Issue No.7


Back to index

This article is reproduced with permission from
Normandy Advisory Services Sdn. Bhd (Licensed Investment Advisor)
15th Floor Menara Multi-Purpose, No 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur
Tel : 03 - 469 5560 Fax : 03 - 294 5561

This article is copyright and no part of it may be reproduced in any form without the prior consent of Normandy Advisory Services

In the 1996 Malaysia's Budget Speech by Minister of Finance Dato' Seri Anwar Ibrahim, one of the topics included was increasing savings. The rate of gross national savings to Gross National Product (GNP) is 34% which is to be increased to at least 40%. The Government wants Malaysians to save around 40% of their earnings so that there will be sufficient money to match the investment rate required to reach Vision 2020.

The rate of gross national savings of 34% to GNP is comparable with that of South Korea and higher than Japan. However, it is not sufficient to meet Malaysia's investment needs, which is now 40%. The increase in savings rate is crucial if the country is to achieve sustainable economic growth.

Some of the actions taken to increase savings were :-

i) The rate of EPF contribution by employee was increased from 10% to 11% in January 1996. In 1993, the employer's contribution was increased from 11% to 12%.

ii) The corporate sector to establish private pension funds for the benefit of their workers. A maximum deduction of 17% is allowed, for income tax purposes, for contribution by employees to the EPF and approved private pension funds.

iii) Another National Savings Bond of RM1 billion to be issued in 1996. This was due to the encouraging response to the previous issue.

iv) Exemption from income tax on the interest income received by individuals on savings and fixed deposit accounts with financial institutions (inclusive of interest free banking schemes) as follows :-

a) savings accounts of up to RM100,000
b) fixed deposits of less than 12 months and up to RM100,000
c) fixed deposits of 12 months or more.

v) Tax relief provided for contributions to EPF and premiums on life insurance (or Takaful) is increased from RM5,000 to RM7,000. The RM2,000 increase was especially to cover premiums on education and medical insurance