Business

Saturday October 31, 2009

Budget allocates more funds for small firms

By EILEEN HEE


AS the dust begins to settle following last Friday’s unveiling of Budget 2010, many small and medium enterprises (SMEs) are not “overly excited” about the measures announced by the Government. In fact, SMI Association president Chua Tiam Wee says most of the SMEs expected much more from the budget.

“Although the budget was wide in coverage, it was quite plain,” he told StarBizWeek. He says most of the measures for economic recovery have already been announced in the so-called mini budget in March, and these are still being implemented.

Chua points out that the funds under the SME Assistance Guarantee Scheme and Working Capital Guarantee Scheme fund are almost exhausted and the Government should look into replenishing these schemes.

He also says conditions should be eased for SMEs to gain access to the RM50mil grant for branding.

“Not many SMEs can obtain this grant because of the stringent requirements,” he argues.

Neither does he welcome the proposed imposition of a RM50 service tax on credit cards, saying it will put a dampener on SMEs that rely on credit card facilities for working capital.

From January next year, the Government plans to collect an annual RM50 service tax on each principal credit and charge card, including free cards, and RM25 for each supplementary card.

However, Chua says the reduction in the maximum personal income tax rate from 27% to 26% for those earning more than RM100,000 will provide some cheer.

He lauded measures such as the tax deduction on expenses incurred in the registration of patents and trademarks in the country, and the annual RM500 tax relief on broadband subscription fees from 2010 to 2012.

“This will help the SMEs to reduce costs and to swiftly adopt ICT, which will enable them to compete with bigger companies,” he says.

In the budget, the Government has allocated RM350mil to SME Corp Malaysia and RM200mil for Tabung Kumpulan Usaha Niaga (Tekun). Of the latter amount, RM20mil is for small-scale Indian entrepreneurs.

Malaysian Indian Chamber of Commerce and Industry (MAICCI) president Datuk K.K. Eswaran says this is the first time that the Government has provided such an allocation for the Indian community under the Tekun loan scheme.

“This is in addition to the RM15mil allocated for the Indian community early this year,” he adds.

He describes the special allocation as a golden opportunity for the new Indian entrepreneurs and urges them to make full use of it.

“The budget has taken into consideration the domestic and global challenges facing the Malaysian economy, particularly the SMEs. It is significant for MAICCI and the Indian SMEs as it has created more opportunities. There are about 100,000 Indian SMEs in the country,” he says.

“It also reflects the Prime Minister’s 1Malaysia concept and shows that he gives priority to the people. This is a budget for everyone.” Eswaran adds that the country’s SMEs will benefit greatly from the budget, which has given more attention to the development of local entrepreneurs.

“The SMEs that are currently reeling from the recession due to financial constraints and low demand, now have a lifeline to tap funding from SME Corp, which has been allocated RM350mil by the Government,” he says. He points out that there is a need for the Indians to strengthen their economic position and they should be united under one umbrella and one system.

The introduction of the Creative Industry Fund and tax breaks for registration of patents and copyrights, are also likely be catalysts in encouraging the creation of high-quality, locally produced animation content with export potential.

“We believe Budget 2010 will bring a lot of benefits to SMEs in the creative content industry like Geoflex,” says Ezmir Ali, the chief executive officer of the IT company based in Cyberjaya.

He adds that incentives to increase PC ownership (computer loans for civil servants and netbook packages for university students) and broadband service take-up (tax relief on broadband subscription fees) will also spur the demand for online video and innovative Web 2.0 applications.

For Motiofixo Sdn Bhd managing director Shamsul Nashriq the additional funds to promote Malaysia in the area of creative content will spur rapid growth in the creative industry as it will attract major players from overseas to come in and invest.

“We can expect businesses to become commercially driven to stay competitive and this will open new jobs/careers for our young professionals. We shall see the quality of work by these professionals increase,” he says. The company deals in creative multimedia.

SMEs are also poised to benefit from the measures announced in the area of education. Internexia Sdn Bhd managing director Bismillah Kader says the creative multimedia and entertainment industry will gain from the intellectual capital that foreign investors will bring and this will inevitably raise standards.

Internexia, which is in both education and creative media, says it also welcomes the RM30bil allocation for primary and secondary education, which will aid 5.5 million students.

“The primary and secondary sectors in education are key areas needing support in the long-term development of human capital. Increasing access will contribute to the government policy of education for all,” says Bismillah.

She also points out that the Government should consider developing the adult ‘return to learn’ sector with incentives for corporations to release employees for knowledge and skills development.

“Women ‘returnees’ is another neglected group in the development of human capital. Incentives for this in terms of childcare provision and scholarships will help to grow human capital,” she argues.

“Encouraging the private sector to participate in the education sector with fiscal incentives is good. However, I think these incentives should not just be in fiscal terms. The Government should encourage innovative initiatives to stimulate creativity and thinking skills.

“They should resist developing more of the same, that is, offering run-of-the-mill skills and knowledge. The Government should identify and remove barriers to access and make open entry more available.”

Jeffrey Raj, founder and CEO of Cuzzy Media Sdn Bhd, says the budget encourages the creative industry to shift gear and move up the value chain in their respective sectors by employing innovation and adding higher skilled offerings for clients.

Cuzzy Media is in the business of entertainment programming and IPTV (Internet protocol television).

“The budget also encourages domestic consumption. So you will see more spending with local companies. But the retail sector may get a bit bumpy, especially because of the service tax on credit and charge cards. Hence, spending is encouraged but on a prudent basis,” says Raj.

Kingoya Enterprise Sdn Bhd director Gopi Nair says the main effect of the budget on his company, which makes specialised harvesting equipment and tools, is in terms of research and development, and commercialisation.

“This budget will have direct impact on these items as we have reached that phase with our products, where access to these grants and tax benefits will be very critical,” he says

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