How Singaporeans Will Be Affected By The New Malaysian Government

How Singaporeans Will Be Affected By The New Malaysian Government

Our neighbours across the causeway have had quite the month. Malaysia’s shock election results on May 10 ended the Barisan National coalition’s 61-year rule and paved the way for the new ruling party, Pakatan Harapan, to take the reins. The new government, led by sprightly nonagenarian Dr Mahathir Mohamad, has announced and already implemented a few changes that have caused ripples among the Malaysian public.

Here’s how Singaporeans will be affected by the new Malaysian government:

1. Changes in prices of goods and services due to 0% GST

Malaysia’s Goods and Services Tax (GST) went zero-rated on June 1, which means that the prices of goods and services should go down by 6%. Not all goods will be cheaper, however – those that were already zero-rated prior to June 1 (such as fresh food items and baby formula) will not experience a price reduction. Click here for a full list of items that were already zero-rated prior to June 1.

While reducing the GST would probably mean cheaper goods, services and properties in Malaysia in the short term, the implementation of the Sales and Services Tax (SST) from September 1, 2018 could bring up prices again. However, it’s hard to say if the implementation of the SST will cause prices to rise or fall beyond pre-June 1 levels, as that will be depend on what the SST rates will be (which have yet to be revealed), as well as which goods and services will be taxed.

Nevertheless, between now and September, buying goods and services in Malaysia will subject you to zero sales tax, services tax or GST. If you regularly visit Johor Bahru to pick up items that are cheaper than in Singapore, you’ll be able to stretch your money a bit further. Consider taking advantage of this tax holiday, as items that was imposed with GST prior to June 1 – like cosmetics, gadgets and movie tickets – will be a bit cheaper.

2. Cheaper properties in Malaysia

The zero-rated GST is expected to bring down property prices in Malaysia.

While the GST is not directly imposed on buyers of residential properties, the cost savings from cheaper building materials (estimated to be a reduction of 2% to 3%) could be passed on to consumers. As for commercial buildings, buyers will no longer have to pay the 6% GST that has been charged prior to June 1.

However, keep in mind that as a foreigner, if you want to buy a residential property in Malaysia, you’ll still have to meet the minimum property purchase price. This could be RM500,000 (S$167,981) to RM2,000,000 (S$671,926), depending on which state the property resides in.

3. Stabilised petrol prices and abolished tolls

Heading across the causeway and fuelling up may just be a bit cheaper, as the new Malaysian government announced that the price for RON95 and diesel would be maintained at RM2.20 (S$0.74) and RM2.18 (S$0.73) respectively, while the price of RON97 will be floated according to the market.

Price of fuel in Malaysia (per litre)
RON95
RON97
Diesel
RM2.20
(S$0.74)
floating rate
RM2.18
(S$0.73)

Dr Mahathir has also pledged to abolish highway tolls. Although there hasn’t been a nationwide toll abolishment as of yet, the toll collection at KL-Seremban Expressway and Salak Expressway has recently been terminated. This means that exiting and entering the Sungai Besi Toll Plaza will now cost between RM0.40 (S$0.13) and RM1.70 (S$0.57) less.

4. No more Kuala Lumpur-Singapore High-Speed Rail

The Kuala Lumpur-Singapore High-Speed Rail (HSR) project – which would have cost Malaysia RM110 billion (S$37 billion) – was cancelled in bid to curb government debt. However, the cancellation of the project is still subject to negotiation between Malaysia and Singapore.

The HSR would have shortened travel time between KL and Singapore to 90 minutes.

Besides Singaporeans (or Malaysians residing in Singapore) who regularly commute back and forth between the two countries, there are other parties at stake with the cancellation of the project. In particular, property owners near the proposed Jurong East terminus may lose out on possible financial gain, as having the HSR could have pushed up property prices in the area. Likewise, if you had bought a property in Malaysia near one of the proposed HSR terminals, the value of your property may not appreciate as quickly.

Without the HSR, businesses will also lose out on a possible increase in foot traffic in Jurong East. News of the cancellation has also deterred some Singaporean businesses from expanding up north, as their access to Malaysian workers will be limited.

Meanwhile, the new Malaysian government is still committed to building the Johor Bahru-Singapore Rapid Transit System Link that is slated to be completed by 2024.

5. Short term volatility for Malaysian-linked stocks on the SGX

According to Malaysia’s Finance Minister, Lim Guan Eng, the lifting of the GST, maintenance of petrol prices and the RM700 million (S$235 million) Hari Raya special assistance that has been allocated to civil servants and government pensioners should boost consumer spending and business profits. However, these policies have also been criticised as populist policies that will put more pressure on Malaysia’s budget deficit.

Singaporean stocks with a large exposure to Malaysia will be impacted by these policies. Some Malaysian-linked stocks on the SGX already experienced dips after the election results were announced on May 10. While it’s too early to tell for sure what the outcome of these policies will be on these Singaporean businesses – although some analysts are optimistic about long-term growth prospects – short-term stock performance may be volatile.

Moving forward

Malaysia’s new administration has promised greater transparency and accountability, as well as fiscal reforms that aim to drive consumption and economic growth. Of course, promises made by politicians don’t always equate to implementation. However, if delivered, they will bode well for Singaporean investors and businesses.

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