More incentives for growth drivers

  • Business
  • Friday, 05 Sep 2003

BY Hanim Adnan

MALAYSIAN exporters will likely receive a strong boost in competing at the international level in the form of “specific” incentives although the range is expected to be smaller in the forthcoming Budget 2004.  

Economists and industry players concurred that too many incentives for the export sector had been dished out during the recent economic stimulus package, which some considered as a “mini budget” by itself and also, in Budget 2003.  

“I personally do not expect any more major incentives for the export sector particularly with the latest RM100mil grants given to companies for developing and promoting high quality Malaysian brands internationally,” said MIDF Sisma Securities economist Azrul Azwar. 

Teh Chin Bin

Budget 2003, among others, has provided special incentives to enhance exports and to ensure that Malaysian goods are able to penetrate the global market.  

SSB Securities economist Manokaran Mottain expects Budget 2004 would focus on long-term economic growth, compared with the economic stimulus announced on May 21, which dealt with short-term economic growth. 

“Perhaps more incentives will be given to sectors which are the country's engines of growth and also more generic incentives like tax relief as well as relaxation on certain rules and regulations,” he said. 

Manokaran said more new measures or incentives would likely be geared towards raising the country's competitiveness against China: like incentives for manufacturing investments related to research and development, technology and innovative products development.  

“I think companies going into new markets would also be given further tax relaxation or incentives. At the same time, bear in mind that the government's next approach would likely be to attract more Arab-related funds, particularly from Middle Eastern countries,” he said. 

Currently, among Malaysia's major exports are electronics and electrical products (E&E), commodity-based products such as palm oil, crude petroleum and chemical products. 

On the key driver to export, both economists agreed that growth in the E&E sector remained the driver of the country's performance as it accounted for 53% of Malaysia's exports and 66% of total manufactured goods. 

Malaysian-American Electronic Industry (MAEI) interim chairman, Teh Chin Bin said the potential upturn in the electronics sector was partly due to the long overdue personal computers replacement cycle.  

“Corporate replacement PCs should happen later this year or early 2004,” he added.  

Further investment in high-tech equipment is another leading indicator suggesting that business expectations are gradually recovering and gearing up for a revival in IT investments and orders.  

MAEI members contribute about 21% to Malaysia's E&E exports.  

Commenting on commodity-based exports particularly palm oil, Bell Group of Companies chief executive officer Datin Liana Low said Malaysia's palm oil exports had increased significantly over the past few months.  

“This is a new record year where since March, we have seen five consecutive months when monthly export volume hit 1 million tonnes,” she said. 

Low said since March there had been a spill-over effect to the subsequent month due to unfulfilled orders.  

She also believes that the spill-over effect would continue until the end of this year, mostly due to increasing demand from India.  

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