Introduction

Adam Smith invisible hand leads the economy market allocates scarce resources to meets the needs
and wants of consumers for the formation of market efficient. In contrast, economists use the term market
failure when the market inefficient and the possible reasons will be lack of market power, appearance of
externalities, incomplete or asymmetric information or uncertainty, problem how to determine how much
defense would be provided in public goods market. If these circumstances were happened, a well-designed
public policy can improve the efficiency in the way that markets operate.


Body

One of the conditions will cause market failure if formation of monopoly, the inefficiency of monopoly can be
measured with a deadweight loss triangle, as illustrated in Figure 1.1. Producer in monopoly market is considered as
price maker, they decide its price by calculating the quantity of output at which its marginal revenue would
equal its marginal cost. Thus, quantity produced and sold is below the socially efficient level. Demand curve
reflects the value to consumers and the marginal-cost curve reflects the cost to the monopoly producer.
Therefore, the inefficiency of monopoly can be measured with a deadweight loss between the demand curve
and the marginal-cost curve equal to the total surplus lost because of monopoly pricing.

For instance, there are two English-language press companies in Malaysia which are The Star and The
Sun intended to merge in 2008 (Kenny Lim February 21, 2008). The deal would be closely examined by the
government before it went to effect to prevent reduced the economic well-being of the country as a whole, as a result,
they can determine the price of goods sold in the market. The government derives this power over private industry from
the antitrust laws, a collection of statutes aimed at curbing monopoly power in order to promote competition. They also
allow the government to break up companies. For example, in 1984, the government split up AT&T, the large
Figure 1.1
Demand
Marginal
Revenue
telecommunications company, into eight smaller companies. Finally, the antitrust laws prevent companies from
coordinating their activities in ways that make market less competitive.
Beside increasing competition with antitrust laws, another way to settle the problem of monopoly is by regulating the
behavior of monopolists such as water, electric and communication companies. In Malaysia, The Minister of Energy,
Communication and Multimedia, Datuk Amar Leo Moggie issued the guideline for few companies to regulate their prices
under Communication and Multimedia Act 1998. The examples of network services that would be niche are public mobile
radio, one or two way radio paging , broadband wireless internet network services. Regulation is often imposed by
government either directly or through an appointed regulator.However, some industries and professions impose
rules on their members through self-regulation.
Furthermore, the government uses the third policy that is public ownership rather than regulating natural monopoly
that is run by a private firm, the government can run the monopoly itself.




















References

1. http://tutor2u.net/economics/content/topics/marketfail/market_failure.htm
2. http://tutor2u.net/economics/content/topics/marketfail/market_failure.htm
3. http://www.economist.com/RESEARCH/ECONOMICS/alphabetic.cfm?letter=M
4. http://www.britannica.com/bps/additionalcontent/18/31846381/StarSun-merger-sparks-monopoly-
worries-in-Malaysia (Media: Asia's Media &Marketing Newspaper, February 21, 2008 by Kenny Lim)
5. http://www.skmm.gov.my/registers/cma/class/MG_NSP_CL.pdf
6. http://www.economist.com/RESEARCH/ECONOMICS/alphabetic.cfm?letter=R
7. Mankiw, N.G. (2007) Principles of Economics, 4th edition, Thompson South-Western
Publishers.
Budget 2010 Updated!
Last update: 11th November 2009 By BERNAMA & BTIMES.
http://finance.klmanagement.com.my/malaysia-budget-2010/
In Finance
1. The stock market will be further liberalised to enhance its efficiency as well as attract domestic and
foreign investment. For this purpose, the government will undertake the following measures: First,
liberalise the commission sharing arrangements between stockbrokers and remisiers in 2 stages to
encrouage retail participation in the stock market. The first stage, which takes effect immediately,
allows flexible brokerage sharing at a minimum rate of 40 percent for remisiers. The commission
sharing will be fully liberalised in the second stage, effective 1 January 2011.
2. Allow 100 per cent foreign equity participation in corporate finance and financial planning
companies compared with the present requirement of at least 30 per cent local shareholding.
3. Islamic banking assets account for 18.8 per cent of Malaysias total banking assets while takaful
industry assets contribute 7.7 per cent of total insurance and takaful industry assets. To ensure rapid
development of financial services, particulalrly in Islamic finance, the government proposes that the
existing tax incentives be extended to 2015.
In Community, Halal, Training and Agriculture
1. Government to allocate RM899 million to intensify tourism industry.
2. 1Malaysia Development Bhd (1MDB) will establish a corporate social responsibility fund totalling
RM100 million as a start to finance community activities
3. Formulate Halal Act in collaboration with State Islamic Religious Councils.
4. To corporatise the Halal Industry Development Corporation as an agency under MITI
5. Intensify Halal Certification by the Islamic Development Department of Malaysia (JAKIM) by
collaborating with international institutions to obtain standards certification such as HACCP ad
GMP.
6. To provide RM24 million to develop halal products anti-smuggling system at three entry points and
three main ports.
7. Allocate RM82 million to modernise aquaculture industry and conduct entrepreneurship training
scheme for aquaculture breeders with focus on production of fish fry and ornamental fish.
8. Effective Jan 1 2010, government agrees to allow agencies to retain 50 per cent of rentals received
while the remaining 50 per cent will be remitted to the government as revenue.
For Education
Baiah, or more commonly known as the New Deal (linguistically, baiah signifies bartering or
exchanging commodities, making a covenant, a compact, an agreement or the like), will be introduced for
appreciating the contribution and performance of principals and head teachers in high performance schools.
20 schools have been identified, and the Malaysian government plans to appraise at least 100 or more in
2010.
In higher studies, the National Higher Education Fund Corporation loans are able to be converted into
scholarships beginning 2010, if student performances graduate with first class honours.
Early childcare & education in Malaysia: RM100mil allocation, Permata programme as a recognition of
the importance of early childcare and education in Malaysia, by Datin Seri Rosmah Mansor. (Childrens age
for PERMATA programme: < 5 years old)
Effort to increase children count in pre-schools: Training, tax relief and government loans to those whore
setting up kindergartens. (Under RM30 billion budget allocation No exact sum quantified, through the
implementation of the national key result areas (NKRA).
For Property & Development Projects
Updated: 11th November 2009
Government provides RM41 million to improve income and quality of life of the Orang Asli
Community by implementing various projects.
Government allocates RM2.3 billion to build and upgrade infrastructures in rural areas.
RM14.8 billion is allocated to manage, build and upgrade hospitals and clinics.
Allocate RM137 million to upgrade and improve drainage and irrigation infrastructures in paddy
fields involving 180,000 farmers.
TNB to spend RM5 billion to implement electricity generation, transmission and distribution projects
in 2010.
To provide RM70 million to build the Paya Peda Dam Project in Terengganu to increase water
supply capacity to paddy irrigation scheme in Besut.
Public-private collaborations to include an integrated immigration, customs and quarantine complex
in Bukit Kayu Hitam, construction of six UiTM campuses and the development of MATRADE
centre
Budget 2010 allocations totalled RM191.5 billion, of which RM138.3 billion is for operating
expenditure and RM53.2 billion for development expenditure.
RM200 million (RM200, 000, 000) will be allocated to refurbish and revive low & medium cost housing
projects. 41 development projects have been identified. This is a one-time funding allocation.
For Rural Development Projects
RM2.3 billion (RM2, 300, 000, 000) will be allocated to various rural development projects, distribution for
tender projects under the Rural and Regional Development Ministry starting 2010.
Budget 2010 on Fiscal Updates
1. The Government will issue 1Malaysia Sukuk totalling RM3 billion.
2. The government needs to ensure that the Malaysian tax system is equitable and able to generate
revenue for development purposes. In line with this, the government proposes that a tax of five per
cent be imposed on gains from the disposal of real property from 1 January 2010. (RPGT)
3. The government is currently at the final stage of completing the study on the implementation of
goods and services tax (GST), particularly to identify the social impact of GST on the people. The
purpose of this study is to ensure that if GST needs to be implemented to stabilised Government
finance, it will not burden the population. If the government implements GST, it will replace the
current sales tax and service tax as well as exemption will be granted to the low income group. The
GST rate to be imposed will be lower than the current sales tax and service tax rates.
4. Government to enhance tax incentives for healthcare service providers who offer services to foreign
health tourists with income tax exemptions of 100 per cent on the value of increased exports from 50
per cent previously.
In equity markets, the Malaysian government has decided to reduce the budget deficit from 7.4% this year
(2009) to 5.4% next year (2010). This fiscal consolidation may see improvement of stock volumes, as it
promotes value for money, high-return investments for investors.
Budget 2010 on Real Property Gains Tax (RPGT)
On Real Property Gains Tax (RPGT) for companies, the Malaysian government issued a capping limit of
5%, where RPGT is imposed on gains from real property disposal irrespective of holding periods and owner
categories. Schedule 5 of Real Property Gains Tax 1976 shouldnt be applicable anymore. This move is
effective 1st January 2010.
The Real Property Gains Tax is reported to be the tax base of the nation In other words, revenue.
RPGT for individuals and non-corporate entities will also stand at 5%, where level of exemption increases
from RM5,000 to RM10,000 or 10% of chargeable gains (whichever is higher), disposal of residential
property once in a lifetime and exemptions to gifts between parent to child, husband to wife, grandparent to
grandchild (family).
In 2009, year of disposal vs. date of acquisition was at 30% for the 2nd year, 20% for the third year (for
non-citizens, non permanent residents, still 30% for 3rd year), 15% for the 4th year (still 30% for
non-citizens), 5% on the 5th year (30% for non-citizens) and for the 6th year thereafter, 5% for companies
and none for individuals and non-corporate entities, 5% for non-citizens.
So in this case if youre selling a house 5 years after youve bought it, the Budget 2010 will reap 5% off
even 6 years or thereafter In 2009 and before, there is no tax imposed on this. Another new rule you will
see is the acquirer will remit considerable amount to the Inland Revenue Board (IRB) 60 days from the
date of disposal (layman version: Sale).
For Cigarettes
On cigarettes excise duty in Malaysia, an increment of 1% is seen, going up to 5.6%. Excise duties on
beer remained unchanged.

For Individuals Tax
1. The Government proposes existing personal tax relief of RM6,000 for EPF contributions and life
insurance premiums be raised to RM7,000.
2. The Government proposes the maximum income tax rate to be further reduced to 26 per cent from 27
per cent effective from the 2010 year of assessment.
3. Individual tax relief on broadband subscription fee up to RM500 a year from 2010 to 2012.
4. Individual taxpayers to be given tax relief on broadband subscription fee up to RM500 a year from
2010 to 2012
5. Government to launch a scheme in January 2010 that enables EPF contributors to utilise current and
future savings in Account 2 to promote house ownership.
6. The Government will establish the 1Malaysia Retirement Scheme to be administrated by EPF.
7. Employees EPF contributions will be raised again to 11 per cent on a voluntary basis with immediate
effect. However, from Jan 1, 2011 employees EPF contribution will revert to 11 per cent.
8. Civil servants are eligible to apply for computer loans once in every three years and up to a
maximum of RM5,000 from the government once in every five years
Individual tax is to be seen reduced to 26%. Personal tax relief for budget 2010 will be increased by
RM1,000. In 2009, its RM8,000 and in 2010, itll be RM9,000.
Individuals earning less than RM24,000/annum (RM2,000/mo) will be free of income tax.
On life insurance premiums & EPF contribution for budget 2010, existing personal tax relief of RM6,000
will be increased to RM7,000 from January next year for people with annuity schemes.
For Malaysian individual tax, which is seen at <RM2,500 (first time) at 0% chargeable tax, RM2,501
RM5,000 to be at 1% (also next RM2,500) and RM5,001 RM10,000 (and next RM5,000) to be at 3% in
2009, dropping 1% in 2009 from 2008; in the categories of RM35,001 RM50,000/p.a. and amount
exceeding RM250,000/p.a.
Iskandar Development region knowledge workers at a number of sectors who work and reside in Iskandar
Johore will be subjected to a flat 15% on chargeable income. These sectors include education services,
biotechnology, green technology, healthcare, financial advisory and consultancy services, creative industry,
logistic services and tourism.
For Petroleum Tax
1. The Government will implement fuel subsidy management system in early 2010.
In petroleum tax, the Malaysian government plans to speed up tax collection by requiring petroleum
companies to pay taxes in the same financial year. This move may see a number of good and bad governing
factors, but the good one being fast tax collection. In previous years tax collections are often forwarded to
the next financial year.
For Tax & Finance
The Accounting Digest wrote about Recommended Budget 2010 for Tax, giving pointers on Withholding
Tax System, Taxation Fees, Tax Losses and Group Relief.
Among some of the listed recommendations (CIMB , PWC, etc.) for corporate tax codes and another
financials include:
1. Tax incentives for installers or bringers of green technology.
2. Reduce import duty on environment-friendly vehicles such as hybrid cars.
3. Introduce potential subsidy for biodiesel programmes.
4. Tax credit for R&D that supports fundamental and applied research.
5. Allow companies to take 30-40% tax credit in expenditure on research and experimentation,
global standards setting, branding and workforce training.
6. Reduce holding costs for property developers of unsold bumiputra property units six months after
the project launch.
7. Real estate investment trust Reduction in withholding tax.
8. Bumiputra discount ONLY FOR housing properties below RM250,000