On October 18, 2024, Prime Minister Dato' Seri Anwar Ibrahim presented the much-anticipated Budget 2025, themed “Ekonomi MADANI: Negara Makmur, Rakyat Sejahtera.”
This record-breaking RM421 billion budget introduces a host of measures aimed at boosting Malaysia's economy, with a sharp focus on fostering entrepreneurship, enhancing digital capabilities, and supporting businesses of all sizes. Entrepreneurs, startups, and established businesses alike can expect significant changes that will shape the business landscape over the next year.
Here are the key highlights:
1. Record Budget Allocation
The RM421 billion budget for 2025, the largest in Malaysia's history, demonstrates the government’s commitment to economic resilience and innovation. The allocation includes:
RM335 billion for operating expenses,
RM86 billion for development, and
RM2 billion reserved for contingency savings.
This record allocation underscores the government's intent to stimulate business activities and support Malaysia's path to becoming a high-income nation. Entrepreneurs and businesses can expect better access to resources that promote innovation, growth, and operational efficiency.
2. Minimum Wage Increase to RM1,700
Beginning on February 1, 2025, the minimum wage will rise from RM1,500 to RM1,700. While this wage hike is crucial for improving workers’ living standards, it may impact business owners, especially SMEs, who need to adjust their payroll systems and financial planning accordingly.
While this change aims to provide a higher quality of life for workers, businesses must ensure they manage their costs effectively to maintain profitability.
3. Mandatory EPF Contributions for Foreign Workers
For the first time, foreign workers will be required to contribute to the Employees Provident Fund (EPF), which will be implemented in phases. This policy is designed to ensure that all workers, both local and foreign, are treated fairly under Malaysian labor standards, and receive retirement benefits.
However, this will likely increase payroll costs for businesses employing foreign labor, especially in labor-intensive sectors like manufacturing, construction and agriculture.
4. New Investment Incentive Framework
A new Investment Incentive Framework will roll out in Q3 2025, focusing on high-value sectors such as:
- Electrical and electronics (E&E),
- Artificial intelligence (AI),
- Sustainable technology.
Businesses involved in these sectors will benefit from tax incentives, including:
Tax incentives for integrated circuit (IC) design services and advanced materials in the electronics and electrical (E&E) sector.
Special tax deductions for companies involved in AI, robotics, the Internet of Things (IoT), and data science.
Incentives for multinational enterprises (MNEs) spending up to RM2 million annually.
RM100 million investment matching funds for local suppliers in E&E, specialty chemicals, and medical devices.
The emphasis on advanced technology sectors offers tremendous opportunities for entrepreneurs and startups looking to innovate in Malaysia’s expanding digital and tech-driven economy.
5. Government Agency Consolidation for Improved Efficiency
Several government agencies will undergo consolidation in an effort to streamline their operations, making it easier for businesses to access support:
MAVCOM will merge with CAAM (Civil Aviation Authority of Malaysia).
InvestKL will combine with MIDA (Malaysian Investment Development Authority).
The Razak School of Government will join INTAN (National Institute of Public Administration).
HDC and MATRADE will also consolidate to improve their operational efficiency.
This streamlining should reduce bureaucratic hurdles, making it easier for entrepreneurs and business owners to navigate government services and support.
6. RM200 Million for CoSIF and NIDF
A total of RM200 million has been allocated to the Strategic Joint Investment Fund (CoSIF) and the NIMP Industrial Development Fund (NIDF).
These funds are essential in driving the growth of SMEs and mid-sized companies, especially in high-growth and innovative industries.
7. KWAP’s Dana Perintis Fund: RM1 Billion to benefit Startups
The KWAP Dana Perintis Fund will be allocated RM1 billion, with RM200 million designated for 2025. This fund is specifically customised to spearhead the growth of startups, supporting innovation and enhancing Malaysia’s competitiveness in the global market.
For early-stage entrepreneurs, this initiative opens new avenues for funding and scaling their businesses.
8. Khazanah’s National Fund-of-Funds (NFOF)
Khazanah will manage RM1 billion under the National Fund-of-Funds (NFOF), with RM300 million allocated for venture capital investments in startups in 2025.
This initiative is aimed at enhancing funding opportunities for Malaysian entrepreneurs in technology and innovation sectors, helping to elevate Malaysia’s position in the global innovation landscape.
9. Cradle Fund Allocation
The Cradle Fund, a key player in supporting the startup ecosystem, will receive RM65 million to assist startups with regional and global growth potential. Additionally, RM15 million will be allocated to incentivize partnerships between government-linked companies (GLCs) and startups through corporate venture capital initiatives.
This is excellent news for startups looking for mentorship, market access, and funding through GLC partnerships.
10. Digital Grants for SMEs
The Madani Micro, Small, and Medium Enterprises (PMKS) Digital Grant will be allocated RM50 million. This grant is aimed at helping local entrepreneurs enhance their digital capabilities, ensuring that Malaysian SMEs remain competitive in the global digital economy.
This funding supports the ongoing digital transformation of small businesses, enabling them to adopt new technologies that improve operational efficiency and market reach.
11. MCMC Support for Online Entrepreneurs
Over the next five years, RM100 million will be allocated to enhance Nadi, the National Information Dissemination Centre, transforming it into a hub for online entrepreneurship.
This initiative, led by MCMC, aims to cultivate digital entrepreneurship across the country by providing resources and training to small businesses looking to establish or expand their online presence.
12. Forest City Special Economic Zone (JSSEZ)
Forest City has been rebranded as a "Duty-Free Island" to boost tourism and financial services within the Johor-Singapore Special Economic Zone (JSSEZ). Businesses operating within this zone can benefit from tax incentives, especially in fintech and global business services.
Furthermore, the introduction of the Single Family Office Scheme provides opportunities for high-net-worth individuals to manage their funds within the region, attracting global capital.
13. Support for Malaysian Exporters
RM40 million has been allocated to MATRADE to help Malaysian exporters promote locally made products in new markets such as Africa, Latin America, and the Middle East.
This initiative is designed to support local businesses in reaching international markets, boosting Malaysia’s export potential and diversifying its global trade portfolio.
14. i-Tekad Programme
RM20 million in matching grants will support low-income micro-entrepreneurs under the i-Tekad programme, with RM5 million designated for insurance or takaful contributions for traders whose crops were damaged by disasters.
15. Social Impact Investments
RM40 million in matching grants will be made available to support social impact investments, including Shariah-compliant P2P financing and public equity financing under the MyCIF programme.
16. RM40 Billion in Loan Facilities for Businesses
To ensure businesses have access to necessary funding, RM40 billion has been allocated for loan facilities and business financing guarantees through government agencies:
RM3.2 billion in micro-loans through BSN and TEKUN for small vendors.
RM6.4 billion from Bank Pembangunan Malaysia Berhad to support infrastructure, digitalisation, and energy sectors.
RM20 billion in SME financing guarantees via Syarikat Jaminan Pembiayaan Perniagaan (SJPP), including a RM5 billion guarantee for Bumiputera SMEs.
This sizable loan facility ensures that businesses of all sizes have access to the capital needed for expansion, digitalization, and sustainable practices.
17. Tax Incentives for Business Expansion
The government has introduced several tax incentives aimed at boosting business expansion, including:
Accelerated capital allowance for computer equipment, software, and consulting fees, deductible within two years.
Stamp duty waivers for loan agreements for MSMEs and financing agreements in conjunction with Skim Pembiayaan Mikro.
These incentives provide businesses with greater financial flexibility to invest in growth-enhancing technologies and infrastructure.
18. Funding for Bumiputera Entrepreneurs
Budget 2025 allocates RM800 million through MARA and PUNB to support Bumiputera entrepreneurs, with an additional RM1.3 billion set aside to empower G1-G4 contractors for small to medium-sized projects.
19. Boost for Female Entrepreneurs
A total of RM470 million in financing will be opened to women-led MSMEs through SME Bank, BSN, Bank Rakyat, and MARA. This funding will help support working capital needs, asset purchases, and business expansion for female entrepreneurs.
20. Tax Benefits for Work-Life Balance
Companies adopting flexible work arrangements and offering caregiving leave to employees can enjoy an additional 50% tax deduction, encouraging a healthier work-life balance for the workforce.
21. Support for Creative Industry Entrepreneurs
MyCreative Ventures will receive RM25 million to finance creative social entrepreneurs and high-potential companies within the creative sector, fostering innovation and growth in the industry.
Final Thoughts
Budget 2025 offers a wide range of initiatives that provide crucial support for Malaysian entrepreneurs, startups, and businesses. The focus on innovation, high-value sectors, digitalisation, and equitable economic growth reflects the government's aim to create a dynamic business environment.
With these measures in place, businesses must be prepared to adapt, seize opportunities, and leverage the benefits that this comprehensive budget provides.
Entrepreneurs and businesses should take full advantage of the new tax incentives, investment funds, and loan facilities, as these will be key drivers for growth and success in the coming years.
Budget 2025 is a clear signal that Malaysia is committed to fostering a resilient, inclusive, and forward-thinking economy, with opportunities abound for those ready to take the next step in their business journey.
By: Kpost
Information Source: VulcanPost , Astroawani , TheEdge
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