Summary of Malaysia's budget 2016

 Prime Minister Najib Razak had announced Malaysia's 2016 budget on Friday,23 October 2015. Following are some highlights of Najib's ongoing speech to parliament.

Five main strategies budget 2016
1) Strengthening the resilience of the national economy
2) Improving productivity, innovation and green technology
3) To prepare the human capital
4) Empowering Bumiputera agenda
5) Easing the cost of living

Budget allocation

• 2016 budget allocates total RM267.2 billion, an increase from a revised allocation of 260.7 billion for 2015. The initial allocation for 2015 was 273.9 billion.
• For 2016, federal government revenue collection is projected at RM225.7 billion, up RM3.2 billion from 2015.

Taxes

• Income tax increased from 25 per cent to 26 per cent for people earning between RM600,000 and RM1 million. Increased to 28 per cent for those earning above RM1 million. Some tax relief measures to help middle income wage earners.
• Goods and services tax to increase government revenue by RM39 billion, versus RM27 billion in the first eight months of 2015. Some basic goods to be zero-rated, including over-the-counter drugs, baby milk, nuts based food, noodles.

Expenditure

• RM41.3 billion allocated to improve education.
• Defence Ministry allocated RM17.1 billion.
• Allocation of RM30.1 billion for development projects, RM5.2 billion for security, social development gets RM13.1 billion.
• Government allocates RM1.2 billion to the tourism industry.
• Majlis Amanah Rakyat, an agency to facilitate the development of ethnic Malays and other indigenous Malaysians, allocated RM3.7 billion.

Subsidies and handouts

• Spending allocation for Bantuan Rakyat 1Malaysia (BR1M), a programme providing cash assistance for low income households, will be raised to RM5.9 billion in 2016, up from an estimated RM4.9 billion in 2015.

Development

• Affordable housing projects allocated RM1.6 billion, to be spent building 175,000 houses.
• RM900 million allocated to resolve Kuala Lumpur traffic congestion.
• Telecommunications infrastructure allocated RM1.2 billion.
• RM1.4 billion earmarked for development of rural roads nationwide. An-Borneo highway to be toll free.
• Government to improve improve infrastructure in rural areas, including building houses and water supply.
• RM5.3 billion allocated to modernize agricultural sector.
• RM515 million allocated to improve electricity supply in Sabah state.

Oil project

• Pengerang oil project to receive RM18 billion in 2016.

Minimum wage

• Increased from RM900 per month to RM1,000 in peninsular Malaysia.

Macroeconomic highlights

• Current account surplus in 2016 to be down more than half to RM11.3 billion from RM23.4 billion this year and RM47.3 billion in 2014.
• Economic growth forecasts at 4.0-5.0 per cent for 2016, compared with 4.5-5.0 per cent this year.
• Fiscal deficit for 2016 reduced to 3.1 per cent of gross domestic product, down from 3.2 per cent in 2015 and 3.4 per cent last year.
• Exports forecast to rebound 1.4 per cent in 2016 after a 0.7 per cent fall this year.
• Inflation seen at 2.0-3.0 per cent in 2016, against 2.0-2.5 per cent this year.
• Government debt limit to remain at 55 per cent of GDP in 2016, forecasting a ratio of 54.0 per cent this year and slightly up from 52.7 per cent in 2014.
• Oil and gas related revenues seen at 14.1 per cent of total revenue in 2016, down from 19.7 per cent in 2015.
• Goods and Services Tax (GST) expected to raise 39 billion next year, against RM27 billion collected in the first eight months of 2015.
• Subsidy allocations seen falling slightly to RM26.1 billion from RM26.2 billion this year. 

TOLL HIKE

                Assalamualaikum guys. Today I would like to write about toll rates issue. For your information, several major highways across the country had raise their toll rates starting October 15 .It seen to be increase in price about of 17% to 80% between 20 cent and RM1.

Unlike previous years, the announcement of toll rate increases made by certain concessions through a separate statement, not by the government. General Manager (Operations) of the company Adnan Ariffin said the new rates involving vehicles as a Class 1 until Class 4, while for the Class 5 that is bus no change.

Adnan said in a statement the new toll rates for the both Toll Plaza Perai and Bagan Ajam is RM1.50 for Class 1, RM3 (Class 2), RM4.50 (Class 3) and 80 sen (Class 4).

"The toll rate for Class 5 at Toll Plaza Perai and Bagan Ajam maintained respectively RM1.30 and RM1.20," he said.

For Toll Plaza Sungai Nyior, RM1.20 for Class 1, RM2.40 (Class 2), RM3.60 (Class 3), 60 sen (Class 4) and Class 5 remains 90 cents.

Class 1 is for private cars, Class 2 for vehicles with two axles and five or six wheels, Class 3 is vehicles with three axles and six wheels and more, Class 4 is taxi and Class 5 for the bus.

I think that's all for today and I hope you can get benefit from my blog. I'm very sorry if the information that I give have any mistake. Insyaallah after that, I will try to improve my skill in writing. I pray all of us are always in mercy of Allah and spared us from any disaster. Thank you.

FACTOR THAT INFLUENCE OIL PRICE 2015

             Malaysian government had decide to stop subsidizing oil by introduce managed float system started from 1 December 2014. That is because malaysian government's decision had been influenced by the trend in world crude oil price. UK Energy Regulation Commission and the International Energy Agency predicts a decline in crude oil price trend will be continues.There are many factors that are effect the oil price and we are going to discuss some of them:

1) China’s Economy. China is the second largest consumer of oil in the world and surpassed the United States as the largest importer of liquid fuels in late 2013. More importantly for oil prices is how much China’s consumption will increase in the coming years. According to the EIA, China is expected burn through 3 million more barrels per day in 2020 compared to 2012, accounting for about one-quarter of global demand growth over that time frame. Although there is much uncertainty, China just wrapped up a disappointing fourth quarter, capping off its slowest annual growth in over a quarter century. It is not at all obvious that China will be able to halt its sliding growth rate, but the trajectory of China’s economy will significantly impact oil prices in 2015.

2. American shale. By the end of 2014, the U.S. was producing more than 9 million barrels of oil per day, an 80 percent increase from 2007. That output went a long way to creating a glut of oil, which helped send oil prices to the dumps in 2014. Having collectively shot themselves in the foot, the big question is how affected U.S. drillers will be by sub-$60 WTI. Rig counts continue to fall, spending is being slashed, but output has so far been stable. Whether the industry can maintain output given today’s prices or production begins to fall will have an enormous impact on international supplies, and as a result, prices.

3. Supply and Demand. Global oil inventories balance supply and demand. If production exceeds demand, excess supplies can be stored. When consumption exceeds demand, inventories can be tapped to meet the incremental demand, and the relationship between oil prices and oil inventories allows for corrections in either direction. Non-OPEC suppliers produce 60% of the world’s oil, and although they are 50% larger than OPEC, they don’t have sufficient reserves to be able to control price and can only respond to market fluctuations.  OPEC, however can directly influence market pricing, especially when the supply of oil produced by non-OPEC nations decreases.

4. OPEC’s Next Move. OPEC, a consortium of 13 countries: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela, is the single largest entity impacting the world’s oil supplies . OPEC is responsible for 40% of the world’s oil production, and sets policies among member countries to meet global consumption. OPEC can affect the price of crude oil, by increasing or reducing production among member countries.

5. Geopolitical flash points. In the not too distant past, a small supply disruption would send oil prices skyward. If an oil-rich area becomes politically unstable, supplier markets react by bidding up the price of oil so that supplies are still available to the highest bidder.  In this instance, only the perception of a shortage in supply can increase prices, even while production levels remains constant. The history has demonstrated time and again that geopolitical crises are some of the most powerful short-term movers of oil prices.

RINGGIT VALUE AND INFLATION RATE

          This topic was become hot when our currency fell to its lowest level since the Asian economic crisis in September 1998, on the exchange rate 1 USD  is equivalent RM 4.40  today . Ringgit remained weak compared to the US dollar and Singapore dollar was contributed to the surge in prices and the cost of living in Malaysia. Money exchange between the two countries will depend on the demand and supply that currency.

           The effect of the weakening ringgit causes a decrease in the purchasing power of individuals. That means every ringgit of revenue will be able to buy some imported goods and services than ever before. The increase in the cost of living which occurred was also not consistent with the slow rate of wage increases. The inflation rate of a country directly affects the demand for the national currency. If country A has a high inflation rate, it means the purchasing power of consumers, its currency weakened against other countries that have inflation rates that are much lower.

          There are some factor that influence the Ringgit value. Nowadays, there are a number of political crisis in the country are said to be the main cause of the fall of the RM; Among them is a controversy involving a company wholly owned Malaysian Ministry of Finance of 1 Malaysia Development Berhad (1MDB) and a cabinet reshuffle involving the sudden dismissal of Deputy Prime Minister of Malaysia, Tan Sri Muhyiddin Yassin, Attorney-General Tan Sri Abdul Gani, along with several other ministers criticized the government Datuk Seri Najib Razak.
         
           Besides that, ringgit value falls because of falling in commodity prices. Commodity prices like oil, palm oil and rubber fell sharply and its effect Malaysian as a producer such commodities. Furthermore, China had sent down the currency Yuan. The government of China lowered the currency Yuan and cause a collapse of the currency other ASEAN countries.

            In conclusion, the backbone of the economy is fluctuating society, nation and state. I am confident that this issue can be settle down by the government.