NEWS: Key players dissatisfied with Budget 2009

PETALING JAYA: The Association of the Computer and Multimedia Industry of Malaysia (Pikom) is disappointed with next year’s budget allocation for the country’s information and communications technology (ICT) segment.

David Wong, its chairman, told In.Tech that the Government likely sees ICT as an area that is doing relatively well and does not need as much help as other sectors.

“This is true to a certain extent but there are areas (within the ICT segment) that need to be seriously addressed, such as promoting (Malaysia as a regional centre) for outsourcing,” he said.

Pikom had hoped for a double deduction of income tax for overseas companies that are outsourcing to Malaysian-operated businesses. This would have been an encouragement for the local businesses, Wong said.

Chipmaker Intel Malaysia shared some of Pikom’s disappointment. It said it had looked forward to more incentives to reduce infrastructure costs, including the removal of import duty and sales tax exemptions on broadband equipment and consumer-access devices.

Such a move, it said, would have helped accelerate broadband deployment across the nation. “The deployment of broadband beyond urban areas will drive greater PC penetration and narrow the digital divide,” said Ryaz Patel, country manager for sales and marketing at Intel Malaysia.

Good stuff

However, the industry players are satisfied with other parts of the budget.

Pikom likes the five-year tax exemption offered to venture capitalists that fund local startups. “This is good news for our startup companies and is a good carrot to attract venture capitalists,” said Wong.

It was proposed that venture capitalists investing at least 30% of the funds needed by a startup would be eligible for the tax exemption.

“Currently only 20% of venture capitalist funding (in the country) is provided by private funds. Most early-stage funding comes from government-linked organisations like the Multimedia Development Corporation (MDeC) and Cradle Fund Sdn Bhd,” he said.

“But whether the tax break alone will be good enough to attract the venture capitalists in question, remains to be seen. Seed funding is a risky business,” he said.

The Government has also proposed that the Accelerated Capital Allowance on expenses incurred on ICT equipment for companies, which is currently claimed over two years as a tax deduction, be accelerated to one year.

“This is good,” said Wong. “If for instance, you spend RM10mil on ICT equipment. You can now claim for all of it on the first year instead of RM5mil the first year and RM5mil the next.”

This move earned kudos from Intel Malaysia, too. “Technology must be made affordable and widely available to all sectors of the community to help accelerate the digital inclusion,” said Patel.

“With the reduced timeframe to claim for the Accelerated Capital Allowance, companies can refresh their IT assets consistently to keep up with technology trends.”

Software giant Microsoft Malaysia agreed. “This serves to encourage more companies to invest in the latest know-how, such as unified communications and mobility technologies, which would result in better productivity and operational efficiencies,” said Vijay Bala, its chief financial officer. “

This is a step forward for local businesses because technology is all about empowerment — tools to bring out the best ideas and innovations.”

More goodies

MDeC chief executive officer Datuk Badisham Ghazali lauded the human capital development programme that was announced under Budget 2009.

“The double tax deduction offered to employers who sponsor staff to pursue postgraduate studies in ICT will definitely encourage more talents to join the industry, which will help meet the growing demand for knowledge workers by MSC Malaysia-status companies,” he said.

MDeC is caretaker of the MSC Malaysia initiative which is aimed at building up the country’s knowledge economy.

Intel Malaysia also supports the Government’s decision to allocate RM14.1bil under Budget 2009 to improve the quality of education at institutes of higher learning.

“We believe this will encourage the development of quality human capital and accelerate the cultivation of 21st century learning skills among students as they prepare themselves for the knowledge economy,” said Atul Bhargava, Intel Malaysia managing director.

Prime Minister Datuk Seri Abdullah Ahmad Badawi announced the details of Budget 2009 on Friday.