Malaysia’s Prime Minister Launches Pemerkasa

The Prime Minister of Malaysia, Tan Sri Muhyiddin Yassin, launched the Strategic Programme to Empower the People and Economy (‘Pemerkasa’) on 17 March 2021. Pemerkasa is valued at RM20.0 billion, with a fresh fiscal injection of RM11.0 billion.
The Government has identified the following five focus areas to restore and empower the economy throughout 2021:
  • Control the spread of Covid-19;
  • Accelerate economic recovery;
  • Strengthen the country’s competitiveness;
  • Implement the regional and community inclusion agenda; and
  • Transform the economy.
Pemerkasa comprises twenty strategic initiatives, most of which focus on the provision of financial assistance to individuals and businesses.
This article highlights the initiatives that may be of particular interest to businesses.
Safe@Work initiative
To protect the workforce, the Ministry of International Trade and Industry (‘MITI’) will introduce the Safe@Work initiative whereby employers assume responsibility to prepare workplaces and accommodations which are conducive to employees.
Employers that sign up for the Safe@Work programme with MITI will be allowed to operate in a situation where workers who are close contacts of individuals with Covid-19 will be isolated from the local community and other workers and placed in a “safe work bubble” until all of them are confirmed to be safe from Covid-19.
To encourage employers to participate in this programme, the Government will grant an additional tax deduction of up to RM50,000 on the expenses incurred in renting of premises and hostels to every manufacturing company and manufacturing-related services company registered with MITI that passes the Safe@Work compliance audit. Registration commences from 1 April 2021.
Separately, employers who carry out Covid-19 testing for their employees will be granted a further tax deduction on the expenses incurred in carrying out these tests until 31 December 2021.
Increase in allocation for small scale projects
The Government’s allocation for small scale projects for 2021 will be increased from RM2.5 billion to RM5.0 billion. Among the projects that will be allocated exclusively to classes G1 to G4 contractors are repairs of public infrastructure and facilities that are damaged by floods, social amenity programmes, repair of stratified housing including lifts replacement in public housing as well as construction of stalls in municipalities.
The Government has pledged to simplify the procurement procedures to expedite the implementation of these projects.
Increased allocation for microcredit financing
The RM1.0 billion microcredit financing facility approved under the Malaysian Budget 2021 will be increased by RM500 million through programmes under Bank Simpanan Nasional (‘BSN’), National Entrepreneur Group Economic Fund (‘TEKUN’), Majlis Amanah Rakyat (‘MARA’) and Small and Medium Enterprises Corporation (‘SME Corp’).
A fund of RM300 million, with a financing limit of RM50,000, will be made available through BSN at a reduced interest rate of 3.0% from 3.5%. The tenure of the loan will be five years and repayment instalments will commence after the sixth month.
For entrepreneurs in the informal sector, TEKUN will make available an additional RM60 million under its Informal Financing Scheme, with a financing limit of RM5,000 for small businesses operating from home and for night market and wet market operators.
In addition, the TEKUN Mobilepreneur programme will be expanded to provide financing for the repair or purchase of new motorcycles with a limit of RM10,000. To complement this initiative, locally assembled motorcycles with an engine capacity of 150 c.c. and below will be granted a 100% exemption from excise duty from 1 April 2021 to 31 December 2021.
TEKUN will also introduce the TEKUN POS-preneur programme where eligible applicants can generate income by delivering goods. A financial assistance of up to RM20,000 will be given to eligible applicants for vehicle repairs, with a maximum of RM50,000 for purchase of vans and lorries.
A sum of RM50 million, with a financing limit of RM50,000 and an interest rate as low as 3%, will be made available through MARA’s Prihatin Micro Business Financing Scheme, with priority being given to assist 1,000 bumiputera micro SMEs to continue their business.
SME Corp will set aside RM50 million to assist local SMEs to obtain financing of up to RM250,000 at an interest rate as low as 3%.
Extension of Wage Subsidy Programme
The Government will allocate RM700 million to extend the Wage Subsidy Programme 3.0 for a further three months which is targeted at the tourism, wholesale and retail sectors, as well as businesses that were compelled to close during the movement control order, such as gymnasiums and spas.
The PenjanaKerjaya apprenticeship programme 
The existing PenjanaKerjaya apprenticeship programme will be enhanced by extending the apprenticeship period from three months to six months and trainees under the programme will receive an incentive of RM800 per month for the six-month period.
Reviving the tourism and retail sectors
The following measures have been announced to assist the tourism sector:
  • Extend the tourism tax and service tax exemptions on accommodations provided by hotel operators until 31 December 2021;
  • Extend the tax incentives to tour operators until year of assessment 2022;
  • Allow deferment of monthly instalment payments of income tax from 1 April 2021 to 31 December 2021 for companies in the tourism industry and selected industries such as cinemas and spas;
  • Grant entertainment duty exemption on entrance fees for places of entertainment such as theme parks, stage performances, sports events and competitions, as well as cinemas in the Federal Territories;
  • Extend the scope of personal income tax relief of up to RM1,000 to cover expenses incurred in purchasing tour packages through tour agents registered with the Ministry of Tourism, Arts and Culture (‘MOTAC’); and
  • Exempt all affected companies in the tourism and retail sectors from paying the Human Resources Development Fund levy until June 2021.
In addition, the Government has agreed to channel a one-off grant of RM3,000 under the Special Assistance Grant to more than 5,000 tour agencies registered with MOTAC as well as a one-off cash assistance of RM600 to 4,000 homestay operators registered with MOTAC.
The 10% special discount granted on electricity bills for operators of hotels, theme parks, convention centres, shopping centres, offices of local airline operators and tour and travel agencies will be extended for three months until 30 June 2021 to assist the cash flow and reduce the operating costs of these operators.
Reducing the burden on companies
To ensure that alternative financing thrives, the Securities Commission Malaysia will increase the fundraising limits on equity crowdfunding platforms from RM10 million to RM20 million. Unlisted public companies will also be allowed to raise funds through these platforms.
To encourage companies to raise funds on the stock market, a 12-month exemption will be granted on listing-related fees for companies that apply for listing on the Main, ACE or LEAP markets of Bursa Malaysia. In addition, a rebate on listing-related fees for 2021 will be granted to listed companies that report losses based on their quarterly reports. Further details of these measures are available in the joint media release issued by the Securities Commission Malaysia and Bursa Malaysia on 19 March 2021.
To reduce the burden on companies that are facing financial difficulties which may result in their winding up, the Companies Commission of Malaysia (SSM) has agreed to increase the threshold of ‘inability to pay debts’ under section 466(1)(a) of the Companies Act 2016 for commencement of winding up proceedings from RM10,000 to RM50,000. This initiative is not new and is an extension of the present debt threshold level prescribed under the Prescription of Amount of Indebtedness of Company under Paragraph 466(1)(a) dated 23 December 2020 (Gazette No. 21841 dated 30 December 2020) which is due to expire on 31 March 2021. The Prime Minister did not provide any indication as to whether this debt threshold will be permanent or for a fixed duration.
Assistance for co-operatives
To assist co-operatives that are affected by the Covid-19 pandemic, the Malaysia Co-operative Societies Commission will set aside RM50 million from the Malaysia Co-operative Societies Commission Revolving Capital Fund to provide unsecured financing incentives of up to RM100,000 per co-operative society, with repayment commencing six months after the approval of the financing.
Matching grants for oil palm industry
The Government has approved a matching grant of RM30 million to encourage investment in the mechanisation and automation of the oil palm industry.
The Government will also increase the matching grant allocated for the purpose of purchasing machinery for the Sustainable Oil Palm Growers Cooperative by RM20 million.
To assist Small and Medium Enterprises (SMEs) to obtain financing, Bank Negara Malaysia has increased the allocation under the Targeted Relief and Recovery Facility by RM2.0 billion to RM5.0 billion, and the SME Automation and Digitalisation Facility (‘ADF’) by RM700 million to RM1.0 billion. Further details of the ADF are available here.
Automation and Digitalisation
Malaysian Industrial Development Finance Berhad has set aside RM200 million for a financing scheme to promote the development of automation, digitalisation and adoption of green technology and has agreed to reduce the interest rate from 5% to 3% for 12 months commencing 1 April 2021.
At the same time, an additional allocation of RM50 million for the Smart Automation Grant under the Malaysian Investment Development Authority will be provided to enable more SMEs and mid-tier companies to enhance operational and manufacturing efficiencies through advanced technology. An allocation of RM50 million will be made available for the Industry4WRD programme under MITI to support the Industrial Revolution 4.0 (IR4.0).
To encourage SMEs to increase the use of automation in order to reduce their dependency on foreign workers, SME Bank will make available a fund of RM200 million for financing the purchase of machinery with an incentive grant of up to 20% of the value of the machinery.
5G and existing telco infrastructure
In his speech, the Prime Minister also confirmed that 5G services will be rolled out in Malaysia in stages beginning end-2021. The Prime Minster also confirmed that RM3.2 billion will be set aside by the Malaysian Communications and Multimedia Corporation in 2021 to improve the quality of broadband services by upgrading existing transmission stations and provide fibre optics access to various premises.
Promoting investments and exports
Foreign investment and international trade are to be given special focus as an important enabler for the national recovery programme. For this purpose, MITI will explore new potential exports and encourage the adoption of automation and mechanisation among industry players. Among the measures to be implemented will be the eBizLink initiative, a virtual and hybrid digital marketing platform, and the Globeprenuer initiative which seeks to enable more SMEs to enter the international market.
The Government will also increase the ceiling for the Market Development Grant (MDG) from RM300,000 to RM500,000 for each company that participates in international exhibition platforms.
A RM50 million matching grant will be made available to develop the aerospace and medical devices industries.
Encouraging sustainable financing
The Pemerkasa programme will also support Malaysia’s sustainability agenda, in particular to achieve the United Nations Sustainable Development Goals (‘SDG’) by 2030. The Government and the United Nations in Malaysia will establish the MySDG Trust Fund as a platform to enable financing from various sources to finance projects that fulfil the SDG criteria. This initiative appears to have been announced during the Malaysia Budget 2021 where the Finance Minister stated at paragraph 219 of the Budget Speech that a fund to be known as the Malaysia-SDG Trust Fund or MySDG Trust Fund will be established with an initial allocation of RM20.0 million.    
To support the country’s goal to become a sustainable financial hub, the Government will launch a Sustainable Sukuk of not less than USD1.0 billion to finance programmes and projects with sustainable elements and address the socio-economic effects resulting from the Covid-19 pandemic.
Empowering women entrepreneurs
To empower women entrepreneurs, the Government will allocate RM30 million for the SME and Micro SME e-Commerce Campaign as well as the Shop Malaysia Online Programme to assist such entrepreneurs to switch to online marketing. In addition, BSN will make available RM50 million for the PEMERKASA-NITA Micro Financing Scheme to encourage women entrepreneurs to venture into business.
A sum of RM10 million will be set aside in the form of a 70% matching grant for women entrepreneurs and self-employed women under the SOCSO Self-Employed Social Security Scheme.
Empowering youths
Among the measures to empower the youths, BSN will offer a PEMERKASA-BELIA Micro Financing Scheme with an interest rate from as low as 3% and a maximum financing amount of RM50,000 to enable youths to venture into business.
Pemerkasa is the sixth assistance package introduced by the Malaysian Government since the first quarter of 2020 to mitigate the economic downturn caused by the onset of the Covid-19 pandemic and to revive the Malaysian economy.
Many of the initiatives comprised in this programme seek to assist Malaysians and Malaysian businesses to recover from the economic downturn caused by the Covid-19 pandemic. While the Prime Minister has stated that greater emphasis will be given to foreign investment and international trade to assist in the economic recovery process, there does not appear to be sufficient initiatives in these areas to suggest that they will contribute significantly to the recovery process.
Alert by Kok Chee Kheong (Partner) and Tan Wei Liang (Associate) of the Corporate Division of Skrine.