Creating high value jobs: Malaysia budget vs S'pore budget

Creating high value jobs seems to be the second selling pitch of Najib administration after 1Malaysia. It is interesting to note that Singapore’s theme for their 2010 budget, according to their Finance Minister Mr. Shanmugarat, is “quality jobs higher income”. It will make interesting reading if a comparison is made.

The budget unveiled a master plan for the next 5 to 10 years to turn Singapore into a “world of opportunities” with total expenditure of S$46.4 billion (given total population of 3.7 million, it is approximately S$ 12,500 allocated per person; by comparison, 2009 budgeted government expenditure in Malaysia of RM220 billion shared by 28 million bumis and pendatangs (in jest) amounted to approximately RM7,800 person*).

* figures of Malaysia 2009 budget is derived from Teh Chi Chang’s excellent book entitled “The Budget : How the Government is spending OUR money”


There are plenty of social aspect to comment about such as higher dependent relief for grand parents and parents, one-off topping up of CPF Medisave from S$200 to S$500 for all Singaporeans above 50 and allocation of S$200million each to citizen’s Medifund and Eldercare.

However, I am more intrigued by the budget’s effort to restructure and transform their economy which does not rely on natural resource, cheap labour or land mass. What ideas can Malaysia glean from them?


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Extract from the newpaper 23 February 2010 (front page news ”Subway sickos film upskirt video and post on internet")

Retrain, retool, restructure to recreate the S’pore super-value worker

Under the caption “SOFTWARE” – I gather this mean mindset of the people

Retrain and retool the mind and mind set of Singapore bosses to workers : allocation of $S2.5 billion over 5 years for Continuing Education and Training.

# The Workfare Training Scheme (WTS)
Designated for low wage workers, if the employers send them for training, the government of Singapore will reimburse up to 95% of the payroll and course fee of the worker


Research: develop new ideas with the target that R &D make up 3.5 percent of GDP over next 5 years

# The Singapore Government to pump $2.2 billion into National Research Fund and will be boosted by another $S$1.5 billion

# S$450 million is to be allocated to government agencies over next 5 years to work with private-sector companies to help innovation driven companies to turn their R & D into marketable solutions. (the comparison is more stark when one think of the theme lobbying done by Malaysian chamber of commerce organized along racial lines)


Under the caption “HARDWARE”

Encouraging start-ups whereby innovative companies which can offer high value will be given room to enter into the economy and room to grow either via organic growth or mergers and acquisitions

# One-off tax allowance to defray up to 5% of acquisition costs, capped at $5 million.

# S$2.5 billion to be allocated as incentive for businesses to re-look at their work processes and re-design jobs to help workers create more value. (I like this, it allows existing companies to work smarter and better)

# Productivity and Innovation Credit^ – tax deduction for investment along the innovation value chain covering Research & Development, registration of intellectual property, acquisition of intellectual property, automation through technology or software

(note: While in Malaysia we have double deduction for approved research and reinvestment allowance^ for modernization of plant but, I stand to be corrected, registration and acquisition of intellectual property may be classified as capital expenditure and not tax deductible)

^ comparison

Singapore : Productivity and Innovation Credit lasting 5 years that will allow 250% deduction for expenditures on innovation focused activities such as R&D, intellectual property registrations or acquisition, employee training, automation and design

Malaysia : Reinvestment Allowance is available to companies engaged in manufacturing, processing and selected agricultural activities that reinvested for expansion, automation, modernisation or diversification.

RA can be claimed for 15 consecutive years and gives a company either 60% or 100% set off of qualifying capital expenditure against its statutory income.

- for Singapore, your tax credit is 2.5 times what you spent while in Malaysia, you can't fully claim whatever you have invested and the scope is much narrower

# National Productivity Fund
The Singapore Government is aiming to pump S$2 billion into NPF to provide grants to help enterprises with potential for large gains to innovate.



Under the caption “HEARTWARE” – I gather this mean mindset of the entrepreneur

#Nurturing better bosses

S$45 million set aside over 5 years for Spring’s Business Leaders Initiative which is an umbrella programme to attract young talent into SMEs and to groom the future generation of business leaders

#Nurturing start-ups
S$60 million over 5 years for successful angel investors by providing funds, mentor ship and access to business network and markets. (I think this, providing level playing field and unlike other places where opportunities are given according to relationship (guan xi), race etc)

An eligible angel investor who commits a minimum of S$100,000 of equity investment can claim 50% tax deduction on his/her investment at the end of a two year holding period.


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Turning to Teh Chi-Chang’s excellent write up again, the RM7 billion stimulus plan from Najib administration is spent on:

# minor projects, maintaining schools, roads and hospitals RM1.6 billion (what is the multiplier effect of this one? Negligible)

# skills training on tourism, health, construction, business outsourcing RM0.3 billion (a very small portion of the total)

# public transport system RM0.5 billion (I am still stuck in the jam)

# upgrade and maintain police station and army camps RM0.5 billion (when economy is down, why the solders need more houses?)

# build 25,000 low to medium cost houses (people are having trouble buying house for lack of income; not too much money chasing too little houses)

There is a glaring lack of capacity building and human capital focus. The only beneficiary I see is the contractors who are not subject to open tenders, hardware and construction material supplier and perhaps some foreign workers who repatriate our ringgit back to heavens knows where.


By comparison, an even better piece of work in “Democratising Malaysia’s Economy – Budget Strategies for Economic Transformation” by the DAP Economic Bureau, the “Communist-minded” DAP chaps (tribute to a recently independent Wakil Rakyat) came up with the following:

# Breaking up the federal monopoly of revenue and increasing the spending power, autonomy and power to borrow of the respective state government who knows their locality better (No more Penang buses runned by Putrajaya)

# Enactment of Unfair Contract Act to address the profiteering via lopsided public contracts such as the IPPs, toll concessionaires,

# Allocating 20% of Petronas surplus funds to building human capacity via a host of education and training schemes and cultivating brain grain and reverse brain drain.

# Expand on Centre of Excellence in Integrated Circuit Design to add value to human capital development and to bridge a link between research activities, institutions of higher learning, and SMEs based on the needs of the Industrial sector (read: try not to produce unemployable or ill-equipped graduates who waste more resource on re-training)

I am doing injustice to the above excellent and holistic budget presentation by quoting a few of the notables. I hope to write more on that some other day.