Budget 2027 good, but MSMEs need support

KUCHING: Federal Budget 2027 provides benefits across various segments of society, but ensuring micro, small and medium enterprises (MSMEs) remain sustainable amid rising operating costs is crucial.

Sarawak business and community leader Datuk Sim Kiang Chiok described the Budget, presented by Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim, as a “good and broadly inclusive budget”.

“One could even call it an ‘election budget’ because almost everyone gets something,” he said in a statement today (Oct 10).

Sim said the Budget balanced immediate cost of living relief with longer term economic growth and social protection, but stressed that the measures must be implemented sustainably without placing excessive pressure on businesses.

He welcomed the increase in individual income tax relief from RM9,000 to RM12,000 and the one percentage point reduction in individual income tax rates, particularly for the M40 group.

“With these changes expected to provide up to RM1,600 in additional disposable income to approximately five million taxpayers, the measures will help middle income families cope with rising expenses, education costs, healthcare and household commitments,” he said.

Sim also welcomed an additional RM100 in Rahmah Basic Assistance (SARA) on two occasions, monthly SARA assistance of up to RM150 for Rahmah Cash Aid (STR) recipients, and the increase in the STR allocation to RM16 billion.

However, he stressed that “cash assistance should complement, rather than replace, efforts to reduce the underlying cost of living”.

On support for persons with disabilities (PwD), Sim welcomed the RM1.5 billion allocation benefiting more than 300,000 people and the increase in the Special Education Needs Allowance from RM150 to RM200 monthly for about 150,000 students.

He also welcomed increased assistance for bedridden PwD and chronic patients to RM600 monthly, as well as the RM1.3 billion allocation for elderly assistance benefiting about 200,000 recipients.

However, he raised concerns over the increase in the income threshold for the Allowance for Working Disabled Persons (EPOKU) from RM1,700 to RM2,000.

“I am concerned that some MSMEs may struggle to raise wages to meet the new threshold while maintaining their business viability,” he said, calling for a transition arrangement or targeted assistance for employers and workers.

On education, Sim welcomed the RM2,500 living allowance for Form Six students, saying it was “a fairer policy that recognises the needs of pre university students”.

“Education assistance should be viewed as an investment in human capital, not merely as expenditure,” he said.

He also welcomed up to RM20 billion in housing financing guarantees through Housing Credit Guarantee Corporation (SJKP) for 80,000 first time homebuyers, particularly self-employed individuals and gig workers.

The stamp duty exemptions for qualifying first time homebuyers would also help reduce upfront costs, he said.

Sim also welcomed the automatic registration of every citizen as an Employees Provident Fund (EPF) member upon turning 18, saying early retirement savings could encourage better financial habits among younger generations.

On MSMEs, he welcomed the reduction in tax rates to 14 per cent on the first RM150,000 of taxable income and 16 per cent on the next RM450,000.

He also described the exemption for MSMEs with annual sales below RM50 million from the new RM2,000 minimum wage requirement as “a practical measure” giving smaller businesses more time to adjust.

“Nevertheless, a key question remains: how can we raise wages sustainably without corresponding improvements in productivity?

“If wages rise faster than productivity, businesses may face higher operating costs, which could eventually lead to higher prices, reduced recruitment or fewer employment opportunities,” he said.

Sim urged the government to complement wage policies with productivity linked wage incentives, automation grants, digitalisation support, technical training and easier access to financing.

“The objective should be to help MSMEs become more productive, competitive and capable of paying better wages, rather than simply transferring higher costs to employers,” he said.

For the construction sector, Sim welcomed the reinstatement of the price adjustment clause covering increases in diesel and bitumen costs, describing it as a “much needed measure” for contractors undertaking government projects.

He urged the government to ensure the clause was implemented transparently, with clear eligibility criteria and timely assessment of claims.

On Malaysia Agreement 1963 (MA63), Sim welcomed the increase in the interim special grant for Sabah and Sarawak to RM1.5 billion.

“However, this should be regarded as progress rather than the end of the matter,” he said, calling for continued work towards a fair, transparent and sustainable formula under Article 112D of the Federal Constitution.

Overall, Sim said Budget 2027 contained “many positive measures” responding to the needs of different segments of society.

“My main concern is ensuring that these measures remain sustainable and that the private sector, particularly MSMEs, can continue to grow and create jobs,” he said.