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Malaysia Budget 2016 favours ICT for citizens but offers less for enterprise ICT

Although broadly welcomed, the latest Malaysian budget is better news for citizens using IT than for businesses

The Malaysia Budget 2016 is generally viewed as a positive step for the country’s development, but it could contain greater support for enterprise ICT, according to industry experts.

A “more holistic approach” is needed to address the needs and challenges of the ICT sector, said Pikom, the national ICT association of Malaysia.

The country’s prime minister and finance minister, Najib Razak, tabled Malaysia’s national budget for 2016 in parliament on 23 October 2015. This budget comes in the middle of a challenging economic climate and is the first under the 11th Malaysia Plan – an initiative to chart the country’s development from 2016 until 2020.

In an effort to turn Malaysia into a “competitive technology hub for the region”, the budget saw allocations of RM1.5bn (£230m) to the Ministry of Science, Technology and Innovation (Mosti), and RM100m to the Malaysian Innovation Agency – or Agensi Inovasi Malaysia (AIM).

Another RM200m was allocated to establish the SME Technology Transformation Fund under SME Bank to provide soft loans at interest rates of 4%.

Meanwhile, the Malaysian Global Innovation and Creativity Centre (Magic) received an additional RM35m to establish itself “as a leading regional entrepreneurship and innovation hub”, said Najib.

Recognising the importance of a strong infrastructure, RM1.2bn has been allocated to improve the country’s telecommunications networks. These include rural broadband projects which will see a four-fold increase in internet speed from 5Mbps to 20Mbps; a national fibre backbone infrastructure; high-speed broadband; and undersea cable systems.

While these measures give a welcome ICT boost to citizens, more can be done for enterprise ICT, said Pikom, which recommends that all ICT products and services be zero rated in terms of Goods and Services Tax (GST).

“It is good to have GST exemption for teaching tools for skills and vocational training. Is this also extended to ICT-related teaching tools and to those who pursue ICT-related training and development courses?” said Pikom chairman Cheah Kok Hoong.

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The budget has made provisions to solve pressing issues having an impact on consumers, said Pranabesh Nath, associate director for ICT at Frost & Sullivan Asia-Pacific.

“To further stimulate demand for ICT products and services, the government should consider GST waiver in more areas,” he said.

Nath added that while the decision to increase broadband speeds to 20Mbps is a welcome move, the average speeds need to increase further. He also said that data consumption charges need to be further lowered for Malaysia to be competitive internationally and spur the adoption of new services such as streaming apps.

“Both mobile data consumption charges and international bandwidth connectivity charges are quite high in Malaysia, making it unattractive for foreign companies to set up shop. This needs to change,” said Nath.

While there is a healthy business and regulatory environment for ICT, more needs to be done to make Malaysia competitive in cutting edge areas such as big data, cloud, internet of things (IoT) and outsourcing, he added.

“Malaysia has the potential to become a hub of innovation, research and development in some of these areas if the policies are aggressive enough.”

Nath said the budget needs to better address the country’s labour and technology capacity, which has a long-term effect on Malaysia’s competitiveness.

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