Government urged to help SMEs with ESG commitments

The Malaysian government should establish a RM2 billion (£34.3 billion) environment, social and governance (ESG) fund to help small and medium enterprises (SMEs) fulfil their ESG commitments.

The call came from the National Chamber of Commerce and Industry of Malaysia (NCCIM), whose president Soh Thian Lai is urging the government to include the initiative in the upcoming Budget 2024. He said Malaysia needed to keep in step with the increasing global emphasis on ESG practices.

“Among our key suggestions is to centralise the national ESG strategy under a primary ministry; introduce an ESG assessment tool to guide SMEs in evaluating their ESG practices; and prioritise companies with strong ESG adherence for government contracts and provide financial support for eco-friendly initiatives,” he said in a statement.

He said that the NCCIM’s proposed measures would bolster SMEs’ ability to compete in the global economy, boosting the overall economy. Lai added that despite the huge role SMEs in the Malaysian economy, the sector had low engagement with key trade agreements like the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

“Our recommendations include enhanced collaborations with industry associations, development of a real-time tariff finder for micro, small and medium enterprises and the establishment of a central agency to address non-tariff barriers,” he said.

Addressing wage disparities, he said NCCIM proposes a dedicated fund of RM200 million for the targeted implementation of the Progressive Wage Model across sectors that require urgent wage enhancements.

“This not only ensures that industries are supported as they make the transition but also guarantees that employees are compensated fairly for their contributions,” he said.

He added that an allocation of RM150 million should be ring-fenced to facilitate skills development and vocational training initiatives.

On boosting the property sector, Soh said an allocation of RM150 million for equalising stamp duty exemptions across different property price bands should be considered to ensure a more balanced property market.

“An additional RM100 million is recommended to refine and promote the Malaysia My Second Home Programme, with the aim to attract more international residents,” he added.

Economists advise government treads carefully with GST re-introduction

The much-mooted reintroduction of a goods and services tax (GST) will need to be carefully considered to ensure the Malaysian people gain full benefit from the tax system, according to leading economists.

Dr Baharom Abdul Hamid, of the Centre of Excellence in Islamic Finance at INCEIF University, said that because the GST is a consumption-based tax the government needed to be very careful in identifying the goods and services that would be taxed.

“In most countries, the moment they introduce the consumption-based tax, they will periodically reduce the income-based tax but that did not happen in Malaysia previously,” he said on a Bernama TV programme on the 12th Malaysia Plan (12MP) mid-term review.

“While we want an additional tax via GST or via consumption base, we maintain the income progressive based tax so the people were not happy.”

Economist Dr Barjoyai Bardai that the GST had some flaws, as previously experienced by Malaysia during its four years of implementation.

“We realise that the main problem with the GST is the apparent burden which psychologically affects the consumer and we know that economics is a sign of behaviour.

“If the people are not happy about the tax system then they are not happy about the whole economy and the nation,” he added.

Minister of Economy Rafizi Ramli said recently that the government was open to reintroducing the GST as one of its strategies to widen the revenue base to achieve fiscal sustainability.

The Malaysian government abolished the Goods and Services Tax effective from 1 June 2018.