In brief
On 7 October 2022 the Malaysian Minister of Finance tabled the Budget 2023 which covers the following 3 agendas, each supported by the agenda’s individual core focus and strategies:
- Responsive Budget – to expand fiscal policy
- Responsible Budget – to ensure financial sustainability of the Government
- Reformist Budget – to implement reforms and enact policies that could adapt to new norms
The comprehensive list of objectives within the Budget 2023 among others, is to strengthen economic recovery post Covid-19 and numerous incentives and action plans had been laid out to achieve these objectives. This alert focuses on the Budget 2023 highlights that would have an impact on the projects and infrastructure industries in Malaysia.
Carbon tax regime
The Government plans to introduce a carbon tax regime and will study extensively the feasibility of a carbon pricing mechanism to ensure Malaysia meets its carbon reduction objectives. The implementation of such pricing mechanism will be supported by the provision of RM 10 million as a matching grant to assist in the preparation of carbon assessments for SME companies and eligible related product.
Increased allocation for the Green Technology Financing Scheme (GTFS)
As part of the initiative to encourage green investments, the Malaysian Government had revised the GTFS which is aimed at producing a low carbon economy with particular focus on:
- The guarantee scheme will be increased to RM 3 billion until 2025.
- The scope of financing is expanded specifically to provide guarantees for EV sector with a guarantee limit up to 60%.
- The waste management sector’s financing guarantee will be increased up to 80%.
It is worth highlighting that although the financing amount in the newly announced GTFS has been earmarked up to RM 3 billion, it is essentially an additional RM 1 billion that is being allocated until 2025. Nonetheless, the additional allocation will still be met positively by green project developers.
Forest restoration projects
The Malaysian Government has also expressed its desire to intensify forest restoration projects by planting seedlings including in Hutan Simpan Wilayah Perhutanan Sandakan, Sabah. There will be also be greater efforts to arrest activities which are detrimental to the environment such as illegal logging and exploitation of wildlife.
Major transport infrastructure projects
The Government has allocated RM 16.5 billion for the transportation sector through major infrastructure projects, especially:
- Pan Borneo Highway
- Gemas-Johor Bahru
- Electrified Double-Tracking Project
- ECRL
- RTS Link
- Central Spine Road
Financing for sustainable development
One of the key strategic financing projects initiated by the Government, through Bank Pembangunan Malaysia Berhad (BPMB), is to provide various types of funding with an interest subsidy of 1.5% per year. These include the Sustainable Development Financing Scheme worth RM 1.5 billion to facilitate effort to achieve the 17 sustainable development goals and the RM 1 billion Maritime and Logistics Scheme which will be made available to support oil and gas, shipbuilding and ship repair industries.
Electric vehicle (EV) infrastructure
The Government is also taking the electric vehicle industry very seriously as can be seen by the various tax incentives made available for the EV market. In addition, Government-linked Companies and Government-linked Investment Companies will take initiatives to keep an active role in Malaysia’s economy by investing up to RM 75 million for EV infrastructures.
Chemical and petrol chemical industry
Another objective of the Malaysian Government is to further grow Pengerang as a petrochemical hub in the region and will propose special incentives for chemical and petrochemical investments into Pengerang.
Conclusion
In light of the announcement by the Malaysian Prime Minister of the dissolution of the Parliament on 10 October 2022, the Budget 2023 may be subject to change after the general elections so it remains to be seen whether the proposals will carry through once a new Government is in place. Nevertheless, a clearer roadmap has definitively been shown through the Budget 2023 with aim to achieve the multiple sustainable development goals as discussed above and it is expected that some, if not all, of the above highlights will be implemented in the next year or so in order to achieve the broader national goal of improving the socioeconomic position of Malaysia and ensuring it becomes a low carbon economy.
Source: Malaysian Budget Speech 2023
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This client alert was issued by Wong & Partners, a member firm of Baker McKenzie International, a global law firm with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner or equivalent in such a law firm. Similarly, reference to an “office” means an office of any such law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.
