THE Federation of Malaysian Manufacturing (FMM) views Budget 2026 as broadly well‑calibrated, applauding the government’s continuation of fiscal consolidation efforts and prudent macro direction.
But, it warns that the package provides only modest relief for the manufacturing sector, especially small and medium enterprises burdened by high operating costs.
FMM noted that the reduction of the fiscal deficit target to 3.5 percent of GDP, from 3.8 percent previously, demonstrates a commitment to fiscal responsibility.
The projection of Federal revenue rising to RM343.1 billion in 2026—up from RM334.1 billion in 2025—is welcomed, with growth expected to be driven in part by reforms such as electronic invoicing, self‑assessment for stamp duties and digital tax stamps.
That said, FMM President Tan Sri Soh Thian Lai expressed concern that the budget does not sufficiently ease cost pressures for manufacturers struggling with multiple taxes and rising input costs.
He urged that relief measures and structural support be extended more meaningfully to micro, small, and medium manufacturing enterprises.
On the positive side, he praised several initiatives in the budget that directly support the manufacturing sector.
The allocation of RM60 million for the MATRADE Market Development Grant (MDG) was welcomed as timely support for exporters, particularly SMEs venturing into new and higher growth markets. FMM also endorsed digital customs reforms—such as the implementation of digital tax stamps and enhanced border enforcement systems—to protect domestic businesses from illicit trade.
Soh also supported the government’s commitment to high‑value manufacturing and technology-driven growth.
Funding under the Strategic Co‑Investment Fund, Industry Development Fund, and incentives via Bank Pembangunan and government investment vehicles are expected to drive R&D, localisation of supply chains, and greater competitiveness in sectors such as semiconductors and electrical & electronics, he explained.
FMM also applauded the move to raise the stamp duty exemption threshold for employment contracts from RM300 to RM3,000 monthly, beginning in 2026, reducing administrative burden on businesses.
In addition, the enhanced focus on STEM, the RM7.9 billion allocation for TVET, and legislative plans for the TVET system were seen as steps in the right direction to align workforce skills with industry demands.
Soh, on environmental and green transition measures, welcomed the continuation of rebates for energy-efficient appliances, the launch of the Solar ATAP programme, green financing schemes, and 100 percent Green Asset Investment Tax Allowance for qualified manufacturers.
However, the association cautioned against unintended cost burdens from the proposed carbon tax, and called for a gradual implementation approach, stakeholder consultation, and mechanisms to avoid electricity tariff hikes for industry.
The industry body president urged stronger incentives to support local supply chain integration, more generous R&D tax allowances for SMEs, and revival of the Brand Promotion Grant (BPG) to enhance export branding capacity.
The group lamented the absence of a dedicated export resilience fund to help manufacturers navigate global trade shifts and urged resolution of lingering Sales & Service Tax (SST) issues that continue to raise costs and complicate compliance.
Soh reaffirmed that while the budget signals a sound macro and strategic direction, deeper support is needed for the backbone of Malaysia’s industry to thrive in an increasingly competitive global environment. - October11, 2025
