Scrapping of 30% bumiputra quota for 27 sub-sectors

With the recent announcement by Prime Minister (and also Finance Minister) Najib Razak, there will be no more 30% bumiputra equity requirement for 27 sub-sectors in the service industry with immediate effect, which covers the health and social services, tourism services, transport services, business services and computer and related services.

The 27 liberalized sub-sectors are:

Computer and related services

• Consultancy services related to installation of computer hardware
• Software implementation services – systems and software consulting services; systems analysis services; systems design services; programming services and systems maintenance services
• Data processing services – input preparation servies; data processing and tabulation services; time sharing servies and other data processing services
• Database services
• Maintenance and repair services of computers
• Other services – data preparation services; training services; data recovery services; and development of creative content
  

Health and social services

• All veterinary services
• Welfare services delivered through residential institutions to old person and the handicapped
• Welfare services delivered through residential institutions to children
• Child day-care services including day-care services for the handicapped
• Vocational rehabilitation services for the handicapped
  

Tourism services

• Theme park
• Convention and exhibition centre
• Travel agencies and tour operators services (for inbound travel only)
• Hotel and restaurant services (for 4 and 5 star hotels only)
• Food serving services (for 4 and 5 star hotels only)
• Beverage serving services for consumption on the services (for 4 and 5 star hotels only)
  

Transport services

• Class C freight transportation (Private carrier license – to transport own goods)

Sporting and other recreational services

• Sporting services (promotion and organization services)

Business services

• Regional distribution centre
• International procurement centre
• Technical testing and analysis services – composition and purity testing and analysis services, testing and analysis services of physical properties, testing and analysis services of integrated mechanical and electrical systems and technical inspection services
• Management consulting services – general, financial (excluding business tax), marketing, human resources production and public relations services
  

Rental/Leasing services without operators

• Rental/leasing services of ships that excludes cabotage and offshore trades
• Rental of cargo vessels without crew (Bareboat Charter) for international shipping
  

Supporting and Auxiliary Transport Services

• Maritime agency services
• Vessel salvage and refloating services
  

This policy of 30% bumiputra equity requirement for companies listed publicly in Kuala Lumpur Stock Exchange (KLSE) and also for foreign companies that wish to operate in Malaysia has long be criticized by both local and foreign investors, and deemed as the major hindrance for them to invest and run business in Malaysia. It was also one of the major cause for certain existing investors to exit their business from Malaysia and gone to other places like Singapore, Vietnam, China, Thailand, etc.

Nevertheless, with effect from 17 June 2003, the 30% bumiputra equity requirement has been no longer applicable to all sub-sectors of manufacturing sector for foreign investors. It is good that another 27 service sub-sectors are free now.

Over the last decade, Malaysia has lost too much opportunities to neighbouring countries due to certain protective policies. This has been a barrier to the performance of KLSE as well as the economic growth of the country. I believe the bumiputra should have good wisdom to reason that instead of insisting on "guaranteed" 30% of a small cake, why not invite more investors to come in and make the cake grow bigger and bigger by releasing the restrictions on them? They might need to work harder to obtain a "non-guaranteed" 30%, but what you prefer? A "guaranteed" 30% of 100 or a "non-guaranteed" chance of 30% of 1000? Even in the worse case scenario, you only managed to get 10% of that 1000, it is still much much more better than the insisted 30% in the 100, isn't it?

Therefore, I view this move as a win-win-win situation, for the bumiputra, non-bumiputra, as well as the foreign investors. It would be better if the 30% requirement be totally scrapped for all sectors to bring back live to the KLSE as well as the economy activities.

IBM the loser in Oracle-Sun deal

Recently, IBM attempts to buy over Sun Microsystems for US$7 billion end up with nothing. However, this move might have catalysed Oracle to buy over Sun with a slightly higher price of US$7.4 billion or US$9.50 per share, which just materialized yesterday (20 April 2009) and becomes today's big news.

With this acquisition, Oracle is now extended its domains in IT field from a leading database, middleware and business applications player, to include operating system (Solaris), office suite (OpenOffice.org), application platform (Java), virtualization (VirtualBox), thin clients (Sun Ray), servers, processors & chips (SPARC), storage solutions, accessories, etc.

"The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems," said Oracle CEO Larry Ellison. "Oracle will be the ONLY company that can engineer an integrated system - applications to disk - where all the pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up."

Now, Oracle has the well diversified software and hardware capabilities covering almost every angle in the system integration aspect, to rival IBM business as IT giant. IBM is not only a loser in Sun acquisition, but also lost its competitive advantage with the emergence of another full-fledged giant competitor in the IT industry.

Meanwhile, by gaining the control to MySQL, Oracle can also dominate the database world with its enterprise-class Oracle DBMS popular for large scale systems, and MySQL popular for web applications and comparatively smaller scale systems. This will no doubt bringing direct impact to competitors such as Microsoft SQL, Sybase, etc. Again, IBM is a loser as its DB2 will face more fierceful competition.

The world's IT industry has no doubt somewhat shakened by this Oracle-Sun deal. Will there be more mergers and acquisitions, or perhaps alliances formation? Let's wait and see...

Make sure your tax exempted allowances are filed correctly in EA Form

In the latest revised EA Form for tax assessment year 2008 (Borang C.P.8A-Pin.2008), there are 2 columns for filing your allowances / perquisites / gifts / benefits provided to you by your employer.

Column to file taxable allowances / perquisites / gifts / benefits:
Item B.1 - Tip kasar, perkuisit, penerimaan sagu hati atau elaun-elaun lain.

Column to file tax exempted allowances / perquisites / gifts / benefits:
Item G - Jumlah elaun / perkuisit / pemberian / manfaat yang dikecualikan cukai.

Among the tax exempt items (not applicable to owner or executive director of the company) are:

• Perquisite (whether in money or otherwise) provided to the employee pursuant to his employment in respect of: past achievement award; service excellence award, innovation award or productivity award; or long service award provided that the employee has exercised an employment for more than 10 years with the same employer (up to RM2000 per annum).
  
• Gift of new personal computer and monthly broadband subscription fee (registered in the name of the employer) (in year 2008-2010)
• Petrol card, petrol allowance or travel allowance between the home and work place (in year 2008-2010, up to RM2400 per annum).
• Petrol card, petrol allowance or travel allowance and toll card for official duties (up to RM6000 per annum).
• Allowance or fees for parking
• Meal allowance
• Allowance or subsidies for childcare in respect of children (up to RM2400 per annum).
• Telephone, mobile phone, pager and Personal Data Assistant (PDA).
• Bills for telephone, mobile phone, pager and PDA registered in the name of the employee or employer.
• Employers’ own goods provided free of charge or at discounted value (up to RM1000 per annum).
• Employers’ own services provided free or at a discount provided such benefits are not transferable.
• Medical benefits exempted from tax are extended to include maternity expenses and traditional medicines such as ayurvedic and acupuncture.
• Interest subsidies for loans up to RM300,000 in respect of housing, motor vehicle and education loans.

Make sure your HR filed your tax exempted items in the correct place (item G) in your EA Form 2008. If they are filed under item B.1, you might end up paying extra tax which suppose can be exempted.

For more detail, please refer to the Explanatory notes to Borang BE [Malay version] [English version].

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