PETALING JAYA: More government assets could be unlocked via new listings on the KL Stock Exchange and reduction of some of its large holdings in companies such as Tenaga Nasional Bhd and Telekom Malaysia Bhd as well as banks.
For Budget 2004, this could be one of the ways to increase government revenue and also add liquidity to the KLSE. The potential list of new listings could be in addition to those speculated by the market following the announcement of a 10-point plan to spur the capital market.
However, the divestment of shares in majority-owned government companies is likely to be done in moderation while the listing of 100%-owned government companies would result in a portion of the proceeds going back to government coffers.
“It’s a good idea and the Government is already doing it, for example, Khazanah Nasional Bhd’s issue of covered warrants and divestment of its stake in the main companies – Malaysian International Shipping Corporation Bhd, Malayan Banking Bhd and Tenaga. But divestment of assets gives a one-off cash inflow while the dividends income stream is lost,” said Tan Pye Sen, head of research at JP Morgan.
“However, if there is good value, the Government can go for it. But it should bear in mind that cutting corporate taxes results in a loss
of recurring income every year,” said another analyst.
On whether foreign investors would be the target for investment into these companies, analysts pointed out that the Employees Provident Fund (EPF) itself was flush with funds.
Sin taxes on cigarettes and liquor should be back after an absence of nearly three years.
Against health concerns especially voiced by the World Health Organisation, the Government may want to support some of these health-related causes while recognising the threats posed by smugglers.
Stepped up security checkpoints and border patrols would be appropriate counter-measures, analysts said.
They added that the quantum of taxes imposed should not be too high as some of the companies may not have recovered from the last tax hike.
Small and medium-sized industries (SMIs), a sector that has been earmarked for development on a big scale, are likely to see more follow-through measures in terms of a likely corporate tax cut, additional grants, extension of micro credit, export promotion, packaging and branding.
Federation of Malaysian Manufacturers (FMM) president Datuk Mustafa Mansur also stressed on the importance of local procurement and support for local industries, which should stand a better chance of getting local contracts.
According to Lee Teck Meng, vice-president of the SMI Association of Malaysia, the micro-credit scheme introduced by the Government has done quite well and to lessen the financing risks faced, mentors have been appointed by the association to study the companies carefully.
He said many of the smaller SMIs still faced financing problems while medium-sized ones were finding it easier to get credit now.
“For this Budget, we are hoping for a cut in the 5% to 10% sales tax which is heavy for many SMIs,” said Lee.
“In place, we propose a value-added tax of 0.5% to 1% for goods purchased.”
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