Bank Islam Malaysia Bhd believes Budget 2021, which will be tabled on November 6, will be formulated to take into account the current economic situation that is still fragile even though it has shown encouraging signs of recovery.
Chief executive officer Mohd Muazzam Mohamad said the Government’s recent move to increase its debt ceiling from 55 per cent of the Gross Domestic Product (GDP) to 60 per cent, would definitely give it some flexibility to manoeuvre an expanded fiscal policy to further boost the economic recovery.
“With that, the steps to be introduced is hoped to be able to help reduce the burden of businesses and Malaysians in general, particularly those in the Bottom 40 per cent income group (B40) and the Middle 40 per cent group (M40).
“Besides that, emphasis on capacity building specifically on upskilling exercise as well to create job opportunities should also be the main focus of the upcoming Budget,” he told Bernama.
Bank Islam has projected the country’s GDP for 2021 to grow at 6.2 per cent compared with an expected contraction of 4.0 per cent this year due to the impact of the COVID1-19 pandemic.
On the back of this scenario, Mohd Muazzam said for Budget 2021, the bank expected the Government to consider increasing the expenditure to stimulate the growth of economic sectors and people who are still affected by the pandemic.
“Focus must be given to minimise the effects of the pandemic on Small and Medium Enterprises (SME) and individuals that have lost their source of income,” he said.
Citing the Statistics Department report that the country’s unemployment rate in August 2020 was at 4.7 per cent or 741,600 individuals who are not working, he said it showed that the country is not operating at full employment.
On that note, he opined the Wage Subsidy Programme (WSP) must be continued to further incentivise the employers in the SME sector to maintain their workers.
Apart from that, Bank Islam also wished to see Budget 2021 prioritising an increase in entrepreneurial training and explore the potential of agrofood sector.
“The retraining programme for entrepreneurs must be widened to encourage the people affected by COVID-19 to join the business segment.
“One of the potential sectors that encourage entrepreneurial activity is the agrofood sector. This is because the country depends a lot on imported produce to fulfil domestic demand,” he said.
In 2019, the total import of agrofood amounted to RM51.5 billion while exports was about RM24.1 billion, showing a trade deficit of RM17.4 billion for this sector, he said.
Mohd Muazzam also highlighted that the self sufficiency ratio for some main agrofood products was low, among them ginger and chilli, which were at 16.2 per cent and 30.8 per cent, respectively, in 2019, while the lamb and beef produce were at 12.1 per cent and 23.7 per cent, respectively.
“Bank Islam sees this situation as a chance for those affected to join in the agriculture segment due to high demand.
“If this is run properly, Malaysia can produce more entrepreneurs who are competitive, as well as guaranteeing the improvement in the country’s food security,” he said.
In another development, he said Bank Islam would also like to see more efforts to integrate the Islamic economic system into the mainstream economy to further drive economic growth.
In this context, Bank Islam’s iTEKAD, a micro financing programme designed to help finance micro industries and individuals under B40 and asnaf to achieve sustainable income and financial resiliency in facing the impact of COVID-19 pandemic, must be widened to other states, he said.
Bank Islam, which initiates this programme, are working together with the implementation partners such as the State Islamic Religious Councils (MAIN) to help these eligible micro entrepreneurs, he added.
This is to ensure a more inclusive economic recovery as the programme was designed to combine with social financial funds such as zakat or sadaqah (charity) especially for the purchase of equipment and tools for the recipients.
“However, the expansion of iTEKAD needs the encouragement from the Government so that MAIN can work together with Bank Islam, which is ready to mediate with the councils to ensure that the programme in all states will realise its economic advantages,” he said.
On the other hand, Bank Islam also hopes that the Government will put in motion the incentive mechanism for tax waiver for the payment of cash waqf which was announced in Budget 2020.
“However, despite the announcement by the previous Finance Minister, the implementation at the Ministry level and Inland Revenue Board has yet to materialise,” he said.
“The tax waiver incentive can drive the growth of cash waqf industries which later can be channelled into projects that can improve economic competitiveness.
“Bank Islam sees this agenda as an effort that can play an important role in improving the people’s economy in Malaysia. It is inclusive and capable of playing a complementary role to the fiscal policy if the funds collected can reach a critical mass,” he added. — BERNAMA