Malaysia ICT Budget 2006

A total of RM 136.8 bil was allocated for the budget towards 2006. That is only USD 36 Billion.

For comparison wise, it is not a bad sum of money. To have a picture of how much is USD 36 billion ?

Microsoft profit = USD 2.9 billion (2004)
Thus you need to have 12 Microsoft operating at full force in order to get USD 36 billion ? Not really, that sum is cash flow, profit is quite a different sum of money. In layman term, cash flow money doesn't belong to you 100%, just a dynamic amount which you may have for a given period of time.



Budget highlights for ICT related:
1. Regional Hub - Optimising the utilization of existing infrastructure:
Malaysia aspires to be a regional hub, especially in the services sector and knowledge-based industries. Therefore, it is important that we facilitate the travel of knowledge workers and business travellers to Malaysia. In this regard, the Ministry of Home Affairs is taking measures with the view to facilitating and expediting the issuance of visas, particularly for knowledge workers and professionals in the fields of ICT, financial services and high-technology industries. In addition, the Expatriate Committee and Inspectorate Units of the Immigration Department will be strengthened.

2. Governance Efficiency - Improving further goverment's delivery system.
Malaysia aspires to be a regional hub, especially in the services sector and knowledge-based industries. Therefore, it is important that we facilitate the travel of knowledge workers and business travellers to Malaysia. In this regard, the Ministry of Home Affairs is taking measures with the view to facilitating and expediting the issuance of visas, particularly for knowledge workers and professionals in the fields of ICT, financial services and high-technology industries. In addition, the Expatriate Committee and Inspectorate Units of the Immigration Department will be strengthened.

3. Develop new growth - Developing new sources of growth.
To further strengthen and diversify the sources of economic growth, the Government will intensify its efforts to encourage the private sector to venture into new areas with high growth potential and competitive edge. These include modern methods for agriculture, biotechnology, nanotechnology, high-technology manufacturing as well as services, especially ICT, education and tourism.

4. Make full use of MSC - Intensifying the ICT sector.
MSC was established to be a catalyst of economic growth based on knowledge and intellectual property. We must fully capitalise on the strengths of MSC, which has succeeded in attracting the outsourcing and shared services industry. To further enhance the development of Cyberjaya, which is a key component of MSC, the following measures will be implemented:

First: the Cyberjaya development guidelines, including plot ratio, will be amended to facilitate the construction of more affordable homes;

Second: public transport will also be improved, particularly in terms of providing bus services to cater for the requirements of shared services and outsourcing companies which operate 24 hours a day;

Third: to encourage more office space for MSC-status companies, the Government proposes that the Industrial Building Allowance (IBA) for a period of ten years be given to owners of new buildings occupied by MSC-status companies in Cyberjaya; and

Fourth: an ICT Development Institute will be established to increase the supply of knowledge workers by providing the skill sets required by the ICT industry, especially shared services and outsourcing companies.

Tax Relieve for non-MSC company:
Presently, multimedia companies operating outside of Cybercities (Cyberjaya, Kuala Lumpur City Centre, Technology Park Malaysia, Bayan Lepas in Pulau Pinang and Kulim HiTech Park in Kedah) do not enjoy tax incentives given to MSC-status companies. To further encourage ICT and multimedia activities including Regional Shared Services Centres, throughout the country, the Government proposes Pioneer Status of 50% income tax exemption for 5 years or Investment Tax Allowance of 50% be given to qualifying companies operating outside Cybercities. This incentive will only be extended to companies endorsed by the Multimedia Development Corporation (MDC).

The Government wishes to encourage Malaysian ICT companies to grow and penetrate global markets. MDC will work together with Permodalan Nasional Berhad (PNB) and Khazanah to identify and match leading MSC status companies with suitable GLCs to test bed their products. These GLCs will become reference sites to showcase the products of MSC-status companies when marketing to prospective customers globally.

5. Encouraging R & D:
The development of science and technology as well as R&D will continue to be encouraged to generate new sources of growth. An allocation of RM868 million (USD 228 mil)is provided under the Ministry of Science, Technology and Innovation. The R&D Grant Scheme will focus on biotechnology, advanced manufacturing, advanced materials, ICT, nanotechnology and alternative sources of energy, including solar, to encourage innovation among local companies and developing new products.

This is nothing compared to Korean IT-839 strategy which allocated a total of USD 400 million for R & D. We thus expert Malaysia to be two times slower than the Korean.

6. Funds for training - Developing human captial
Human resource development must be enhanced to ensure the nation remains competitive and resilient, particularly in a global economy where knowledge, science and technology are highly valued. In this respect, quality education will be emphasised to equip Malaysians with knowledge, skills and positive values to become a workforce imbued with a culture of high performance. Quality education will also ensure that they remain relevant to meet current market requirements to face the increasingly competitive international environment. A total of RM5 billion is allocated for education and training under development expenditure, including RM1.3 billion for pre-school, primary and secondary schools and matriculation, RM1.4 billion for higher education, RM1.1 billion for training and RM1.2 billion for ICT, curriculum development, hostels and teachers’ quarters.

A Young Entrepreneurs’ Scheme will be implemented by the Ministry of Entrepreneur and Cooperative Development in fields, such as ICT, tourism, halal products as well as food processing and packaging;

Conclusion:
Something interesting to look out for. At least we know that the grants will be back. Small grant such as Cradle Investment Program will be available for some time now since they only provide for RM 50K per project for a duration of 6 months.

Many new R & D projects will be initiated. It is very unlikely that existing R & D project will be given second round funding unless it is proven that market commercialization is pretty much viable in the near future. To enable this believe, fellow researcher must collaborate with private companies as partner to integrate its invention into the company's existing business stream, otherwise there is nothing concrete. For instance, a R & D in Biometric Identification System must partner with embedded system company to propose for a second round funding targeting product finalization aiming at the automotive vehicle's embedded system. The partner must be proven to have the resources for the marketing take-off and business contacts. Most important of all, both parties must have agendas which can work together.

This budget is good for those ICT companies involve with R & D related work. It is less attractive for companies dealing with enterprise solutions and even for outsourcing service provider.