As usual, after Malaysia Prime Minister Abdullah finished his 2008’s Budget speech last Friday (after heavy coughs in between), you can bet your last penny all the cabinet members will praise how great the budget was. All the ministers never fail to amuze me and perhaps everyone on the street, as they (ministers) seem to sing the same old praise song repeatitively on annual basis. So, was the budget this time really benefits the people who voted the current government? Let’s see:

Corporate Businesses

Corporate tax reduced to 25% in 2009 – obviously this reduction is good for local businessman as they’ll pay less tax, though not necessary will translate to better productivity by passing the same quantum of benefits to its employees. If the intention is to maintain or wrest foreign investors into the country, this might not work too well, considering neighbouring countries such as Singapore has a lower tax bracket.

Besides lower tax and other incentives, foreign investors are putting other factors such as red-tapes, efficiency, transparency, good-governance, fair-policies and to a certain degree crime rates into consideration as well. I still don’t see why foreign investors will be super-interested in local REIT sector with the racial policy of minimum 30% Bumiputra ownership requirement.

Housing

50% stamp duty exemption for house purchase not more than RM250,000 per unit – a good move though I can bet most people (buyers & developers) will ask why not abolish it 100%. Besides, house buyers still need to fork out huge amount of dollars for legal fees, not to mention the bulk of the cost in owning the house will actually goes into serving bank interest of which the rate is not low either.

Of course, you might argue that the kind-hearted government now allows you to make monthly withdrawals from the balance in Account 2 to reduce housing loans. Does this new measure serve any purpose since the existing policy allows EPF contributors to withdraw “all money” (or balance of the loan whichever lower) from Account 2 once a year to reduce housing loans? The quantum of monthly withdrawal allowed is not known (though I still wonder till today why it wasn’t presented) but unless you can withdraw maximum amount required to pay “monthly installment”, it won’t help much, would it?

Lower Education

As for tax exemption for primary and secondary Chinese and Tamil schools, these schools should not be taxed at all in the first place. Not only the government didn’t chip in a single cent while these schools were busy begging for donations from public and depends heavily on charitable bodies (mostly Chinese and Indian businessmen and associations) in order to run the schools, the government also “steals the IP (intellectual property)” from these schools – to borrow a statement from former premier Mahathir who recently claimed that developed countries should pay for stealing so-called talents and thus IP from developing countries which spent huge amount of money and time in providing the education for its own citizens.

Text Book Loan Scheme will be provided to all students – irrespective of their families’ income. And annual fee for primary and secondary schools will be abolished. But shouldn’t the government provide “free” education if it’s serious about developing human capital? Furthermore reducing RM4.50 annual fee for primary school and RM9.00 annual fees for secondary school is nothing to shout about.

Note that with the new goodies, the lower education is not free yet, it’s just “almost free” – you still have other miscellaneous fees which might eats up into the poor’s pocket. Remember the case of how a student who was so poor that his mother has to cut the pencil into two so that it can be shared with other brother and sister, only to be teased by the teacher that the student ate the pencil because he was hungry resulting in the student commited suicide?

Higher Education

Tax relief of up to RM5,000 on education fees to all post graduate studies might be one of the most attractive goodies for working people who desire to climb the corporate ladder which might require you to have a Master degree nowadays. Again, with the average course fees ranging from RM20,000 to RM40,000, depending on which university that offer it, the 5K might looks like chicken feed.

PSD sponsored students in loca universities to be doubled from current 5,000 to 10,000 annually should be lauded. But instead of pushing for quantity, the government should admit there’s serious problem with the quality of the graduates generated from the mill nowadays with thousands of them not being able to find employment. Either they’re “not employable” or the government did a lousy job in administering the country that “unemployement” hits record high – please pick your choice.

The cheers could be heard both locally and thousands of miles away when the premier announced the increament of COLA (cost of living allowance) between 23% to 84% and almost 100% for students in local and overseas universities respectively. How many non-Bumiputras actually benefits from
such move? Not that they’re eager to come back to serve the country after their studies. Heard of how these students studied for years but yet to graduate, even got married and have kids mind you, simply because they purposely fail their papers in order for them to “continue their studies” (forever), while staying at the comforts of the rented home enjoying the allowance for years?

Youth and Sports

Everyone was surprised with the individual tax relief of up to RM300 a year be given on the purchases of sports and exercise equipment. Great step in encouraging healthy citizens. I would be still interested to know the scope of equipments that I can buy to claim the relief, does golf set or slimming sets count?

Aren’t it pathetic to allocate almost RM1 Billion to implement so called sports programmes, including RM677 million for training of 110,000 youths under the National Service Training Programme only to have multiple deaths reported due to unknown and suspicious reasons? You might start asking yourself whether you’re actually sending your son or daughter to die in the camp, not to mention the multiple corruptions or misuse of the funds. The business of providing equipments under such program is simply too lucrative.

And talk about Youth and Sports Ministry, you should read today’s news on how the consultants for the Youth and Sports Ministry had reached an estimated price tag of RM399.67million for the equipment for the IKBN (National Youth Skills Institutes) project which later ballooned to RM767.98 million after two appeals by the ministry for additional allocations. And guess where the extra money ballooned went to. Consider this:

• Technical books (market price = RM417 per set) was billed for RM10,700 per set
• A set of 3 plastic vases (market price = RM5.20) was billed for RM42.80
• A 2-ton car-jack (market price = RM50) was billed for RM5,741
• A set of average screw-drivers (market price = RM40) was billed for RM224.94
• A 3.1 megapixel digital camera was billed for RM8,254

Internet Trading

Minimum broking charges per transaction will be fixed at RM40 from RM12 previously and clearing fees be reduced to 0.03% from existing 0.04% with a maximum fee of RM1,000 were proposed. I won’t mind paying if the broker’s remisiers or dealers can add value by providing me with quality advice. But to pay minimum RM40 per transaction for the no-brainer advice such as “buy this stock because it’s going to fly soon but don’t ask me why” is simply outrages.

As comparison, I’m paying USD1 dollar (RM3.50) per contract trading U.S. options via internet trading, though some other broker houses charge slightly more than that. That’s the cheapest brokerage fees I can get with super-fast speed in trades execution. To add salt into wound, I can sometimes get cheaper rate (less than USD1 per contract) during promotion period. So, Malaysia’s internet stock trading still has a long way to go dude.

Where the credit is due it should be awarded. So FinanceTwitter think the stock investors would appreciate that the government has stopped robbing investors of the dividends paid by companies. The removal of dividend tax will give better investment returns to shareholders. Hence, high dividend-yield stocks will stands to gain with new interest from investors.

Conclusion – I believe citizens are still hoping that the huge allocation for Education Ministry (RM30 billion), Public Transportation (RM12 billion), Public Safety (RM6 billion) and others will not go to waste (or corruption or misuse) as most of the money came from hard-earned taxpayers’ money (42.5%).

# Note: FinanceTwitter has started yet another poll on what you think of the Malaysia 2008 Budget revealed last Friday. Have fun voting (located on right side navigation bar of this blog, just scroll down)

Other Articles That May Interest You …

• Paying through the nose for tools
• Budget 2008 Live Update from FinanceTwitter
• Bad Economy & Crimes Eat into Petrol Stations?
• Is Malaysia’s Coffer Out of Money?

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September 9th, 2007 by financetwitter

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