diligently listened to what was broadcasted last Friday. I’m talking about the annual national budget that was tabled in Dewan Rakyat on October 11, 2019. With themes ‘Shared Prosperity’ and ‘Kemakmuran Bersama’ spearheading the highly-anticipated event, we were all eager to know if the proposed key initiatives for year 2020 would live up to its name.

While it was no easy feat trying to keep up with our finance minister Lim Guan Eng’s speech during the Belanjawan 2020 presentation, we managed to capture some key highlights.

In case you’ve missed it, catch a live version of what went down here:

Otherwise, let’s start with some visuals of the key initiatives that will be implemented next year.

Last year, a sum of RM314.5 billion was allocated for Budget 2019 which was themed as ‘Credible Malaysia, Dynamic Economy, Prosperous Rakyat’. This year, the government has allocated RM297.02 billion — a drop of 5.6% compared to the previous year.

Budget 2020 is anchored on four thrusts:

• Driving Economic Growth in the New Economy and Digital Era
• Investing in Malaysians: Levelling Up Human Capital
• Creating a United, Inclusive and Equitable Society
• Revitalisation of Public Institutions and Finances

The objectives of the 15 strategies outlined under the budget includes future proofing the economy and bridging wealth as well as income disparities that is in line with the aspirations of the Shared Prosperity Vision 2030.

See also: Budget 2020: What Can We Expect?

Sources: The Star, Bernama.

 
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Propelling Entrepreneurs and SMEs into the Digital World

• By CompareHero.my
• October 14, 2019

SMEs are the growth engines of the nation.

The Small and Medium Enterprises (SME) landscape in Malaysia show that this segment is 98.5% of all business establishments, and in 2018, SMEs contributed RM521.7 billion of the nation’s gross domestic product (GDP), while providing 5.7 million jobs to 70% of Malaysia’s workforce. However, being less financially significant and visible compared to the multinationals, and perhaps less conspicuous than some start-ups and micro enterprises, SMEs are typically the least publicly profiled organizational sector. Yet with less legacy baggage than their multinational brethren, SMEs can be nimbler in pursuing transformational change.

Amid globalization and technological advances, SMEs must embrace digital technologies to enhance their competitiveness and flexibility, and to expand and create new sources of value. The benefits of investing in new technologies such as process automation, artificial intelligence or machine learning and robotics range from raising efficiencies, improving customer services, managing costs, getting ahead of the competition and building connectivity. Many case studies are well-documented, and success stories abound.

Read also: Budget2020: Over RM1 Billion Boost for SMEs and Entrepreneurs

Transformation is, however, an extensive and continuous undertaking. Effective digitalization requires SMEs to move from its traditional operating models and legacy architectures, and demands a longer-term view on resource investments. This calls for organizations to leverage new tools and applications, digital partners, digital talent and new ways of working, and ecosystem connectivity to deliver enhanced products and services, and pursue new markets and customers. With risks intensifying alongside digital adoption, they also need to consider new dimensions of security challenges such as cyber threats and vulnerabilities.

Embracing digital can be broadly categorised into computerisation and digitalisation.

Computerisation means adoption and usage of digital devices, however more towards individual usage or limited business usage. While digitalisation can be defined as business process transformation including customer management, transaction, services and feedback in a complete digital environment.

In the Digitalisation Survey of SMEs 2018, Information and Communications Technology (ICT) usage among SMEs predominantly comes from personal devices, such as smartphone (91.4%), basic internet connection (90.1%) and computer or laptop (86.5%). The usage of back-end business processes, such as Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) are very low among SMEs. It also found that SMEs that utilised data management services which help organise, store, display data of business operation, sales and customer information were able to increase their productivity up to 60.0%, as compared to SMEs that utilised e-business and social media initiatives leading to increase in productivity to only about 27.0% and 26.0%, respectively.

Steps to undertake in the digital transformation journey.

According to a new EY report, Redesigning For The Digital Economy, it highlights seven high-level steps that SMEs should undertake in their digital transformation journey:

• Lay a firm foundation for digital success: Transformation begins with having strong and committed executive level sponsorship with oversight of digital technologies and foresight to prioritise these to champion change.
• Balance legacies with new technology: 61.0% of Malaysia respondents (Southeast Asia 60.9%) highlight that IT limitations from legacy architectures are hindering their digital strategies. This is a pervasive issue, with organisations working on old fragmented infrastructures that constrain business agility.
• Focus on end-to-end, not discrete initiatives: Organisations should create and embed the digital strategy into business operations, then design the right products, services or experiences to enhance performance based on these aspirations.
• Share responsibilities collectively; digitalisation isn’t an IT-only initiative: Adopting emerging technologies should be cross-organisation such that no one individual or department owns it. The responsibility is shared across multiple divisions, with multiple users benefiting from the transformation.
• Manage the people dimension: Talent is an extremely crucial actor as transformation creates new roles while impacting existing positions. Besides sourcing for new staff, SMEs need to engage incumbent employees to minimise resistance and drive the behavioral changes needed to integrate digitalisation.
• Mitigate new dimensions of digital risks: SMEs should develop integrated risk management, compliance and security protocols as part of their initial design phase.
• Integrate into an ecosystem-based world; don’t create digital islands: Transformation is a massive undertaking with limited success, if undertaken in silos. With the customer typically driving the need for digital transformation, partnerships would be essential to raise competencies that support more holistic customer experiences.

Majority of Malaysia’s SMEs in early stages of digital maturity. While the benefits of digitalisation are apparent, the digital ambitions of the SME respondents of the EY survey may not sync up with their perceived level of digital maturity. Only 6.8% of Malaysia’s SMEs (Southeast Asia 8.7%) are at stage five of digital maturity, where organisations have a single digital platform to scale technological innovations and consider themselves digital native enterprises. The majority of SMEs in Malaysia (62.7%) are in the early stages of digital maturity (Southeast Asia 54.9%), with digitalisation programmes remaining largely unaligned with the broader enterprise strategy and multiple initiatives running in parallel across business functions.

Over half of the SMEs in Malaysia are at stage two (Malaysia 52.5%, Southeast Asia 38.3%) of digital maturity, where digital transformation initiatives have some alignment to the organisation’s enterprise strategy and are initiated at the functional or lines of business level, with multiple strategies running in parallel; while less than a fifth (Malaysia 10.2%, Southeast Asia 16.6%) of the respondents are still at stage one, or the initial phases of digital transformation, where initiatives are largely informal, tactical and separate from the organisation’s broader enterprise strategy.

In the Economist Intelligence Unit’s Asian Digital Transformation 2018 Index, Malaysia ranks sixth overall of the 11 Asian markets but behind the average score. The primary reason is Malaysia’s lag in the ‘industry connectivity’ category – meaning the tendency of companies to collaborate with other organizations and communities to advance digital transformation.

In an effort to accelerate digitalisation, the Malaysia Digital Economy Corporation (MDEC) launched its Digital Transformation Acceleration Programme (DTAP), aimed at offering Malaysian companies a structured approach to transformation, leveraging the expertise of its Digital Transformation Labs’ and grants in the adoption of emerging digital technologies. Other Digital Economy Initiatives by MDEC for entreprenuers include:

• Malaysia Tech Entepreneur Programme (MTEP)
• Malaysia Innovation Policy Council
• Malaysia Digital Hub
• Global Acceleration and Innovation Network (GAIN)
• Digital Creative Content
• Islamic Digital Economy (IDE)
• Global Tech Fund
• Big Data & AI
• FinTech
• eCommerce

A study by enterprise technology provider Workday has found that Malaysian companies are leading the Asia Pacific in quantifying the return from their digital transformation initiatives. 58% of C-level executives in Malaysia responded to Workday’s “Digital Dysfunction in Asia Pacific” study saying that their digital transformation initiatives are seeing measurable returns. By comparison, only 47% of companies in Singapore and 34% in Japan are seeing returns.

According to the APAC SMB Digital Maturity Index released by Cisco recently, around 46% of Malaysian Small and Medium Businesses (SMBs) are aware of government programmes that could support them in digital transformation but have not taken the initiative to take part in them, whereas 49% are aware and have benefitted from them.

SMEs in ASEAN, including Malaysia (but with the exception of Singapore), are in the ‘Digital Indifferent’ stage of digital maturity; where companies’ digital efforts are often reactive to market changes, rather than driven by a proactive tactical approach. However, it also notes that Malaysian SMEs are very close to reaching the next level of digital maturity, ‘Digital Observer’ that will place them in the same league as developed countries across the Asia Pacific.

SME Corp targets the digitalisation of all SMEs by 2024.

SME Corporation Malaysia (SME Corp) expects all SMEs in the country to embrace digitalisation in their business operations within five years compared with the current 32%.

“We have met with 10 service providers who can assist the SMEs in digitalisation. In this digital era, we want the sector to embark on using digital technologies, at least a cloud-based service or point-of-sale system, which would enable them to store customer data and do analyses,” he said during a media briefing on the Entrepreneurship and SME Week 2019. – SME Corp Chief Executive Efficer Noor Azmi Mat Said.

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Budget 2020: Live Updates On Oct 11

• By CompareHero.my
• October 11, 2019

FWD Takaful Launches Online Channel With FWD Protect

• By CompareHero.my
• October 10, 2019

From left to right:
Encik Wan Ahmad Najib Wan Ahmad Lotfi, Chief Strategy & Digital Distribution Officer, FWD Takaful Berhad, Encik Salim Majid Zain, Chief Executive Officer, FWD Takaful Berhad, Puan Sharifah Zarina Syed Osman, Chief Product Officer, FWD Takaful Berhad.

FWD Takaful(FWD), Formerly known as HSBC Amanah Takaful Berhad) launched its FWD Protect Direct, Malaysia’s first Takaful protection plan that can be participated online. This new channel allows coverage of up to four family members under one certificate with automatic underwriting. Marking its first phase of FWD Takaful’s digital distribution model, the channel allows customers to obtain Takaful protection online and receive immediate coverage.

According to its CEO, FWD is thrilled to offer online Takaful plans at this early stage in its digitalization journey to allow customers to easily obtain Takaful protection and receive instant coverage.

” We want to make a difference in people’s lives today with our new Takaful product. It is easy to use, simple, reliable and direct. This enables customers to manage their Takaful certificates at their own convenience. Having this product online makes it more accessible to Malaysians all over the country plus it is affordable.” he added.

FWD Protect Direct

FWD Protect Direct is a pure protection Takaful plan that covers death for you and your family.
No intermediaries are involved in the distribution of FWD Protect Direct.

Available for as low as RM0.40 per day for an individual plan or RM1.20 per day for a family plan, the contribution level is throughout the term of the certificate, so customers do not have to manage increasing contributions as they grow older. The plan also provides a waiver of future contributions should the certificate owner passes on, ensuring continuous protection for the rest of the family.

Death benefit
This plan ensures your loved ones receive financial support up to RM500,000. You can participate for yourself or as a whole family.

No medical examination
You are only required to answer simplified underwriting questions.

Pay the same contribution yearly
Pay level contribution until your certificate mature.

We pay your family’s contribution upon your passing
We ensure that your family remains covered upon your passing.

The online purchasing experience incorporates an intelligent underwriting system. Customers can
instantly get quotes and check for eligibility through its dynamic application questions, reflexive
questioning and predictive underwriting. The fully automated process is truly a market differentiator
that makes for an easy user experience, which demonstrates FWD Takaful’s customer-led approach.

The channel has an intuitive user interface based on responsive design supported by help texts;
underpinned by FWD Takaful’s easy to understand and simple language. Customers can expect to
start their protection within 24 hours upon completing their application and certificates are
delivered directly to their email.
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