CHARLES HECTOR: Najib's BUDGET 2016 SPEECH -

THE BUDGET 2016 SPEECH BY PRIME MINISTER AND FINANCE MINISTER DATUK SERI NAJIB TUN RAZAK - INTRODUCING THE SUPPLY BILL (2016) AT THE DEWAN RAKYAT

"PROSPERING THE RAKYAT"

Mr Speaker Sir,

I beg to move the Bill intituled "An Act to apply a sum from the Consolidated Fund for the service of the year 2016 and to appropriate that sum for the service of that year" be read a second time.

INTRODUCTION

Mr Speaker Sir,

1. In the name of Allah, the Most Gracious and the Most Merciful. All praise is due to Allah, the Lord of the A'iamin. Wa bihi Nastai'n.

2. Praise be to Allahu Ta'ala who created the seven heavens and earth and who also created a state of darkness into the light.

3. Peace be upon the Prophet Muhammad, the chosen Messenger who rejects falsehood, and safeguards rights and truths.

4. Since March 2009, I have presented eleven major documents on the nation's economy.

5. These include the first stimulus package, the second stimulus package, the 10th Malaysia Plan and the 11th Malaysia Plan (11 MP) as well as the annual budgets since 2010. Today, I will present the 2016 Budget.

6. With Allah's grace, we pray and hope that we will be able to continue presenting the Budget in the coming years.

7. The Budget presented today represents a manifestation of the 11 MP. This is the first Budget in a series of five budgets until our beloved nation transforms into a high-income advanced economy.

8. This Budget leverages the lessons from history based on Al-Quran through the understanding of Surah An-Nisa' verse 58 which was translated by Imam Qurtubi, as leaders, it is incumbent upon us to safeguard the rights and ensure equitable distribution of wealth among the rakyat.

9. Even before the presentation of the Budget today, there have been debates in various media regarding the Malaysian economy, alleging that the country is on the verge of bankruptcy; the economy is in a crisis; and the ringgit has depreciated sharply, due to the perception of ineffective financial governance and non-prudent Government spending.

Given the unwarranted comments and misperceptions, it is only fair that I take the opportunity in this august House to explain, particularly to the honourable members of Parliament as well as the rakyat, so that they are able to directly obtain a clear and correct understanding.

AMONG THE SIX MAIN ACHIEVEMENTS UNDER THE NATIONAL TRANSFORMATION POLICY AND ECONOMIC PROSPECTS

10. Since 2009, the nation has been confronted with several economic challenges. We faced various uncertainties in the global economy as well as domestic economic issues.

11. Praise be to the Almighty, despite daunting challenges, the Government has managed to address and overcome these challenges effectively.

12. To summarise, there are six main achievements that we can be proud of in uplifting the economy from where it was half a decade ago.

13. First Achievement: The Malaysian economy grew by 5.3% in the first half of 2015 and is expected to expand between 4.5% and 5.5% this year despite a slower global growth of 3.1 %.

14. In this context, we have to remember that there is no comparison whatsoever between the current economic situation with 1998. Clearly, in 1998, Asia experienced a financial crisis and the Malaysian economy contracted by 7.4%.

15. We are aware that we are not spared from the impact of a slowdown in the global economy, including declining commodity prices, particularly crude oil, palm oil and rubber, depreciation of the ringgit and slower growth in major advanced economies.

16. Amid this scenario, the nation's Gross Domestic Product (GDP) is expected to expand between 4% and 5% in 2016. Growth will be driven by private investment and consumption at 6.7% and 6.4%, respectively.

17. Exports will grow by 0.9% and imports by 1.5%. Meanwhile, the construction sector will expand by 8.4%, services 5.4% and manufacturing 4.3%.

18. Second Achievement: We have consistently reduced the fiscal deficit from 6.7% of GOP in 2009 to an estimated 3.2% this year.

19. Third Achievement: Through the National Transformation Policy (NTP) commencing 2010, the Government continued to vigorously eradicate poverty.

20. As a result, over the five-year period, the incidence of poverty has been reduced from 3.8% in 2009 to 0.6% in 2014. In fact, hardcore poverty has almost been eradicated.

21. Fourth Achievement: The unemployment rate in 1999 was 3.4%.

22. With Allah's blessing, as a result of effective economic management, we have reduced the unemployment rate to 2.9% and the Government has succeeded in creating 1.8 million jobs.

23. Fifth Achievement: A total of 5 million rakyat in rural areas have benefited from basic amenities such as electricity and clean water supply.

24. Sixth Achievement: The rakyat has benefited from several initiatives such as Bantuan Rakyat 1Malaysia (BR1M), 1Malaysia Clinics, Urban Transformation Centres (UTCs), Rural Transformation Centres (RTCs) and Kedai Rakyat 1Malaysia, towards reducing the cost of living.

25. The inflow of foreign direct investment remains strong at RM22.4 billion in the first half of this year, while the FTSE Bursa Malaysia KLCI (FBM KLCI) recorded 1,705 points, with market capitalisation of RM1.675 trillion as at 22 October 2015.

26. Although the ringgit has depreciated, the international reserves remained high at RM418 billion as at 15 October 2015, sufficient to finance 8.8 months of retained imports and is 1.2 times the short-term external debt.

27. Moreover, the inflation rate is expected to remain manageable, between 2% and 3% in 2016.

28. In reality, Malaysia is not a failed or bankrupt nation, but one which is stable with strong economic fundamentals and remains competitive.

CLARIFICATION ON GOODS AND SERVICES TAX (GST) COLLECTION

29. Before we continue with the Budget presentation, there are two important things to be clarified. The first is regarding GST, which has been hotly debated since early this year.

30. On GST, the Government appreciates the high and encouraging registration and compliance.

31. I wish to inform this august House that to date, almost 400,000 companies have registered for GST with a submission rate of more than 90%.

32. The Government's decision in implementing GST is right, more so as crude oil prices have fallen more than 50% from a level of USD100 per barrel in 2014.

33. The fact is, Petroliam Nasional Berhad (PETRONAS) contributes a certain amount of dividend to Treasury every year. The amount of dividend is dependent on global crude oil prices.

34. For example, when crude oil prices averaged USD100 per barrel, revenue from PETRONAS dividend and petroleum tax revenue totalled RM62 billion.

35. The scenario, however, changed when crude oil prices declined to around USD50 per barrel. The contribution from PETRONAS and oil-related sectors will be RM44 billion in 2015.

36. As oil prices are expected to remain low in 2016, oil-related revenue is estimated at RM31.7 billion.

37. As announced several times, the rakyat can be reassured as revenue from GST collection will be returned to benefit the rakyat, in addition to clarifying how GST will be spent. This is the real intention of the Government and there is no hidden agenda.

38. The situation has changed. This intention must be balanced with the reality of the Government's financial position due to the uncertainty in global crude oil prices as I elaborated earlier. However, due to the reduction in oil-related revenue, the collection from GST has helped to cover a major portion of the shortfall.

39. In this regard, in 2016 based on the Government's calculation, if GST was not implemented and we had to rely on Sales Tax and Service Tax (SST) as previously, Government revenue would be lower by RM21 billion.

40. Furthermore, if SST was retained, collection would have been only RM18 billion compared with GST

revenue of RM39 billion.

41. Consequently, the fiscal deficit would have increased to 4.8% and not the targeted 3.1% in 2016.

42. If this were to happen, the Government would have been forced to borrow, including to pay civil servants' salaries; the nation's credit rating would be downgraded; and all borrowing costs, including personal loans, business loans and housing loans would definitely be higher.

43. We are grateful to the Almighty that the Government remained steadfast and had the political will to implement GST, although this decision was faced with various challenges and was unpopular.

44. Those who used to vehemently oppose GST have now accepted it and even included it in their Budget document.

45. This clearly indicates the changing and inconsistent stand of the opposition.

46. As a responsible Government, however, we will continue to make the right decisions though not popular in the best interest of the rakyat and the nation.

47. In fact, GST is an efficient tax system as reflected by its implementation in more than 160 countries.

48. Despite the constraints on financial resources, the Government remains sensitive to the difficulties faced by the rakyat.

49. Thus, after receiving feedback from various segments of society including NGOs, I am pleased to announce the Government is prepared to forego the GST revenue on several basic necessities.

50. Seven measures to improve GST treatment, which will be effective from 1 January 2016, are as follows:

51. First: Zero-rating of all types of controlled medicines under the Poisons List Group A, S, C and D as well as an addition of 95 brands of over-the-counter medicines including treatment for 30 types of illnesses such as cancer, diabetes, hypertension and heart disease. This is a double increase from 4,215 to 8,630 brands of medicines.

52. Second: Zero-rating of the following food items:

i. Soybean-based milk and organic-based milk for infant and children;

ii. Dhal or what is popularly known as Parpu in the north, such as chickpeas, green and white beans;

iii. Lotus root and water chestnut;

iv. Mustard seeds;

v. Jaggery powder; and

vi. Dried mee kolok.

53. Third: To enable small-scale farmers to benefit from the Flat Rate Scheme, the Government proposes that the annual sales turnover threshold for registration under this scheme be reduced from RM100,000 to RM50,000.

54. The requirement to maintain records will also be simplified. With the reduction in the threshold, more small-scale farmers will be able to register under the scheme and impose an additional 2% on sales value and this amount can be retained to offset against any GST paid on their input.

55. Fourth: Companies involved in maintenance, repair and overhaul (MRO) activities in the aerospace industry are allowed to participate in the Approved Trader Scheme which relieves them from paying GST on the imported goods.

56. Fifth: GST relief is also provided for reimportation of goods that were exported temporarily for the purpose of promotion, research or exhibition.

57. Sixth: For the oil and gas industry, GST relief is provided on the reimportation of equipment such as equipment for oil and floating platforms that are temporarily exported for the purpose of rental and leasing.

58. Seventh: GST relief is also provided on teaching materials and equipment procured by skills and vocational training providers conducting approved programmes under the National Skills Development Act 2006.

59. The Government realises that the majority of mobile phone users, particularly youth depend on prepaid telecommunication services or prepaid cards.

60. In this regard, Malaysian consumers will receive rebates equivalent to the amount of GST paid, which will be credited directly to their prepaid accounts. This measure will be effective from 1 January 2016 to 31 December 2016.

61. In an effort to strengthen the tax structure to be more competitive and progressive, it is proposed that the taxable income band for the highest tax rate be increased from 25% to 26% for those with an income between RM600,000 and RM1 million.

62. Meanwhile, for those with an income above RM1 million, the tax rate will be increased from 25% to 28%.

63. The 2016 Budget allocates a total of RM267.2 billion compared with the revised RM260.7 billion in 2015. Of this amount, RM215.2 billion is for Operating Expenditure and RM52 billion for Development Expenditure.

64. Under Operating Expenditure, RM70.5 billion is for Emoluments and RM36.3 billion for Supplies and Services. Meanwhile, a total of RM106.6 billion is allocated for Fixed Charges and Grants, RM761 million for Purchase of Assets and RM1 billion for Other Expenditure.

65. Under Development Expenditure, the economic sector will receive the highest share at RM30.1 billion, followed by the social sector RM13.1 billion for education and training, health, housing and the well-being of the rakyat.

66. In addition, RM5.2 billion is allocated to the security sector. The balance of RM1.6 billion is for general administration and RM2 billion for contingencies.

67. In 2016, the Federal Government revenue collection is estimated at RM225.7 billion, an increase of RM3.2 billion compared to 2015.

68. Taking into account the revenue and expenditure forecast, the fiscal deficit is expected to decline to 3.1% of GDP in 2016.

69. This Budget and future Budgets will be premised on striking a balance between the Capital Economy and People Economy. In addition, we need to achieve an inclusive and sustainable growth as well as build a competitive, progressive and a morally strong nation, with a society that is united.

70. Therefore, I propose to table the Budget with the theme "Prospering the Rakyat" based on five priorities as follows:

First Priority: Strengthening Economic Resilience;

Second Priority: Increasing Productivity, Innovation and Green Technology;

Third Priority: Empowering Human Capital;

Fourth Priority: Advancing Bumiputera Agenda; and

Fifth Priority: Easing the Cost of Living of the Rakyat.

72. Measure 1: Boosting Domestic Investment. Domestic investment activity will be intensified with its contribution to GDP estimated at 26.7% in 2016. It will be driven by the increase in private investment at RM218.6 billion and supported by public investment of RM112.2 billion.

73. Under this measure, among the projects and initiatives that will be implemented are:

First: Development of the Malaysian Vision Valley covering an area of 108,000 hectares from Nilai to Port Dickson, as announced in the 11 MP, with an initial investment forecast of RM5 billion in 2016;

Second: Implementation of Cyber City Centre in Cyberjaya with a development cost of almost RM11 billion for a period of five years;

Third: Development of an airport township or KLiA Aeropolis in an area covering 1,300 acres which is expected to attract an investment of RM7 billion;

Fourth: Investment of RM6.7 billion by Khazanah Nasional Berhad in nine high-impact domestic projects in sectors such as healthcare, education, tourism as well as communication software and infrastructure;

Fifth: Khazanah Nasional to allocate RM500 million as venture capital and private equity fund including a tourism capital venture fund of RM50 million;

Sixth: Investment of RM18 billion estimated in 2016 for the Refinery and Petrochemical Integrated Development Project (RAPID) Complex in Pengerang, Johor;

Seventh: To attract more private investment. Among the projects being implemented are the development of Rubber City, Kedah with an allocation of RM320 million, Samalaju Industrial Park, Sarawak RM142 million and Palm Oil Jetty in Sandakan, Sabah RM20 million;

Eighth: Focus will also be given to chemical, electrical and electronics, machinery and equipment, aerospace and medical devices industries as well as services. For this, RM730 million is allocated to funds under the Malaysian Investment Development Authority (MIDA); and

Ninth: To further promote reinvestment among existing companies in the manufacturing and agriculture sectors whose Reinvestment Allowance incentive has expired, a new incentive that is, Special Reinvestment Allowance, will be provided. The rate of claim is at 60% of the qualifying capital expenditure and is allowed to be set off against 70% of statutory income from year of assessment 2016 to 2018.

74. Measure 2: Invigorating Capital Market. To further invigorate the capital market, the Government agrees to implement several initiatives, including tax deduction on issuance costs of Sustainable and Responsible Investments (SRI) sukuk and 20% stamp duty exemption on Shariah-compliant loan instruments to finance the purchase of houses. Other initiatives will be announced later.

75. Measure 3: Energising Small and Medium Enterprises (SMEs). Indeed, SMEs playa key role in developing the business value chain and are expected to contribute 41% of GDP by 2020. For this, the following five initiatives will be undertaken:

First: Provide an additional RM1 billion for the Shariah-compliant SME Financing Scheme until 31 December 2017 with the Government subsidising 2% of the financing profit rate;

Second: Allocate RM107 million for the SME Blueprint to provide funds for entities at various stages of business development;

Third: Allocate RM60 million for the Entrepreneurs Acceleration Scheme, and SME Capacity and Capability Enhancement Scheme;

Fourth: Establish a RM200 million SME Technoiogy Transformation Fund under the SME Bank to provide soft loans at 4%; and

Fifth: RM18 million to expand the Small Retailer Transformation Programme (TUKAR) and Automotive Workshop Modernisation (ATOM) projects.

76. Measure 4: Improving Infrastructure.

Infrastructure is a catalyst for overall economic and social development.

77. Currently, Malaysia is ranked 25th out of 160 countries in the 2014 World Bank Logistics Performance Index report.

78. In this regard, the Government will continue to improve logistics infrastructure, including building and improving rail transport network and highways in 2016. These include the highways of Damansara - Shah Alam, Sungai Besi - Ulu Klang, Pulau Indah and Central Spine Road.

79. To reduce traffic congestion in Kuala Lumpur, RM900 million is provided to implement the Jalan Tun Razak Traffic Dispersal Project through a strategic public and private partnership.

80. The Government will also study the feasibility of constructing a coastal highway from Masjid Tanah to Klebang and from Klebang to Jambatan Syed Abdul Aziz in Melaka.

81. A sum of RM42 million is provided for the construction of Mukah Airport, Sarawak as well as the upgrading of airports in Kuantan and Kota Bharu. A feasibility study will be undertaken for the extension of the runway in Batu Berendam Airport in Melaka.

82. To ensure the comfort of people in urban areas, an efficient public transport system is being intensively implemented, involving significant outlays.

83. Allow me to provide an update on one of the biggest projects in the nation's history, that is, the MRT-LRT, an integrated public transport system.

84. The first Phase of the Ampang LRT line extension project spanning 18.1km will be ready for use in March 2016. Meanwhile, the LRT extension line from Kelana Jaya to Putra Heights spanning 17.4 km will be ready for commuters from the middle of 2016. Both these projects cost RM1 0 billion.

85. The MRT line from Sungai Buloh - Semantan will also be ready for commuters in December 2016. Meanwhile, Phase 2 of Semantan - Kajang is expected to be completed by mid-2017. These projects covering 51 km are being implemented at a cost of RM32 billion.

86. The Government will also implement other public transport networks as follows:

First: MRT II project from Sungai Buloh - Serdang - Putrajaya spanning 52 km, with an estimated cost of RM28 billion, will benefit two million people. Construction will commence in the second quarter of 2016 and is expected to be completed by 2022;

Second: LRT3 project from Bandar Utama, Damansara - Johan Setia, Klang spanning 36 km, with an estimated cost of RM10 billion, will benefit two million people. Construction will commence in 2016 and is expected to be completed by 2020. Meanwhile, the Government will continue negotiations on the high-speed rail with the Singapore Government; and

Third: For public bus services, the Rapid Transit Bus (BRT) project at a cost of more than RM1.5 billion and BRT Kota Kinabalu at a cost of almost RM1 billion, will be implemented.

87. To improve the telecommunication infrastructure, Malaysian Communications and Multimedia Commission (MCMC) will provide RM1.2 billion, among others, for rural broadband projects which will see a four-fold increase in Internet speed from 5 megabyte per second to 20 megabyte per second; National Fibre Backbone Infrastructure; High-speed Broadband; and undersea cable system.

88. A sum of RM250 million is allocated for the national broadcasting digitalisation project to enhance audio visual quality and provide value-add to TV content as well as interactive data transactions.

89. Since independence, the wellbeing of the rural population remains our priority. We will never marginalise them. To date, under the Barisan Nasional Government, rural road coverage has increased from 46,000 km in 2009 to 51,000 km, while 98% of rural areas have access to electricity and almost 95% have access to water supply.

90. The Government will continue with efforts to implement infrastructure development in rural area as follows:

First: RM1.4 billion to build and upgrade 700 km of rural roads nationwide.

A sum of RM200 million is provided for the upgrading of roads in Federal Land Development Authority (FELDA) settlements;

Second: RM878 million for the Rural Electrification Project covering 10,000 houses and RM568 million for the Rural Water Supply Project to benefit 3,000 houses;

Third: RM60 million for the Social Amenities Programme for drainage projects to mitigate floods. Emphasis will be given to states affected by floods such as Kelantan, Kedah, Terengganu, Pahang, Sabah and Sarawak;

Fourth: As a catalyst for entrepreneurship in rurai areas and for rural communities, RM70 million is allocated for continuation of the Rural Business Challenge (RBC) and Sustainable Rural programmes; and

Fifth: RM67 million is allocated to the MARA Bus Transport Project for operating buses on uneconomic routes in rural areas.

91. Measure 5: Promote and Strengthen Economic Activity.

The tourism sector has the highest potential to generate economic activities in the current situation. For 2016, the Government targets 30.5 million tourists, which is expected to contribute RM103 billion to the economy. For this, a sum of RM1.2 billion is allocated to the Ministry of Tourism and Culture.

92. Online visa applications will be implemented beginning with China, India, Myanmar, Nepal, Sri Lanka, the US and Canada.

93. To facilitate tourists to visit Malaysia, the Government will implement E-Visa by mid-2016.

94. To take advantage of the current level of the ringgit and in efforts to attract more tourists, the 100% income tax exemption on statutory income for tour operators will be extended from year of assessment 2016 until 2018.

95. Economic activity in the agriculture sector provides a source of food as well as a source of income for farmers, paddy farmers and fishermen.

96. In this regard, RM5.3 billion is allocated to the Ministry of Agriculture and Agro-based Industry. The programmes for 2016 are:

First: RM450 million for various high-impact programmes such as fruit and vegetable cultivation, matching and research grants for herbal products as well as fish cage farming;

Second: RM180 million to upgrade drainage and irrigation infrastructure in the Integrated Agricultural Development areas;

Third: RM190 million to FAMA for the Price Reduction Programme; increase farmers' markets by an additional 50; and establish 150 new Agrobazaar Rakyat 1Malaysia (ABR1M). Of the goods sold in ABR1 M, 40% are fresh food such as fish and vegetables with prices expected to be lower between 5% and 30% compared with market prices; and

Fourth: RM90 million is allocated for Youth Agropreneur Development Programme in the form of in-kind grants; Agriculture Entrepreneurs Financing Fund; rebranding MARDI, Department of Veterinary Services, Department of Agriculture and the Department of Fisheries; as well as to implement the Multiplier Farm Project for breeding cattle and free-range chicken.

97. In formulating appropriate policies for the current economic situation, the Government proposes the tax incentive for food production be extended until 2020. The following incentives will be provided:

First: Companies that invest in subsidiaries that undertake food production project will be given tax deduction equivalent to the amount invested;

Second: Companies that undertake new food production projects will be given 100% income tax exemption for 10 years; and

Third: Existing companies undertaking project expansion will be provided with the same incentive for five years.

98. The scope of the incentive will be widen to include rearing deer, cultivation of mushroom, coconut, seaweed, honey bees and stingless honey bees and planting animal feed crops such as sweet potato and tapioca.

99. In addition to the above measures, the Government will intensify support to strengthen exports.

100. A sum of RM235 million is allocated to MATRADE for 1Malaysia Promotion Programme, Services Export Fund and Export Promotion Fund.

101. MATRADE and SME Corp will also increase the capacity of SMEs and mid-tier companies to export goods and services overseas.

102. To diversify the use of foreign currency in trade transactions, Bank Negara Malaysia provides the Ringgit-Renminbi credit swap facility for local banks.

103. Currently, SMEs are eligible to claim income tax exemption of 10% or 15% of the value of increase in exports.

To further increase exports, SMEs are given flexibility to comply with the value-add condition that is from 30% to 20% and from 50% to 40% for manufactured products. This flexibility will be given for years of assessment 2016 to 2018.

104. To encourage evaluation and international standards compliance services to be conducted in the country, the Government will provide incentives for the establishment of Independent Conformity Assessment Bodies (ICABs).

105. As of today, Malaysia has signed 13 free trade agreements (FTAs) comprising six regional agreements through ASEAN and seven bilateral agreements.

106. As an open economy, with total trade accounting for about 150% of GDP, the Government has agreed in principle to the Trans-Pacific Partnership Agreement (TPP). However, the final decision will be made by Parliament.

107. SECOND PRIORITY: INCREASING PRODUCTIVITY, INNOVATION AND GREEN TECHNOLOGY.

To raise productivity, we need to accelerate innovation and creativity. The use of green technology will also ensure sustainability of the nation's natural resources.

108. Therefore, the Government has targeted an annual labour productivity growth of 3.7% through:

109. Measure 1: Accelerating Innovation and Entrepreneurship. To make the nation a competitive technology hub in the region, RM1.5 billion is allocated to the Ministry of Science, Technology and Innovation (MOSTI).

110. The year 2016 will be declared as Malaysia Commercialisation Year towards spurring commercialisation of R and D products by local research institutions.

The following initiatives will be implemented:

First: SMEs that incur expenditure on R and D projects up to RM50,000 for each year of assessment are eligible to claim double tax deduction automatically. This facilitation is provided for the years of assessment 2016 to 2018;

Second: RM100 million to Malaysian Innovation Agency (AIM);

Third: RM200 million under the Funding Scheme for Technology and Innovation Acceleration by Malaysia Debt Ventures Berhad;

Fourth: RM35 million to MaGIC as a Leading Regional Entrepreneurship and Innovation Hub, including RM10 million as initial allocation for the Corporate Entrepreneurs Responsibility Fund;

Fifth: RM30 million for several youth entrepreneurship programmes such as Global Entrepreneurship Community, BAHTERA, GREAT, 1MET, National Innovation Competition and a Pilot Coding Project in schools; and

Sixth: To accelerate demand-driven innovation activities in 2016, the Government will allocate RM50 million for a Public-Private Research Network.

111. Measure 2: Leveraging Advancements in Technology.

To enhance the use of technology in the construction sector, the Government will promote the use of Industrialised Building System (IBS). In this respect, the Government will encourage more companies to adopt the IBS technology.

112. For this, an IBS Promotion Fund of RM500 million will be established through the SME Bank to provide soft loans to developers and contractors in category G5 and below.

113. Measure 3: Inculcating Green Technology. The Ministry of Energy, Green Technology and Water will implement various projects including to provide clean water supply by building water treatment plants with an allocation of RM877 million. A sum of RM515 million is allocated to ensure the reliability of electricity supply in Sabah.

114. The Government targets to reduce the intensity of greenhouse gas emissions (GHGs) to 40% of GOP in 2020 through:

First: RM45 million for the implementation of an Electricity Mobility Action Plan including energy audit process;

Second: Sustainable Energy Development Authority (SEDA) will offer a quota of 100 megawatts per year under the Net Energy Metering Scheme to encourage the use of solar photovoltaics; and

115. THIRD PRIORITY: EMPOWERING HUMAN CAPITAL.

This is a critical factor for the future of the nation. In this regard, the following measures will be undertaken:

116. Measure 1: Strengthening Malaysia's Quality of Education. Under the Malaysia Education Biueprint 2013 - 2025, a sum of RM41.3 billion will be allocated in 2016.

117. Among others, the Government will build: 30 primary schools and 27 secondary schools; four MARA Junior Science Colleges (MRSM) will be built in Sik, Kedah, Ketereh and Tanah Merah, Kelantan and Bagan Datoh, Perak; and five fully residential schools in Alor Gajah, Melaka; Pendang, Kedah; Segamat and Ledang, Johor; and Jerantut, Pahang.

118. A sum of RM44.6 million is allocated to implement various programmes in 9,113 pre-school classes in schools nationwide.

119. To increase Proficiency in Bahasa Malaysia and English, a sum of RM135 million is allocated for upholding Bahasa Malaysia and strengthening English Language.

120. Given the importance of the English Language to face current global competition, another two initiatives, namely the Dual Language Programme and Highly Immersive Programme will be implemented as an option at a cost RM38.5 million. In this respect, 300 schools have been identified as a pilot project.

121. To ease the burden of schooling expenses faced by parents, the RM100 schooling assistance will be continued. From January 2016, it will be targeted to students from households with monthly income of RM3,000 and below. This will benefit 3.5 million students through an allocation of RM350 million.

122. The supplementary food programme involving 550,000 students from poor families listed in e-Kasih will be enhanced.

123. Previously, the programme only provided meals during recess, but it will now be expanded to provide breakfast with an additional cost of RM173 million. The overall cost for the programme is RM423 million.

124. As in previous years, the Government will continue to provide allocation to develop and maintain education facilities for national schools, national-type Chinese schools, national-type Tamil schools, religious schools, fully residential schools, national religious assisted schools, MARA Junior Science Colleges, registered Sekolah Pondok and national-type Chinese secondary schools or conforming schools which adopt the national curriculum, with a total allocation of RM500 million.

125. Measure 2: Strengthening Higher Education. Under this measure, the scholarship programmes will be continued with allocations as follows:

RM1.65 billion through Public Service Department;

RM288 million through Ministry of Education;

RM250 million through Ministry of Higher Education; and

RM258 million through Ministry of Health.

126. To encourage the rakyat to pursue higher education, I am pleased to announce that the maximum relief on tuition fee for an individual taxpayer is increased to RM7,OOO from RM5,OOO a year.

127. This will be complemented with the continuation of the RM250 1Malaysia Book Voucher Programme for 1.2 million students. To prevent misuse of the voucher, the redemption will only be allowed in designated book shops.

128. Measure 3: Transforming Technical and Vocational Education and Training (TVET). In efforts to enhance employees' income, we need to target 60% of 1.5 million new jobs by 2020 are for workers with TVET skills. A sum of RM4.8 billion is allocated to 545 TVET institutions.

129. Towards this, the Ministry of International Trade and Industry (MITI) will establish an Industrial Skills Committee to coordinate TVET programmes in collaboration with industries.

130. More than 330,000 trainees will benefit through programmes including the following:

First: RM585 million for TVET training equipment at polytechnics, community colleges, MARA Skills Institutes, National Youth Skills Institutes, Industrial Training Institutes, GiatMARA and vocational colleges;

Second: RM350 million to finance various TVET training programmes under the Skills Development Fund Corporation; and

Third: RM80 million to establish a Tourism Academy at Community College in Kota Kinabalu and Vocational College in Sandakan as well as Industrial Training Institute of Serian, Sarawak.

131. Measure 4 is for Empowering Youth, Community and NGOs. For this measure, RM930 million is allocated to the Ministry of Youth and Sports for the following initiatives:

First: RM280 million for technical and vocational training in National Youth Skills Training Institutes (IKBN) and National Youth Advance Skills Training Institutes (IKTBN);

Second: RM50 million to enhance youth participation in economic and entrepreneurial activities;

Third: RM145 million to prepare athletes for the 29th SEA Games and the 9th ASEAN Para Games in 2017 in Kuala Lumpur;

Fourth: RM75 million to produce world-class champions under the Preparation of Elite Athletes (Podium Programme);

Fifth: RM22 million to build two sports complexes in Bagan Datoh and Kuantan; and

Sixth: RM360 million to improve the National Service Training Programme (PLKN) for 20,000 trainees. The new curriculum will include creative thinking and technical skills.

132. A sum of RM160 million is allocated for NGOs to implement programmes based on community development, solidarity, social welfare, health and safety.

133. Measure 5 to empower human capital through a quality workforce. To improve the employability of the workforce, the following programmes will be implemented:

First: Allocate 30% of the Human Resources Development Fund (HRDF) to implement training programmes to meet the needs of local industries in Sabah and Sarawak as well as an Outplacement Centre to retrain retrenched workers; and

Second: Train an additional 15,000 participants under the 1Malaysia Training Scheme (SL1M) with an allocation of RM250 million which will be fully financed by GLCs.

134. To improve the management of foreign workers, a sum of RM77 million will be provided by PSMB to implement programmes such as Train and Replace in selected fields such as hospitality, shipping and transport.

135. The Government remains committed to achieving at least 30% participation of women in decision-making positions in the public and private sectors. This includes at the board of directors level. The Government will continue to monitor the achievement of this policy.

136. FOURTH PRIORITY: ADVANCING BUMIPUTERA AGENDA.

I would like to emphasise that empowering Bumiputera is a national agenda and this includes the development of Bumiputera community in Sabah and Sarawak.

137. A sum of RM150 million is allocated to the Bumiputera Agenda Unit (TERAJU) to implement various programmes including Bumiputera Entrepreneurs Startup Scheme and High Performing Bumiputera Companies Programme.

138. A sum of RM150 million is allocated to the Bumiputera Education Steering Foundation to implement Peneraju Tunas, Peneraju Prates/anal as well as Peneraju Ski! dan lIt/zam programmes.

139. Majlis Amanah Rakyat (MARA) is allocated RM3.7 billion for expenditure, including the sponsorship of 72,000 Bumiputera students to continue studies at tertiary level.

140. To increase equity ownership and strengthen Bumiputera entrepreneurship and businesses, the following initiatives are allocated with a sum of:

First: RM400 million to National Equity Fund Limited (EKUINAS);

Second: RM250 million to Perbadanan Usahawan Nasional Berhad (PUNB);

Third: RM150 million to Pelaburan Hartanah Berhad; and

Fourth: RM100-million loan to UDA Holdings for development of Kampung Baru, Kuala Lumpur.

INTENSIFYING DEVELOPMENT IN SABAH AND SARAWAK

141. The following development agenda will be implemented in Sabah and Sarawak:

First: Sarawak Pan-Borneo Highway spanning 1,090-km is expected to be completed in 2021 with an estimated cost of RM16.1 billion. In Sabah, construction work on the 706-km highway frorn Sindumin to Tawau will commence in 2016 with an estimated cost of RM12.8 billion.

I am pleased to announce that the Pan-Borneo Highway will be toll free;

Second: Air transportation is one of the main modes of transportation for people in the interior areas of Sabah and Sarawak as well as Labuan. Thus, the domestic air transportation for economy class passengers on Rural Air Services (RAS) routes is exempted from GST;

Third: As a new programme, RM70 million is provided through Bank Simpanan Nasional in collaboration with the state government of Sabah and Sarawak for interest free loans for the purpose of building longhouses with a maximum loan up to RM50,OOO for every unit in the longhouse;

Fourth: RM70 million subsidy for hill paddy fertiliser to increase food supply and income of hill paddy farmers in Sabah and Sarawak. The programme will cover 65,000 hectares of crop areas in Sarawak and 11,000 hectares in Sabah;

Fifth: RM260 million is provided to ensure price uniformity of selected items nationwide through the 1 Price 1Sarawak and 1 Price 1Sabah programmes;

Sixth: RM115 million is allocated to the Special Programme for Bumiputera in Sabah and Sarawak, such as for native customary rights, including mapping procedures and customary land surveys as well as for building native courts. For native customary rights, RM20 million is provided for land surveys in Sabah and RM30 million in Sarawak; and

Seventh: Enhance services of 1Malaysia Mobile Clinics in the interior areas of Sabah and Sarawak including procurement of new boats and vehicles.

142. FIFTH PRIORITY: EASING COST OF LIVING OF THE RAKYAT.

This issue is implemented as follows close to my heart and the Government. Thus, various initiatives will be.

143. Measure 1: Increasing the quality of life of 840 households as follows:

First: TEKUN will provide RM600 million of which RM500 million is for Bumiputera entrepreneurs and RM100 million for 10,000 Indian entrepreneurs through the Indian Community Development Scheme. In addition, SME bank will provide RM50 million to assist small-scale Indian entrepreneurs;

Second: An additional RM200 million to Amanah Ikhtiar Malaysia (AIM) for its micro-financing facility to B40 households;

Third: RM100 million is provided under the Socio-Economic Development of Indian Community Programme in collaboration between NGOs and private skills training institutes;

Fourth: An additional RM90 million is provided for microcredit to Chinese hawkers and petty traders including RM50 million for KOJADI; in addition, RM40 million is allocated to implement infrastructure projects and soft loans programme for residents in Chinese New Villages for land premium payments and repairing houses;

Fifth: RM50 million is allocated to the Ministry of Rural and Regional Development (KKLW) for the Career and Skills Training Programme as well as the Income Increment Programme. Through these programmes, participants will be able to benefit from skill training and assistance in the form of assets and raw materials;

Sixth: Provide RM100 million to private skills training institutions and NGOs to enhance skills of the 840 group to help them get jobs or start business.

144. The Government is very concerned about the welfare and progress of the Orang Asli cornmunity. For this, RM300 million is allocated as follows:

First: RM80 million for the development of Integrated Villages including in Sungai Siput, Perak which involves the construction of connecting roads, provision of electricity and treated water;

Second: RM45 million for supplementary food assistance, pocket money and school transport fares; and

Third: RM25 million for development of rubber and oil palm plantations as well as cash crops through the

Orang Asli Economic Development Project.

145. For the 840 group, the eRezeki and eUsahawan programmes will be expanded nationwide to increase employment opportunities and raise their income.

The Government targets 100,000 people from 840 to benefit from the programme through an allocation of RM100 million provided by the Ministry of Communication and Multimedia.

146. For Paddy Farmers, Smallholders and Rubber Tappers, this Budget provides RM852 million to the Rubber Industry Smallholders Development Authority (RISDA) and Federal Land Consolidation and Rehabilitation Authority (FELCRA) to implement various income and productivity enhancement programmes.

147. The Government intends to improve the rubber production incentive (IPG). For this, I am pleased to announce that the IPG activation price of SMR20 FOB is raised from RM4.60 to RM5.50 per kilogramme as well as from RM1.75 to RM2.20 per kilogramme at farm price for scrap rubber or cuplumps.

148. As an illustration, based on the average production of 250kg for each hectare per month, smallholders with two hectares are expected to receive income of RM1,000 per month, at a market price of scrap rubber of RM2 per kilo.

149. Now with an additional payment of RM0.20 per kilo from lPG, the overall income will be RM1 ,100 per month.

150. The improvement in IPG is expected to raise the income of 300,000 rubber smallholders with an allocation of RM200 million.

151. To encourage paddy farmers to increase the quality and quantity of harvests, the Government will implement a paddy grading initiative and improve the paddy price subsidy scheme or SSHP from 1 January 2016.

152. Paddy grading is based on standardisation of paddy prices at RM1,200 per metric tonne. To complement this initiative, the Government will also raise the rate of SSHP from RM248.1 0 to RM300 for every metric tonne.

153. This means that if a farmer produces six metric tonnes of paddy that meets the quality with a 20% discount, he is able to receive sales of RM5,760.

154. In addition, the farmer is also entitled to receive an additional income through SSHP with total income increasing from RM1, 190 to RM1,440.

155. Overall, the farmer will receive RM7,200 for each harvest. A total of 155,000 farmers will benefit from the improved scheme.

156. Measure 2: Providing Affordable Houses. House ownership is an issue that has often been raised in recent years. The implementation of affordable housing requires the invoivement of several agencies.

157. The 2016 Budget will continue with various house ownership programmes for all levels of income as follows:

First: PR1MA to build 175,000 houses which will be sold at 20% below market prices with an allocation of RM1.6 billion. A total of 10,000 units are expected to be completed next year;

Second: SPNB will build 10,000 units of Rumah Mesra Rakyat with a subsidy of RM20,000 for each house through an allocation of RM200 million;

Third: Build 100,000 houses, priced between RM90,000 and RM300,000, under Perumahan Penjawat Awam 1 Malaysia (PPA1M) by 2018. A Facilitation Fund of up to 25% of development cost is provided;

Fourth: Build 22,300 units of apartments and 9,800 units of terrace houses under the Peoples Housing Programme (PPR) with an allocation of RM863 million to KPKT;

Fifth: Establish a First House Deposit Financing Scheme under KPKT to assist first-time house buyers of affordable houses to pay the deposit. For this, RM200 million is allocated;

Sixth: Build 5,000 units of PR1MA and PPA1M houses in 10 locations in the vicinity of LRT and monorail stations, including in Pandan Jaya, Sentul and Titiwangsa;

Seventh: Allocate RM60 million to the Department of Orang Asli Development particularly for building houses for the community;

Eighth: Build houses for the second generation of settlers comprising 20,000 units by FELDA, 2,000 units by FELCRA and 2,000 units by RISDA.

For houses built by FELDA, the maximum price is reduced to RM70,000 from RM90,000 previously;

Ninth: GLCs to build affordable houses in the vicinity of the MRT station in Bandar Kwasa Damansara. Kwasa Land owned by EPF will build 800 units and Sime Darby Property 4,600 units; and

Tenth: Allocate RM40 million to KPKT for reviving abandoned low and medium-cost private housing projects.

In addition, exemption on stamp duty is given on financing instruments to contractors who revive the project as well as the original purchaser of the abandoned house.

158.To provide a comfortable living environment for the people, the following measures will be implemented:

First: RM150 million to build and repair 11,000 dilapidated houses in rural areas by KKLW; and

Second: RM155 million for maintenance of low-cost public housing and 1Malaysia Maintenance Fund by KPKT. Among others, the Fund provides 100% financing for the repair of lifts, railings as well as rewiring.

159. Measure 3: Quality Healthcare Services. Every country wishes to have the best world-class health quality. This is what the Barisan Nasional Government has and continues to strive for. Among the projects for health services that will be implemented are:

First: Building five new hospitals in Pasir Gudang, Kemaman, Pendang, Maran and Cyberjaya;

Second: The RM848-million Kuala Lumpur Women and Childrens Hospital will commence operations in October 2016;

Third: Redevelopment of Kajang Hospital;

Fourth: Provide RM260 million to build and upgrade rural clinics, health clinics, dental clinics as well as quarters nationwide;

Fifth: Allocate RM52 million for operating the existing 328 1Malaysia clinics and establishing 33 new ones;

Sixth: Allocate RM72 million to provide medical assistance, including haemodialysis, which is expected to benefit nearly 10,000 poor patients; and

Seventh:RM4.6 billion will be allocated for the supply of medicines, consumables, vaccines and reagents to all Government hospitals and clinics.

160. Beginning 1 January 2016, the Government will impose full medical charges on non-citizens.

161. Measure 4: Ensuring the Welfare of the Less Fortunate and Persons with Disabilities (PWD). The Government will continue to strengthen the social safety net system with an allocation of almost RM2 billion to the Ministry of Women, Family and Community Development to assist PWD, the elderly and poor families. For this, the following programmes will be implemented:

First: Allocate RM445 million for monthly allowance of RM350 for employed PWD; assistance of RM200 for unemployed PWD; and assistance of RM300 for taking care of bedridden PWD. The assistance will benefit nearly 150,000 PWD;

Second: RM100 million is allocated to establish an additional 20 Community-Based Rehabilitation Centres; and

Third: RM662 million is allocated for monthly assistance of RM100 to RM450 for children from poor families and RM300 for poor senior citizens.

162. Last year, the nation faced two major disasters, that is, massive floods at end-2014 and a major earthquake in Ranau, Sabah. If proactive measures are not taken, such disasters can cause huge losses amounting to billions of ringgit and more importantly, the loss of lives.

163. To strengthen natural disaster management, a sum of RM180 million will be provided including for establishing the National Disaster Management Agency under the Prime Ministers Department.

164. A sum of RM730 million is provided for the Flood Mitigation Projects nationwide. Meanwhile, RM60 million is allocated to implement the National Flood Forecasting and Warning Programme and to develop a National Earthquake and Tsunami Sub-Centre in Sabah.

165. It is clear that this administration is carefully undertaking policies and plans as practised for decades.

166. I would like to reiterate that this Budget is part of a series of major measures which will enable us to achieve the status of an advanced nation.

167. However well we plan, ultimately the success of the nation depends on our ability to remain united.

168. We are thankful to the security forces for their service and sacrifice in ensuring peace and security in the country.

169. Therefore, the Government is committed to implementing capacity-building plans for the Malaysian Armed Forces (ATM) in stages.

170. In this regard, RM17.3 billion is allocated to the Ministry of Defence. This includes the procurement of six Littoral Combatant Ships, Very Short Range Air Defence weapons system, armoured vehicles and the A-400M Airbus.

171. ATM will be equipped with the latest technology including the use of Unmanned Airborne System to improve Intelligence, Surveillance and Reconnaissance capacity.

172. A sum of RM523 million is allocated for the development of an ESSCOM armed forces camp in FELDA Sahabat, Lahad Datu, Sabah.

173. In appreciation of the contribution of our heroes, a sum of RM160 million is provided to build 4,000 quarters for ATM personnel.

174. In addition, the Armed Forces Fund Board (LTAT) plans to build 2,000 units of affordable houses for armed forces personnel beginning 2016.

175. The Malaysian Maritime Enforcement Agency (APMM) is allocated RM864 million, among others, for the acquisition of Offshore Patrol Vessels and patrol boats.

176. To enhance safety and security in the country as well as to continuously reduce crime rate, RM13.1 billion is allocated. Among the initiatives that will be implemented:

First: RM155 million for building two new district police headquarters (IPD) in Lawas, Sarawak and Kota Kinabalu, Sabah while 10 IPD and five police stations are under construction;

Second: Plans to build 2,000 units of affordable houses for members of Polis Diraja Malaysia (PDRM), among them, in Rawang while other areas are being identified;

Third: RM36 million is allocated to build offices, quarters and upgrading of immigration detention depots;

Fourth: RM50 million for enhancing security measures in prisons; and

Fifth: RM20 million for the Safe City Programme in 60 black areas, among others, to provide pedestrian walkways and lighting in selected areas.

I would like to announce an additional 500 motorcycles and 500 cars for the patrolling unit at PDRM with a total allocation of RM35 million.- Star, 23/10/2015