Decentralisation is about effective governance

Published: 20 January 2015
The Malaysian Insider

A recent article I wrote proposing greater decentralisation of powers in Malaysia has managed to attract criticism and attacks by Umno apparatchiks, such as Kepala Batas MP Datuk Seri Reezal Merican and Umno-owned national daily Utusan Malaysia. They said my suggestions were nothing short of an attack on the Federal Constitution and, unsurprisingly, seditious (what isn’t, these days?).

I quickly responded by pointing out the obvious – that there is in fact an explicit provision in the Federal Constitution (Article 76A) that effectively allows the delegation of federal power to state authorities. In other words, decentralisation of powers from the federal to the state is not merely allowed but in fact envisioned by our country’s highest law.

Also, I ridiculed Umno’s hypocrisy on the matter. If it is considered seditious or unconstitutional to devolve powers from the centre to the periphery, then why isn’t it the other way around?

Over the last forty years, the federal government has wrested power from the state and local governments over what are, sensibly, local areas of governance, such as sewerage, solid waste management, public cleansing and the likes. If anything, it is the Barisan Nasional (BN) federal government that has gone against the spirit of federation.

But, more than merely disrespecting the original intentions of our country’s contract of federalism, this alarming trend of “over-centralisation” has grossly concentrated power in the hands of the federal government, resulting in two major consequences.

Firstly, it has increased the scale of corruption and rent-seeking. For example, it is immediately noticeable that centralisation tends to occur in areas that involve management contracts, the awarding of licences, as well as infrastructure projects. So, the more powers are centralised, the easier it is for the federal government to dispense patronage.

Secondly, the attempt to manage everything centrally, often hundreds of kilometres away, has been proven to be inefficient. More so in areas such as public transport, where even bus route changes require approval from the Land Public Transport Commission in the Prime Minister’s Department. As a result, it is extremely difficult for democratically elected state governments to make improvements to public transport infrastructure. Even road maintenance is subject to different ownerships – federal, state and local government.

An impasse

Due to their near-absolute control over federal and state legislatures, the BN’s agenda of gradual centralisation has managed to escape public scrutiny. This is no longer the case in today’s two-coalition environment. It may not have mattered much that state governments did not have much power as long as the federal government was cooperative, but this is clearly not the case when opposition parties hold power at state level.

In the case of Kelantan, which has been ruled by PAS for 43 out of 58 years since 1957, even their oil royalty is denied them. Terengganu also saw their oil royalty payments halted when Pas ruled the state between 1999 and 2004. The double standard is apparent when BN-controlled states such as Sabah and Sarawak have no problems receiving their fair share of oil income, as set out by the Petroleum Development Act 1974. If even what is legally enshrined can be denied, then what cause is there to rely on cooperation from the federal government?

This attitude of the BN federal government has resulted in an impasse with regard to the development of states under opposition control. In Penang, attempts by the state government to improve public transport have been thwarted time and again. Even when the state government offered to pay existing bus operator RapidPenang to provide free bus trips throughout the entire state during peak hours to encourage greater usage of public transport, the Ministry of Finance-owned bus company unfortunately felt that this offer of guaranteed income should be rejected.

More effective governance

High on the list of priorities is the need for fiscal decentralisation, without which states would continue to be severely handicapped. In most models of federation, revenue is shared between the state and federal governments. Typically, taxes collected would be redistributed to states based on a formula that takes into account the state’s share of contribution as well as its level of development.

Currently, there is no such tax-sharing mechanism as the only available federal funds are the Capitation Grant, the State Road Grant and minor grants for local councils, all of which combined amounts to just over RM150 million a year for a state like Penang. Meanwhile, state development funds are beyond the reach of state authorities, as they are managed by the State Federal Development Office, a unit under the Prime Minister’s Department.

This effectively means that state governments are starved of funds and completely reliant on revenue from properties, lands, mines, forests and local council assessments. As one can imagine, this does not actually amount to much. Constitutional constraints also mean that states cannot raise funds through loans. As a result, Penang’s 2015 budget is equal to less than 0.4% of the 2015 Federal Budget. This is an astonishingly insignificant proportion when one considers that Penang is the second most-developed state after Selangor.

Besides a more equitable revenue-sharing regime, there is also an urgent need to review the efficacy of overly centralised control over areas such as education (school principals, for instance, have no power over hiring and firing of teachers), housing (particularly when land is a state matter) and welfare, along with the more naturally local areas of governance such as public transport, waste management, public cleansing and sewerage.

In this context, the rationale behind the call for greater decentralisation is not about devolving political control per se, but making governance more efficient, effective and accountable. In other words, it is an urgent administrative exigency that would reduce federal interference in local services, allow state governments to carry out their popular mandate, and improve the responsiveness and delivery of governance at every level. – January 20, 2015.

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