Theme: Implementing the National Mission Towards Achieving the National Vision
Main thrust: Private sector to spearhead economic development, generate new sources of growth in technology and knowledge-intensive sectors
Total allocation: RM159.4 billion
Operating expenditure: RM112.9 billion, up 11.2% from 2006
Development expenditure: RM46.5 billion, up 31% from 2006
Development expenditure allocation: RM20.8 billion for economic sector, RM14.2 billion for social sector, RM6.8 billion for security, RM2.7 billion for general administration, RM2 billion for contingency reserves
Government revenue in 2007: RM134.8 billion, up 11.8%, of which RM53.7 billion (about 40%) from petroleum-related revenue

Corporate and other taxes and tax-related incentives

• Corporate tax to be cut by two percentage points in two stages: To 27% in 2007, and 26% in 2008
• Venture capital companies that invest at least 50% of investment funds in seed capital eligible for income tax exemption for 10 years
• Basis of determining penalty on withholding tax amended from total payment to that of withholding tax not paid
• Zakat paid by cooperatives and trust bodies up to 2.5% of aggregate income be given tax deduction
• Eligibility period to claim refund of sales and service tax related to bad debts cut from 12 months to six months

Private Financing Initiatives

• Establishment of PFI Facilitation Fund of RM5 billion

Agriculture

• RM3.6 billion for agriculture sector: increase Fund for Food by RM300 million to RM1.9 billion; establishment of Non-Food Agriculture Credit Scheme with initial allocation of RM20 million
• Khazanah to establish agriculture fund of RM200 million to provide venture capital to finance new technology-intensive agriculture projects
• BNM to establish RM200 million agriculture fund to invest in integrated agriculture and livestock projects Biotechnology
• RM210 million allocated for development of biotech sector
• Incentives:
  a. Bionexus companies given tax exemption for 10 years, after that taxed at concessionary rate of 20% for another 10 years;
  b. Tax deduction for individuals and companies investing in bionexus companies;
  c. Stamp duty and real property gains tax exemption for bionexus companies undertaking mergers and acquisitions of a biotech company within five years

Halal food industry

• Establishment of Halal Industry Development Corp with launching grant of RM25 million
• RM50 million to start up halal food parks
• RM20 million allocation to SME Bank to finance entrepreneurs to develop halal products

ICT

• RM154 million to MDeC to boost ICT activities
• Establishment of Content Industry Development Fund with initial RM25 million to finance ICT applications
• RM162 million allocation for Mimos
• To promote PC ownership, eligibility period for incentive to purchase PC, given once every five years, is shortened to every three years. RM500 tax rebate to be replaced by tax relief of RM3,000.

R&D

• RM194 million allocation for Science Fund for basic and applied science research
• RM354 million allocation for Techno Fund for funding commercialisation of research projects

Islamic financial services

• Income tax exemption of 10 years for all Islamic banking and takaful entities conducting business in foreign currencies
• Additional 20% stamp duty exemption on instruments relating to Islamic financing for period of three years
• Income tax exemption of 10 years for local and foreign fund managers managing Islamic funds for foreign investors
• Personal tax relief on study fees up to RM5,000 per year for Islamic financial studies
• Tax deduction on expenses incurred for establishment of Islamic stock-broking firms
• Tax deduction on expenses incurred in issuing Islamic products extended from 2008 to 2010

Capital markets

• Dividends received by individual foreign and local investors from listed REITs taxed at 15%; foreign institutions — 20%, from 28% before, for five years
• Undistributed income from REITs exempted from tax provided they distribute at least 90% of their income

Promoting investments abroad

• Paid-up capital of EXIM Bank increased to RM2.7 billion from RM2 billion to enable it to lend more to companies going overseas
• Establishment of Overseas Investment Fund with RM100 million to provide soft loans to local companies to finance start-up costs overseas
• Malaysian-owned banks given five years' tax exemption on income received from new branches abroad

Tourism

• Allocation of RM149 million for Visit Malaysia Year 2007
• Income tax for tour operators providing packages for at least 500 inbound tourists per year or 1,200 local tourists extended for another five years until 2011

Construction

• RM27.5 billion to roll out construction of roads and other infrastructure facilities
• PFI projects valued at RM4 billion to be implemented in 2007
• RM1 billion in contracts for maintenance of infrastructure and public amenities to be awarded to small contractors
• Expenses incurred by property developers within defects liability or warranty period be allowed as deductions from the same project, losses incurred in the last year of a project to be allowed as deduction from profits received from previous years of that project

Education

• Biggest allocation of RM33.4 billion for operational and development expenditure, accounting for 21% of 2007 budget:
  a. RM6.7 billion for primary education
  b. RM6.2 billion for secondary education
  c. RM10.4 billion for higher education
  d. RM10.1 billion for training programmes

Higher education

• Establishment of two new universities in Terengganu and Kelantan
• All students with 10 A1s in SPM or equivalent from families with income of RM1,500 and below to be given scholarships for tertiary education

Skills training and graduate employability

• Utilisation of Human Resources Development Fund expanded to include internships and training programmes for graduates
• Tax relief on purchase of books increased from RM700 to RM1,000 a year
• Double deduction on allowance paid to participants of the Capital Market Training Scheme for Graduates extended to all companies participating in scheme under supervision of Securities Commission

Regional development

• Northern Economic Corridor
  a. Sime Darby to lead implementation of several new projects including creation of growth cluster for commercialised agriculture, high-tech industries/tourism.
  b. Perlis to be declared a promoted area where designated projects will enjoy higher income tax exemptions
• East Coast Corridor
  a. Development to be spearheaded by Petronas, particularly downstream industries based on petrochemicals, handicrafts and tourism
• Southern Johor Economic Region
  a. Khazanah to spearhead development which has been allocated RM2.3 billion
  b. Strategic investment fund of RM200 million to be set up

Corporate Social Responsibility

• Public listed companies required to disclose CSR activities
• Ceiling for tax deduction on contributions by private sector to charitable organisations increased from 5% to 7% of aggregate income. Tax deduction extended to sports activities

Healthcare

• RM10 billion allocation to improve healthcare services, facilities
• Specific excise duty on cigarettes increased by one sen a stick; for liquor with 40% alcohol content, duty increased by RM5 a litre

Environment

• Bank Pembangunan to establish Bio-Diesel Fund of RM500 million

Public safety

• RM4.9 billion to enhance efficiency of Polis Di Raja Malaysia operations

Arts, culture and heritage

• RM685 million allocated for development and management of arts, promotion of culture and heritage activities
• Establishment of RM100 million Creative Industry Development Fund

Civil servants

• Civil service fixed allowance for supporting staff increased by RM30 to RM50 a month, effective Jan 1, 2007
• Cost of living allowance extended to civil servants not residing in government quarters, at 50% of allowance to those not residing in government quarters, effective Sept 1, 2006
• Housing loan entitlement of civil servants raised by 20%, effective immediately
• Civil servants earning up to RM750 to get two months' bonus
• Those earning more than RM750 to get one-month bonus but subject to minimum payment of RM1,500

Pensioners

• One-off payment to pensioners: RM400 for those receiving less than RM750 a month, RM200 for those receiving more than RM750 a month