This article first appeared in The Edge Financial Daily, on October 22, 2015.

KUALA LUMPUR: Johor-based property developer KSL Holdings Bhd wants the government to exempt key construction materials such as cement, sand and steel from the goods and services tax (GST), while water pipe manufacturer Engtex Group Bhd is hopeful that there will be a replacement policy for water pipes in Malaysia after a certain number of years.

KSL chairman Ku Hwa Seng told The Edge Financial Daily that the GST exemption would result in lower construction costs, and ultimately enable more affordable houses to be built. 

He also thinks the government should make home mortgage’s interest rate deductible against personal income tax for the first five years, especially for first/main homebuyers for properties priced below RM500,000 per unit. 

As for the pipe replacement policy, Engtex group managing director Datuk Ng Hook said it would reduce water wastage through leaky pipes. 

Engtex also would like the government to replace the old asbestos cement (AC) pipes, which were laid out more than 50 years ago and are now causing water leakages of up to six billion litres per day, nationwide, said Ng. 

Ng said this contributed to 37% of non-revenue water, compared with Singapore’s 5%, Japan’s 7%, and the Phillipines’ 11%. Further, he said concerns about AC pipes had surfaced as their gradual corrosion over time may pose health risks. 

Both KSL and Engtex believe public spending should be at the forefront in such uncertain economic times by pump-priming the economy via encouraging new developments and expediting planned public infrastructure development — such as the Klang Valley light rail transit 3 extension. 

They opined that these would create a positive multiplier effect and spur investors’ confidence in the strength of the overall 

economy. 

Meanwhile, UMW Oil & Gas Corp Bhd (UMW-O&G) wants priority to be given to local companies in the awarding of contracts by national oil company Petroliam Nasional Bhd (Petronas) and other production service contractors (PSCs) operating in Malaysia, besides giving exemptions from GST for marine assets moving in and out of our shores. 

UMW-O&G president Rohaizad Darus said the award of contracts to local O&G players will have trickling effects on other local businesses.

“More importantly, it reduces foreign cash outflow which results in a significantly improved trade balance,” said Rohaizad in an email response.

As for the GST exemption, Rohaizad said: “A number of local companies have expensive marine assets, such as drilling rigs, marine vessels and barges, which serve both Malaysian and regional markets. Each time these marine assets re-enter Malaysia to work, to [be] repaired, or to idle between contracts, GST will be charged, which is high due to the high value of the assets.

“Multiple GST also needs to be paid throughout the life of the assets due to cross-border movements. Due to this, owners may prefer Singapore or Indonesia for repair or idling purposes as no tax is imposed there. This will result in lost opportunities for the Malaysian marine support industry”.

The group also wishes to see exemptions given to Petronas from having to open up more to foreign companies under the Trans-Pacific Partnership agremeent to prevent large foreign service providers from gradually eliminating local companies.

“It will [also] be good if the corporate tax for pure local O&G service companies (now at 24%) be gradually reduced by 2% annually until it matches Singapore’s corporate tax (of 17%). Alternatively, tax incentives such as tax holiday or investment tax allowance be extended to local O&G service companies that are exporting its services regionally,” said Rohaizad.