Strategic investments initiatives reinforced the government’s policies and strategic plans for economic well-being that will be shared across the board.
These include a RM25bil allocation to increase direct domestic investment under GEAR-uP through government-linked investment companies, RM6bil Dana Pemacu under the Retirement Fund Inc (KWAP) to strengthen the local private market; RM1bil allocated by Khazanah to support the local semiconductor industry and a RM200mil fund to encourage the innovation and growth of MSMEs and mid–tier companies.
For SMEs, there is RM40bil in loans and financing guarantees, which includes up to RM20bil in guaranteed financing through Syarikat Jaminan Pembiayaan Perniagaan, RM6.4bil financing fund under Bank Pembangunan and RM3.8bil loan fund from BNM for digitalisation, up to RM3.2bil in micro loan facilities through Tekun Nasional, BSN and others, RM780mil business financing allocated to women and youth, and the Indian community, and RM100mil financing fund allocated under the Malaysia Cooperative Societies Commission (MCSC).
To support startup companies, a RM300mil fund is allocated to support venture capital fund managers in investing in these companies under Khazanah’s National Fund-of-Funds for 2025 and RM200mil to support local startup activities under KWAP’s Dana Perintis for 2025.
This integrated approach of policy development and partnership with the private sector is most welcomed as the government is more abled to address the issue of access to funding and shortfall of resources by the respective economic players through an ecosystem wide solution for the benefit of society and the nation.
However, the government would need to accelerate the tabling of the Climate Change Act and Government Procurement Act to improve the implementation efficiency and effectiveness of various projects and initiatives.
In Malaysia, women’s labour force participation rates remained modest and low, notwithstanding Malaysia’s rapid post-independence industrialisation process and advancements in the educational sector.
Malaysian women’s labour force participation rate was at 55.5% compared to 80.9% for men in 2021 (DOSM, 2022).
For a more inclusive and diversity workforce, the government urged compliance of Bursa Top 100 companies to meet the 30% target for female board participation by 2027.
Various initiatives and tax deductions for employers to support women in workforce were also proposed.
To boost women’s economic participation, additional tax deductions up to 50% will be provided for: wages paid over a period of 12 months for hiring women returning to work; up to 12 months of paid caregiver leave; and expenses incurred for capacity development and software acquisition in implementing flexible working arrangements.
However, these initiatives may fall short of achieving their targets as the mandatory female board participation only applies to public-listed companies, and currently are not enforced across corporate Malaysia, unlike in more advanced countries like Norway, which mandates a 40% representation of women on corporate boards.
Norway has long had a progressive view of addressing the gender gap and is known for its generous family leave policies for both women and men.
It is ranked second out of 136 countries in terms of opportunities for women, according to the 2014 World Economic Forum Global Gender Gap Report.
However, imposing a compliance target may not be effective in the long run. A joint study by the University of Texas and the Norwegian School of Economics, and the University of California, Los Angeles found that female directors have benefited from the law, but those improvements haven’t translated into higher average earnings for women broadly, or a markedly increased likelihood of a woman joining the C-suite.
Clearly more needs to be done by the government in policy development to boost women’s participation at the senior management levels.
Tax aspects
Budget 2025 proposes an extension of tax deductions for sponsorships of smart AI-driven reverse vending machines (RVMs). This initiative aligns with Malaysia’s Plastics Sustainability Roadmap 2021–2030, which aims to increase the recycling rate of plastics to 40% by 2025.
The smart AI-driven RVM promotes recycling and supports the circular economy by providing an effective collection system for plastic waste. Currently, tax deductions are available for contributions to community projects, including the sponsorship of RVM, for applications received by the Finance Ministry from April 1, 2023 to Dec 31, 2024.
The proposal suggests extending this tax deduction for an additional two years to encourage recycling practices and enhance the collected-for-recycling rate.
The 12th Malaysia Plan proposes to implement the Extended Producer Responsibility (EPR) for e-waste, packaging materials and single-use plastics.
We look forward to seeing a holistic review of the tax framework governing the EPR to support this initiative, such as considering a special tax deduction on EPR contribution and tax exemption, or enhanced allowances for qualifying waste management activities.
The plan to introduce carbon tax on iron, steel and the energy industries by 2026 aligns well with the rationalisation of blanket subsidy for RON95 grade petrol in mid-2025.
This not only promotes environmental sustainability but also encourages more responsible consumption of fossil fuels.
This is particularly timely in light of the European Union’s implementation of the Carbon Border Adjustment Mechanism (CBAM) in January 2026.
The carbon tax will help prevent tax leakage by ensuring that the taxes Malaysian exporters would owe under CBAM are collected by the Malaysian government through the introduction of this carbon tax.
The revenue generated from the carbon tax, earmarked for funding research and green technology programmes, is a welcome proposal that supports Malaysia’s ambition to achieve net-zero emissions.
However, it would be beneficial to allocate a portion of these funds to assist SMEs with limited financial resources in making the transition to green investments.
New taxes are never popular. A robust framework and clear guidelines and policies must be crafted to ensure successful roll out of the carbon tax.
Karina Mohamad Nor is a director of sustainability and emerging assurance at Deloitte Malaysia, and Sim Kwang Gek is the country tax leader at Deloitte Malaysia.
