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Last Updated: Sep 25th, 2006 - 11:36:04 |
BY SHILING WOON AND LEONG HUNG YEE
MORE efforts to promote the agricultural sector can be expected in Budget 2006 as the Government is reorganising the sector to help rural folk and reduce the rising bill of imported food.
The Government had allocated RM1.5bil for agricultural projects in Budget 2005, and more money may be coming in for this sector, as the nation's imported food bill is expected to swell to RM21.9bil this year.
The bulk of the imported food is from the United States, Australia, New Zealand, China, Thailand and Indonesia.
RAM Consultancy Services managing director Dr Yeah Kim Leng hopes the Government will increase incentives for agriculture to boost the local food industry and modernise the sector.
“The course of action is important to ensure that food prices remain stable for the lower income group. It can also reduce the food import bill,” said Yeah.
Malaysia has been recognised as an efficient and major global producer of several agricultural commodities such as palm oil, rubber, cocoa and pepper.
However, the potential for food production has yet to be fully exploited, considering the high food import bill.
Tax incentives given by the Government to the industry are expected to attract big players.
Yeah said raising the level of taxable income could act as an incentive to attract more small- and medium-sized entrepreneurs to enter the food-related business.
Direct incentives like research grants will also be effective for companies to enhance their food production.
Besides research grants, Yeah hopes there will be more funds for research and development, and biotechnology for food development.
In terms of tax incentives, the agricultural and food sectors received the most perks under the 2005 Budget.
Agriculture is also one of the two sectors that enjoy group relief, which allows companies to offset their losses from such activities against their overall income.
While the sector enjoyed the lion's share of incentives previously, many players in the agricultural and food segments are expecting to receive more in the coming budget. Yeah expects reinvestment allowance to continue in the 2006 Budget, as it is an effective instrument to boost the food product and processing sectors.
Industry players are also expecting more “goodies” this year, but are conservative in their expectations of incentives from the coming budget.
An executive in the poultry business anticipates there will not be many changes.
“We are not expecting a big ang pow. However, the reinvestment allowance from switching to the more environment-friendly closed-house system from the open system had benefited our business,” he said, adding that more tax incentives could be given for agricultural mechanisation, automation and other labour-saving expenditure.
Besides tax incentives for the agricultural sector, industry officials expect the Government to continue emphasising on the halal food segment, as it is expected to increase to RM2tril this year globally.
“This vast potential must be tapped to enable Malaysia to be one of the leading producers and exporters in the world,” said a poultry company official.
He said Malaysia had many competitive advantages in the production of halal food.
“Malaysia has the expertise in certification and registration of halal logo certificates, which is recognised throughout the world,” he added.
Companies producing halal food will be given investment tax allowance of 100% of qualifying capital.
To encourage new investments and increase the use of state-of-the-art machinery and equipment, the Government has proposed an Investment Tax Allowance of 100% for five years to companies that produce halal food.
A RM10mil fund for the development and promotion of halal products was set up last year.
The fund will finance studies in business planning, technology and market development, as well as improving productivity and quality to achieve international certification, and to penetrate more export markets.
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