Call for brave new thinking under Impian Malaysia – case for greater fiscal decentralisation to restructure new Federal-State relations

Impian Kelantan, as part of Impian Malaysia, is dedicated to the fulfilment of an inclusive vision where Malaysians, regardless of race, religion or region, are bonded together under an united Malaysian identity and consciousness where they have more in common as citizens of this country than the differences that divide them whether over race, religion or region.

Over the decades, more and more Malaysians should feel that they are increasingly Malaysian-minded finding more common ground with other Malaysians, regardless of race, religion or region, although their racial characteristics, religious identities and regional stakes will continue to be an integral part of their lives.

Otherwise, Malaysian nation-building would be on a trajectory of failure since Merdeka in 1957 and Malaysia Agreement in 1963.

The December 2014 Great Floods which led to the loss of 25 lives, created a million flood victims with a quarter of million flood evacuees and caused billions of ringgit of damages had one silver lining – the coming together of Malaysians regardless of race, religion, region or politics, whether as NGOs (non-government organizations) or NGIs (non-government individuals) on a humanitarian cause to help the flood victims.

It is in this crucible of flood catastrophe but wellspring of Malaysian humanity and unit that Gabungan Impian Kelantan comprising over 40 NGOs and political groups was born.

The three-day Bruce Lee 75th anniversary art exhibition by over 100 artists now being held at KB Mall, Kota Bahru, which is to last stop of month-long programme which has taken the exhibition to Penang, Kuala Lumpur and Johor Baru, is to raise funds for Gabungan Impian Kelantan projects in aid of the Kelantan flood victims.

The target of the month-long four-stop exhibition is to raise RM200,000 for Gabungan Impian projects, but with the great support of the Malaysian people, regardless of race, religion or region it may come close to double the target of close to RM400,000.

Impian Kelantan like Impian Malaysia is motivated by the universal values of justice, integrity, unity and solidarity of the human race.

It is opposed to all forms of oppression, repression, injustice, and of course, corruption and abuses of power – whether the RM42 billion 1MDB scandal or the latest of scandals in Malaysia, the criminal breach of trust in the corruption and money-laundering of MARA acquisition of properties in Melbourne, which brought international shame and disgrace to Malaysia.

Impian Kelantan must also be grounded in brave new thinking in setting Malaysia on a new course of nation-building, as the country seemed to have lost its way in recent years, with worsening of racial and religious polarisation; deviation from the principles of accountability, transparency and integrity; as well as increasingly undemocratic governance, whether in between the government and the governed or in Federal-state relations.

Among the brave new thinking Malaysians must wrestle with in Impian Malaysia must be the need and case for greater fiscal decentralisation to restructure new Federal-State relations.

There are at least three reasons for this:

1. Development allocation to the states have been falling steadily from the 3rd to the 8th Malaysian Plans

Table 1: Allocation for development expenditure for each individual state compared to total federal government revenue (RMK3-RMK9)

Total Allocation to Individual States (Development Expenditure) (RM billion) Total Federal Government Revenue (Estimates) (RM billion) % Allocation to the States / Total Government Revenue
RMK3 (1976-1980) 16.5 43.3 38.0%
RMK4 (1981-1985) 31.5 98.5 32.0%
RMK5 (1986-1990) 24.7 130.4 19.0%
RMK6 (1991-1995) 35.8 183.2 19.6%
RMK7 (1996-2000) 45.5 294.0 15.5%
RMK8 (2001-2005) 59.7 396.7 15.1%
RMK9 (2006-2010)* 141.6 683.1 20.7%

Note: Not including multi-state development allocation
(*) Not including Private Finance Initiatives (PFIs)

In the earlier RMKs 3 and 4, the percentage of the development allocation which were allocated for projects in individual states were 38.0% and 32.0% of projected federal government revenue over a five-year period.

By RMK6, this percentage had dropped to 19.0% and hit a low of 15.1% in RMK8. Only in RMK9 was it somewhat ‘revived’ to 20.7%.

These figures were not made available in RMK10 and the recently announced RMK11 perhaps because the federal government does not want to show how little it is allocating for development projects to individual states.

2. Allocation to Kelantan fell significantly after the PAS government won control of the state in the 1990 general elections

Table 2: Amount and % of RMK development spending going to Kelantan (RMK3 to RMK9)

Total Allocation to Individual States (Development Expenditure) (RM billion) Allocation to Kelantan (RM billion) Allocation to Kelantan as % of total allocation to individual states
RMK3 (1976-1980) 16.5 1.02 6.2%
RMK4 (1981-1985) 31.5 2.85 9.0%
RMK5 (1986-1990) 24.7 1.93 7.8%
RMK6 (1991-1995) 35.8 2.06 5.8%
RMK7 (1996-2000) 45.5 1.89 4.2%
RMK8 (2001-2005) 59.7 2.31 3.9%
RMK9 (2006-2010)* 141.6 6.65 4.7%

(*) Not including Private Finance Initiatives (PFIs)

Under RMK5, Kelantan received 7.8% of the planned total development expenditure.

Right after PAS won control of the state government in the 1990 general elections, under RMK6, Kelantan’s share of the allocation decreased to 5.8%. It fell further to 4.2% and 3.9% under RMK7 and RMK8 respectively and only somewhat “revived” back to 4.7% in RMK9.

Again, similar figures were not published under RMK10 and RMK11.

The Kelantan state government, especially under PAS, has clearly lost under this BN regime, especially over oil royalties of which the Kelantan state government receives a negligible amount.

3. Federal government revenue has increased much more than the state government revenues

According to figures in the RMK4, the total state government revenue for 1981 to 1985 was estimated at RM14.4 billion compared to the federal government revenue for the same time period of RM98.5 billion.

This means that in the early 1980s, the state government revenue was approximately 15% of federal government revenue.

In 2013, estimated state government revenue was RM20.1 billion, an increase of RM5.7 billion or 40%.

In comparison, the estimated federal government revenue in 2013 was RM220.4 billion, an increase of RM121.9 billion or 124%. In 2013, the state government revenue was a mere 9.1% of federal government revenue.

This system is clearly unfair to the states since the federal government takes in the lion’s share of revenue and is giving a smaller % back to the states.

At the same time, states in Peninsular Malaysia are not allowed to issue bonds and borrow money in the markets, which deprives them of the ability to finance new infrastructure projects which the federal government is unable to or unwilling to fund.

One way to overcome this imbalance is to allow for greater fiscal decentralization whereby the state governments are allowed to raise more revenue through the use of a wider array of tax instruments and also borrowing money via the market via state government bonds.

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  1. #1 by drngsc on Saturday, 27 June 2015 - 6:10 pm

    Yes indeed. Impian Malaysian Malaysia is a good rallying call. We must all work for a Malaysian Malaysia. To re-structure Federal-State relationship, will need a change in the tenant at Putrajaya. Without that change, it is not possible. This current insecure, greedy, power crazy and corrupt tenant in Putrajaya is unlikely to want a change in Federal-State relationship. If they do not make it worse, is already a bonus. In their insecurity, they may try and make things worse. The future for Malaysia is to change the tenant at Putrajaya, to save Malaysia. DAP must find worthy Malay partners, either internally or by external pacts, to join us in that march to Putrajaya. Let us keep working hard on this Impian Malaysian Malaysia, to realise it. Let us all join hands in our march to Putrajaya.

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