Economics, Trade, and Regional Integration: Calvin Cheng, Hanson Chong, Jaideep Singh and Qarrem Kassim
Climate, Environment and Energy: Ahmad Afandi, Dhana Raj Markandu, Kieran Li Nair and Zayana Zaikariah

October 2024

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Snapshot

The key initiatives announced as part of Budget 2025 across critical economic, social and environmental policy areas are listed below. More in-depth analysis of each initiative is provided in subsequent sections, accessible through the corresponding hyperlinks.

Fiscal policy and taxes

  • Fiscal consolidation: Budget 2025 continues “soft-fiscal tightening”, prioritising revenue growth to reduce the deficit, aiming for a 3.8% deficit-to-GDP in 2025.
  • Tax measures: expansion of the sales and service tax (SST) to luxury goods and services. Introduction of a 2% dividend tax on income above RM100,000.
  • Development expenditure: shrinking as a share of GDP over the past two years, with concerns over the sustainability of development investments.

Subsidies and social protection

  • Targeted subsidies: removal of RON95 petrol subsidies for the top 15% income group.
  • Cash transfers: expansion of cash-assistance programmes (e.g., Sumbangan Tunai Rahmah), with a focus on the Sumbangan Asas Rahmah top-up programme.
  • Social protection: incremental improvements to pension and social insurance coverage, but gaps remain for informal workers.

Industrial development and competitiveness

  • New Investment Incentive Framework: targeted, performance-oriented incentives to promote high-impact investments.
  • Electronics and semiconductors: new investments in hard and soft infrastructure for the electrical and electronics sector, including RM1.2 billion mobilised from Khazanah.
  • MSME financing: RM40 billion for MSME-related loans and credit guarantees, with a focus on infrastructure, digitalisation and sustainability.

Work, education and training

  • Progressive Wage Policy: full implementation in 2025 with RM200 million allocation but concerns over scalability.
  • Education: major investments in preschool education and teacher training. Increased funding for skills development through TVET.
  • Higher minimum wage: increased to RM1,700, aligned with labour reforms but regional disparities pose challenges.

Energy transition and low carbon development

  • National Energy Transition Roadmap (NETR): focus on renewable energy and decarbonisation, with RM305.9 million allocation.
  • Carbon tax: introduction by 2026 for high-emitting sectors (e.g., steel, energy) to support low-carbon technologies.
  • Solar energy: extension of Net Energy Metering (NEM) programme to promote rooftop solar installation.

Climate and disaster-risk management

  • Disaster-risk management: RM13 billion allocated for flood mitigation, infrastructure maintenance and geological-risk management.
  • Ecological Fiscal Transfer (EFT): increased funding for biodiversity conservation at RM250 million.
  • Marine conservation: RM3.3 million to improve marine ecosystem management.

 

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