KUALA LUMPUR: Budget 2025 strongly emphasises organic growth within Malaysia's economy.

Investors should look at the various allocations against a broader MADANI Economic framework to appreciate the strategic intent behind the government's approach, said UOB Kay Hian Wealth Advisors head of investment research Mohd Sedek Jantan.

Elaborating on Budget 2025's allocation for the Investment, Trade and Industry Ministry (MITI) which amounted to RM2.184 billion overall, he told Bernama that to drive economic transformation competitiveness, the New Investment Incentive Framework (NIIF) will shift Malaysia's approach from product-based to activity-based incentives, focusing on high-value and strategic sectors.

"MITI's oversight of this framework aims to attract quality investments that foster innovation, ultimately driving the nation's economic transformation," he said.

On the RM1 billion Strategic Investment Fund, Mohd Sedek said MITI will manage it to support the development of local talent and foster high-value-added activities, ensuring that Malaysia remains competitive globally.

MITI would also introduce incentives to strengthen local supply chains and ecosystems.

"This includes double tax deductions for multinational enterprises (MNEs) that invest in local suppliers and joint ventures.

"This initiative is designed to enhance the robustness of key industries," said Mohd Sedek.

To further attract investments, he said MITI would lead efforts to ease the process of doing business in Malaysia by expediting approvals for new businesses and investment expansions while promoting collaborations between the public and private sectors.

He also said in expanding Malaysia's global reach and trade opportunities, the export tax incentives in high-value high-tech sectors would encourage Malaysian firms to explore global markets, with Malaysia External Trade Development Corporation (MATRADE) taking a lead role in international promotion such as in the integrated circuit (IC) design services.

In terms of market exploration for Malaysian products and services, a RM40 million reimbursement grant would be allocated to MATRADE to assist exporters penetrate new and diverse markets, including Africa, Latin America, and the Middle East.

"This initiative aims to broaden Malaysia's global trade footprint," he said.

Aside from that, to boost the halal sector, Mohd Sedek said Budget 2025 has allocated RM20 million for MATRADE to enhance Malaysian halal products and services competitiveness, ensuring that halal companies could reach global markets more effectively.

In terms of talent development and technical and vocational education and training (TVET), RM200 million would be allocated through Khazanah Nasional Bhd to train 11,000 local talents in strategic sectors like semiconductors and electrical and electronics (E&E) to build resilience.

According to MITI, this funding would be channelled to Universiti Teknologi MARA (UiTM) and Universiti Sains Malaysia (USM) to develop engineering and artificial intelligence (AI) related skills, ensuring that the country's workforce is ready for the future economy as the nation is gearing towards a high-skilled high-income nation.

On another development, the Exporter Sustainability Incentive Scheme amounting to RM70 million, to be primarily managed by EXIM Bank, would see collaboration with MATRADE. The aim is to support local exporters in expanding their international presence, particularly with sustainability goals in mind.

Additionally, the Joint Committee on National Competitiveness, MITI, and MATRADE would focus on enhancing Malaysia's overall competitiveness in global markets.

Meanwhile, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid is of the view that Budget 2025's allocation for MITI made sense since the ministry played an instrumental role in driving investment, especially foreign direct investment (FDI).

"Certainly, the allocation should help MITI in their roadshows and prescribe incentives that can help promote Malaysia as an ideal investment destination," he said.

He also said the higher allocation would help MITI to expand its reach to micro, small and medium enterprises (MSMEs) and their awareness of the benefits of bilateral and multilateral trade agreements.

He said a higher allocation means more capacity-building programmes to promote entrepreneurship and help encourage the adoption of digitalisation.

Another analyst, SPI Asset Management managing director Stephen Innes said Budget 2025 signals a strong commitment to fiscal consolidation that could strengthen the ringgit next year.

According to Bank Negara Malaysia's (BNM) financial markets committee (FMC), the ringgit was one of the best-performing currencies globally in the third quarter of this year (3Q 2024), strengthening 14.4 per cent against the US dollar and 11.4 per cent on a year-to-date basis.

Innes said it is forecasting the currency to strengthen to RM4.00 per US dollar, with a potential for more upside.

"The government's plan to narrow the budget deficit to 3.8 per cent of gross domestic product (GDP) in 2025 is a bold move, rolling back subsidies and social assistance from RM61.4 billion in 2024 to RM52.6 billion while boosting fiscal revenue," he told Bernama.

Government spending is set to rise by 3.3 per cent to RM421 billion in 2025, with fiscal revenue targeted to grow by 5.5 per cent to RM339.1 billion.