KUALA LUMPUR (Oct 7): The Federation of Malaysian Manufacturers (FMM) has commended Budget 2023’s focus on the rakyat’s well-being, but calls for more to be done on the business front to support its recovery.

“We note that the budget is expansionary in nature with [a] focus on assisting the middle- and lower-income groups as well as the micro, small and medium enterprises (MSMEs) during the current challenging economic climate.

“The development budget of RM95 billion, an increase from the previous RM75.6 billion, will certainly help to further stimulate domestic consumption which will have a spillover effect on the entire economy,” it said.

But beyond that, the FMM said it is disappointed that Budget 2023 has failed to provide any assistance to support trade for industries to expand their market access, as many are facing severe impact to their existing markets due to the Covid-19 pandemic and supply chain disruptions.

“There were also no specific allocations to support SMEs (small and medium enterprises) that have invested or [are] going to invest in ESG (environmental, social and governance) initiatives in their operations.

“In addition, we find that the allocation of RM100 million for the Domestic Investment Strategic Fund (DISF) is insufficient to support business recovery,” it added.

Nonetheless, the FMM noted that the Budget 2023 addressed and included initiatives and incentives for further investments in specific manufacturing sub-sectors, namely the electrical and electronics; medical devices; pharmaceutical; shipbuilding and ship repair; chemical and petrochemical; automotive, in particular, electric vehicles (EVs); and aerospace industries.

And it welcomed the five-year income tax exemption to support women returning to work after a career break, as well as hiring incentives for unemployed youths, technical and vocational education and training (TVET) graduates and vulnerable groups — initiatives introduced to address the current labour shortages faced by the industries.

It was also grateful to the government for continuing the mobility assistance under the Social Security Organisation (SOCSO), which it said will mobilise the workforce from rural areas, as well as from Sabah and Sarawak, to Peninsular Malaysia and vice versa.

"We commend the government for the RM6.7 billion allocation for TVET to support the TVET empowerment agenda. We hope this would also include the initiatives by the Government-Industry TVET Coordination Body (GITC), which has been established to drive the industry-led TVET agenda. The allocation of RM750 million to HRD Corp is lauded as it would further drive re-skilling of the workforce as well as the TVET skills training fund of RM180 million for Malaysian Skills Certification Programme and RM20 million for National Dual Training System to support the transformation towards high technology and high value added activities," it said.

In regard to the foreign worker multi-tier levy mechanism, the federation thanked the government for making a firm decision to implement the mechanism, as well as for channelling the additional levy contribution towards helping SMEs' automation activities to reduce the dependence on foreign workers.

"However, we had hoped that the government would have channelled the entire levy contribution towards a National Automation Fund and National TVET Apprenticeship Fund, as proposed under FMM's Budget 2023 wishlist as a two-pronged approach towards minimising dependence on foreign workers," it said.

Meanwhile, despite its qualms about the budget’s lack of specific allocation to support SMEs' ESG initiatives, the FMM noted that the RM1 billion allocation for the Low Carbon Transition Facility to help SMEs adopt low carbon practices, with the RM10 million matching grant to assist SMEs conduct carbon assessment, as a first step to kick-start SMEs' ESG journey.

It described the allocation and matching grant as a “very good move” by the government, adding it would be helpful for SMEs if the interest rate is less than 3%.

“Moving forward, more funding would be required in the ensuing years to help SMEs sustain and continue with their ESG journey,” it added.

Get our comprehensive coverage of Budget 2023 here.