The BGA Malaysia Team, led by Managing Director Hazree Mohd Turee, wrote an update to clients on Malaysia’s 2025 budget.

Context

  • Malaysian Prime Minister and Finance Minister I Anwar Ibrahim on October 18 tabled the 2025 federal budget in Parliament’s lower house. The budget’s theme centered on “revitalizing the economy, driving reforms and prospering the rakyat [people].” The MYR 421 billion ($97.8 billion) budget is Malaysia’s biggest to date. The 2025 budget doubles down on fiscal and institutional reforms. It proposes gradual reforms and maintains continuity from previous budgets under Anwar’s administration. There is a strong focus on equitable distribution of wealth, as well as supporting existing government initiatives instead of developing new megaprojects.
  • The government continues to promote Malaysia as an investment destination amid a changing investment landscape. Officials affirmed their commitment to implement the global minimum tax in 2025, but also assured investors that they would consider other measures such as establishing a strategic investment tax credit to maintain the country’s competitiveness. A new investment incentive framework will be rolled out in the second half of 2025 to update existing incentives in line with the government’s aim to grow targeted sectors, such as electric and electronics and artificial intelligence (AI).

Significance

  • Budget 2025 is the biggest budget in Malaysia’s history at MYR 421 billion ($97.8 billion), an increase from the MYR 393.8 billion ($91.5 billion) set aside for 2024. MYR 335 billion ($77.8 billion) is allocated for operating expenditures, while MYR 86 billion ($20 billion) is allocated for development expenditures. The government also continues to commit to reducing the fiscal deficit. It aims to decrease the fiscal deficit from 4.3 percent in 2024 to 3.8 percent in 2025.
  • The Ministry of Education remained the biggest recipient in the 2025 budget at MYR 64.1 billion ($14.9 billion); the Ministry of Health is the second biggest with an allocation of MYR 45.3 billion ($10.5 billion). Although the Ministry of Health was granted one of the biggest percentage increases in budget allocations, it was smaller than the increase recorded last year. The slight drop in increased allocations can be partially attributed to the government’s focus on using public-private partnerships to finance much-needed health care infrastructure.

Implications

  • Businesses should watch for public-private partnerships, which will play a prominent role as the government looks to alternative measures to source financing for public investments and expenditures. Budget 2025 proposes for local and foreign companies to participate in financing infrastructure projects through the public-private partnership framework. Government-linked investment companies will also provide direct funding to support economic initiatives especially in key economic sectors.
  • The government continues to dismiss the possible reintroduction of the goods and services tax. Instead, the government opted to expand government revenue by progressively widening its tax base and redistributing subsidies to those in need. This direction includes the rationalization of RON 95 petrol subsidies and the widening of the scope of the sales and service tax sometime in the middle of next year.

We will continue to keep you updated on developments in Malaysia as they occur. If you have any comments or questions, please contact BGA Malaysia Managing Director Hazree Mohd Turee at hturee@bowergroupasia.com.

Best regards,

BGA Malaysia Team

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Managing Director

Hazree’s 25 years of business experience have spanned across many sectors, including consulting, sales, marketing and services. His work with large multinationals and government link companies helped him build an extensive network, especially in the government. Hazree has been involved in business development projects in industries like oil and gas, banking, supply chain and e-government. He has turned around troubled and complex projects with challenging policy, financial and technical problems. He has set up a cloud computing business and was the architect of Commerce dot Com’s Center of Excellence for Government Procurement. Hazree has vast experience in liaising with government ... Read More