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Tuesday, October 8, 2013

Govt may take staff housing loans off balance sheet: Maybank IB


PETALING JAYA (Oct 8, 2013): The federal government may be looking at transferring some RM42 billion in staff housing loans from its balance sheet to government-owned development financial institutions in a bid to lower the government's debt to gross domestic product (GDP) ratio, said Maybank Investment Bank Research (Maybank IB Research).

The research house said arithmetically the move will immediately lower total federal government debt by around 4% to 4.5% from 51.8% of GDP as of June 30, 2013.

"We are hearing that this (staff housing loan) portion of the federal government debt may be taken off its balance sheet via a transfer to government-owned development financial institutions such as Bank Rakyat, Bank Simpanan Nasional, Agro Bank, Bank Pembangunan, which will manage and administer the existing stock and future stream of civil service home loans," Maybank IB Research said in its report on its expectations of Budget 2014.

It said such a move will also relieve the federal government of the need to allocate annual budget for its employees' housing loans.

"In a repeat of Budget 2013, we expect further reviews in personal income tax rates, rebates and/or reliefs for the middle-income group (household income of RM3,000 to RM5,000 per month)," it said of other possible measures to be introduced in Budget 2014.

Maybank IB Research, however, does not expect a cut in 25% corporate income tax in the upcoming budget, although the goods and services tax is likely to be announced for implementation in 2015.

On the broader economy, Maybank IB Research expects the government to reintroduce the subsidy rational programme (SRP) started by the Performance Management and Development Unit (Pemandu) in 2010 and suspended at the last review in May-June 2011.

"With the 13th general election (GE) out of the way, we expect the government to reinstate SRP, with some tweaks to the details, namely on the quantum of subsidy adjustments and the timeframe for
market-determined pricing, where we expect the government to adopt gradual – as opposed to big-bang – implementation," it said.

In line with the re-introduction of SRP, the research house also opines that the cash handout programme (BR1M) started by the federal government before the GE is expected to continue as a means to alleviate the impact of the SRP.

For the property sector, Maybank IB Research opines there may be a third round of adjustment in real property gains tax (RPGT) in view of the ongoing issue of rising property prices and its impact on affordability.

"We are speculating that instead of another across-the-board 5 percentage points increase in RPGT like in the last two budgets, the 15% rate may be extended to include properties disposed in the third year after purchases," it said.

Maybank IB Research added that this "tweak" in RPGT may also be accompanied by additional measures like higher sellers' stamp duty and a raise in the minimum value of property that can be purchased by foreigners, which is currently at above RM500,000.

The minimum value of property purchased by foreigners was last reviewed in 2009, when it was brought up from more than RM250,000.

The research house also opines that there may be announcements to reschedule or defer some major infrastructure and investment projects, especially those with low economic multiplier effects and high import contents, with a view to ensure Malaysia does not fall into a "twin deficit" situation given the narrowing current account surplus amid persistent fiscal deficit.

"Our eyes are also on the various government land development projects. We reckon the developments of Sungai Buloh Rubber Research Institute (RRI) land and the Warisan Merdeka project will go ahead, although these projects and the Tun Tazak Exchange (TRX) may be stretched over a longer period or scaled down in terms of implementation and completion," it said.

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