Budget 2011

Our Prime Minister Datuk Seri Najib Tun Razak just tabled Budget 2011 on 15^th October 2010 and it has become a hot topic for Malaysians. Thus, is this budget good or bad for Malaysians?

One of the highlights in the Budget 2011 is Government-Linked Investment Companies (GLIC) will be allowed to increase investment in overseas market to explore opportunities for better returns. For example, the Employees Provident Fund’s (EPF) investment overseas is currently at 7% and will be raised up to 20% of the total assets managed. I think all the employees will be happy about this news. However, the budget has also introduced another provident fund which is known as Private Pension Fund (PPF) that caused dismay among the employees. This is because according to the ministry’s economic and international division under secretary, Datuk Dr. Mohd. Irwan Siregar Abdullah, the EPF dividends would be gradually scaled down to encourage contributors to bring their money to the PPF. I would not mind if the return of PPF is high. The problem with PPF is the return is not guaranteed. EPF is used for our retirement purpose and there is research done saying that EPF is just enough for the retirees to use up to 5 years. With the implementation of Budget 2011, can most of the Malaysians afford to retire at the age of 55?

The other highlight is the government proposes the import duty on approximately 300 goods preferred by tourists and locals at 5% to 30% be abolished to promote Malaysia as a shopping haven in Asia by providing branded goods at competitive prices. Not only tourists, even the citizens are encouraged to spend. Besides that, Budget 2011 proposes that the sales tax will be exempted on all types of mobile phones. Again, this is to encourage the local to spend the money. The economy will be stimulated as there is money flow in the market. I can see that the government has been trying to stimulate the economy by encouraging money spending. However, I feel that some Malaysians might misuse. The lower price of branded goods and mobile phone will encourage impulsive buying especially those consumers below 30 years old. Although they are lower price, I believe many will still use credit card to buy them. Insolvency Department has reviewed that 50% of the credit card holders who had been declared bankruptcy were those below 30. Once declared bankruptcy, their lives will be tough. If the prices are lower, is the percentage of those credit card holders, who are 30 years old, been declared bankruptcy going to increase?

Skim Rumah Pertamaku has also been introduced in Budget 2011. This program is introduced as the government is aware of the difficulties faced by the Malaysians particularly young adults who have just joined the workforce with income less than RM3, 000 to own a house. The house must be below RM220, 000. Under this program, those house buyers who fulfill the criteria will obtain a 100% loan without having to pay the 10% down payment. I think that this is only beneficial to those who do not intend to buy a house in Kuala Lumpur, Petaling Jaya, Penang, Johor Bahru. We can hardly find houses below RM220, 000 in the places mentioned above. For those who wish to locate property at these places, this would not do them any help. But then maybe it will help the property market at the other areas as they might wish to enjoy the benefit offered by the government. Moreover, most of the developers have marked up the price of the property and house buyers usually can borrow 90% of the house loan. They are only required to pay a few percent (normally less than 5%) of the house price as the down payment.

This is my personal view on the Budget 2011. I only focus on those related to finance field as this is the Window to Financial World. I hope you can share with me if you have different view on the budget. Thanks. J

Reference:

[1]http://thestar.com.my/news/story.asp?file=/2010/10/15/budget/20101015174503&sec=budget

[2]http://thestar.com.my/news/story.asp?file=/2010/10/20/nation/20101020145928&sec=nation

[3]http://skorcareer.com.my/blog/is-your-epf-money-enough-for-retirement/2009/08/04/

[4]http://thestar.com.my/news/story.asp?sec=nation&file=/2010/7/19/nation/6690491