Twelfth Malaysia Plan Mid-Term Review: Some things that lie ahead
13 September 2023
A Special Meeting of the Second Session of the Fifteenth Parliament 2023 has been convened from 11 to 26 September 2023 to discuss and approve the Mid-Term Review of the Twelfth Malaysia Plan for the period of 2023-2025 (“12MP MTR
Our write-up on the Twelfth Malaysia Plan can be accessed here
The Prime Minister of Malaysia, Dato’ Seri Anwar Ibrahim, presented the Kajian Separuh Penggal Rancangan Malaysia Kedua Belas 2021-20252
Paper (Command Paper CMD.30 2023) (Mid-Term Review of the Twelfth Malaysia Plan for the period of 2023-2025) (“12MP MTR Report
”) to the Dewan Rakyat (House of Representatives) of the Malaysian Parliament on 11 September 2023.
The 12MP MTR Report is a 351 paged tome that sets out the Government’s framework to achieve the objectives of the Twelfth Malaysia Plan by 2025. It identifies three main areas of focus, namely:
- Strengthening Sustainability;
- Developing a Prosperous Society; and
- Achieving Status as a High Income Nation.
The 12MP MTR Report identifies 17 Big Shifts that are to be implemented through 71 strategies. Examples of these Big Shifts are the development of high growth high value (HGHV) industries, strengthening fiscal sustainability, housing for the Rakyat, faster energy transition and targeted subsidy.
In this Alert, we will only highlight some of the initiatives comprised in the strategies that may be of particular interest to businesses or indicate that significant new laws or amendments to existing laws will be introduced under the Twelfth Malaysia Plan.
- A Fiscal Responsibility Act will be introduced.
- Drafting of the Government Procurement Act will be accelerated to improve the procurement system. The Financial Procedure Act 1957 will be amended to include provisions allowing the use of direct negotiation methods for better management of the procurement process.
- A new anti-corruption plan will be introduced as a guideline to all public and private institutions on issues of integrity, governance and corruption.
- New legislation on anti-rent-seeking will be introduced to promote transparency and economic efficiency.
- Climate change laws will be enacted to regulate the implementation of initiatives to fulfil the nation’s climate change responsibilities.
- The Environmental Quality Act 1974 and the Water Services Industry Act 2006 will be amended to address emerging environmental issues and to increase the penalties for offences.
- The capacity of renewable energy, in particular solar, hydrogen, biomass and hydropower, will be enhanced. The structure of electricity tariff will be realigned to be in line with the cost of the system.
- Existing laws and guidelines to be revised to meet current global trends and a new law will be introduced to address cybersecurity issues and management.
- The Companies Act 2016 and the Limited Liability Partnerships Act 2012 are being reviewed in relation to the declaration of beneficial ownership to strengthen transparency on beneficial ownership.
- The Government will continue to explore a progressive tax policy that ensures that individuals and corporations with higher incomes contribute more proportionally to society in line with international best practices.
- Enforcement activities will be intensified to enhance tax compliance and curb leakages.
- The scope of the Housing Development (Control and Licensing) Act 1966 will be expanded to afford protection to purchasers of residential properties, such as small office and home office, and small office virtual office, that are built on commercial land.
- To become the driver in the international halal market with a halal export value of RM63.1 billion by 2025.
- Measures to encourage women to continue working or return to work will be enhanced through the provision of facilities such as child care centres, and easing the procedures for the establishment of such centres by employers and granting incentives for providing the same.
- The policy on intellectual property (“IP”) will be revised to enhance the national commercialisation ecosystem to expand ownership, adoption and technology transfer. IP assets will be leveraged in the assessment to secure financing to encourage commercialisation and innovation activities.
- Research, development, commercialisation and innovation (R&D&C&I) activities will be scaled up and adoption of advanced technologies will be elevated.
In his speech presenting the 12MP MTR Report, the Prime Minister reiterated that capital gains tax will be implemented in 2024. He also indicated that the Financial Responsibility Act will be tabled during the October 2023 session of the Malaysian Parliament.3
It may be recalled that during the 2023 Malaysian Budget Speech, Dato’ Seri Anwar Ibrahim had announced that a low-rate capital gains tax will be imposed on the disposal of unlisted shares commencing 2024.4
It is unclear whether the scope of the capital gains tax will be extended to capital gains on the disposal of listed shares.
The introduction of the Financial Responsibility Act does not come as a surprise as Dato’ Seri Anwar Ibrahim had indicated during the 2023 Malaysian Budget Speech that the new Act will be introduced this year.5
It will be interesting to see whether the proposed anti-rent-seeking law will have sufficient bite to end a practice that only serves to line the pockets of intermediaries and increase the cost of government procurement. However, it is hoped that the proposed inclusion of provisions for ‘direct negotiations’ in the Financial Procedure Act 1957 will be subject to sufficient safeguards to avoid giving rise to another avenue for abuse.
In reviewing the progressive tax structure, the Government must bear in mind that several of our regional competitors presently offer lower tax rates, in particular, for corporate tax. Bearing this in mind, the Government must ensure that any increase in income tax rates to generate revenue must not discourage investors from investing in the country.
Alert by Tan Wei Liang (Senior Associate) of the Corporate Practice of Skrine.
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact firstname.lastname@example.org.
The Dewan Rakyat (the House of Representatives) and the Dewan Negara (the Senate) will meet for a period of six days and four days respectively for this special meeting.
The 12MP MTR Review is only available in Bahasa Malaysia at the time of publication of this article.
3 Putrajaya lifts revenue, GDP growth target for 2021-2025
, The Edge CEO Morning Brief, 12 September 2023.
Paragraph 32 of the 2023 Malaysian Budget Speech.
Paragraph 24 of the 2023 Malaysian Budget Speech.