ACCOUNT PROFILE

Steel players’ wish list for Budget 2022

Posted on 20 September 2021

Steel players wish for the government to allocate special incentives, tax relief and schemes to help stimulate the consumption of local iron and steel products in the country.

According to Malaysia Steel Association (MSA) president Tan Sri William Cheng, (pic) the steel industry, affected by excessive imports in recent years, is facing huge challenges following the lockdowns and subsequently operating at reduced capacities.

He told StarBiz that MSA’s Budget 2022 wish list is for the government to expedite the rollout of infrastructure and construction projects estimated at RM200bil to boost demand for steel products here

“We also hope for the implementation of local content requirements for domestic projects and a ‘buy local’ policy for steel products.” At the same time, local raw materials such as metal scrap for local processing into high value-added steel products must be retained, instead of being exported.

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Cheng pointed out that the local steel millers have to import metal scrap in view of the supply shortage in the country.

MSA also proposed that there should be no issuance of new manufacturing licences for similar steel products, except for those not produced or available locally.

Cheng said the government should include the mining industry as one of the promoted industries in Malaysia to encourage large-scale domestic mining with a potential to become a major contributor to the economy.

“Large-scale domestic mining companies with investment cost of more than RM200mil should be given reinvestment tax incentives.

“For example, the first five years profit should be given 75% exemption on business income, while after five years profit should be entitled to a 50% exemption on business income,” suggested Cheng.

He added that the tax savings from the exemptions could be reinvested to increase capacity, raise productivity, conduct research and for expansion to new locations.

To alleviate the financial burden of local steel manufacturers, MSA is proposing a reduction in electricity and gas tariffs at 50% for the next 12 months and to be reviewed later.Also, it proposed a moratorium on repayment of loans and financing for all steel mills for six months and further deferment of loan repayments subject to the approval by the respective banking institutions.

Meanwhile, Malaysia Steel Institute (MSI) chief executive officer Jarrod Lim (pic below) concurred that the government should revive or roll out mega infrastructure projects within the next 24 months to boost the demand for steel related products.

“There should be greater support schemes to strictly implement and enforce “buy Malaysian first” which is currently lacking,” he added.

MSI is also proposing for more export-oriented incentives and schemes under Budget 2022 to facilitate exports.

Lim noted that the average utilisation rate in the local iron and steel sector is below 40%, which is well below the industry sustainability benchmark of 80%.

“Exploration of new markets through exports is important to increase the competitiveness and sustainability of the industry, as in other steel producing countries such as the European Union, Japan, South Korea, India and China,” he added.

The iron and steel white paper, prepared by the steel industry, also suggested increasing the value of apparent steel consumption and becoming a high value export-oriented industry focusing on the Asean market.

Therefore, the government should examine special incentives including promotion and assistance in penetrating existing and newly identified markets to support exports of locally-produced iron and steel products.

Lim said more emphasis should be given to the existing schemes such as services export fund, market development grant, e-trade and mid-tier development programmes.

According to Lim, the ship building and ship repair industry (SBSR) needs greater emphasis and merit support. There are around 100 shipyards or 200 SBSR companies in Malaysia. In terms of exports, the industry has explored Asean, the United Arab Emirates, Australia, Taiwan and other countries.

Proposed support measures under Budget 2022 should include reinvestment incentives to help motivate the existing iron and steel industry players to upgrade their facilities to develop new iron and steel products which are not available in Malaysia.

Another important incentive is the allocation of budget for training local manpower, according to Lim.

Source : The Star