Comparing the state budgets of Penang and Selangor (2011)

How time flies. Back in 2010, we were just charting out the second only Selangor state budget for the year ahead in 2011. This was my comparison between the budgets of Penang and Selangor, written in December 2010 for the Penang Monthly.

Comparing the state budgets of Penang and Selangor 

Penang and Selangor are the testing ground for alternative and future styles of governance in Malaysia. What will be decisive in the long run is not so much the points gained in the daily rhetorical sniping that seems to be an inescapable part of a two-coalitional politics, but how well the state governments are run. The state budgets are therefore what analysts should be studying.

Amidst the noise and clamour of Malaysia’s politics, it is easy to forget that daily responsibilities continue for governments and bureaucrats. The Pakatan Rakyat (Pakatan) coalition for example, has suffered several recent shocks, namely the twin by-election losses in Galas and Batu Sapi, followed by the damage control it has had to put into action following Zaid Ibrahim’s decision to quit the Deputy Presidency race. These events have occupied much media space.

Whilst Pakatan’s political resilience is an absorbing issue, it is perhaps more important to examine the ways in which Pakatan state governments are running their states respectively. This is a more appropriate reflection of Pakatan’s philosophies translated into reality. For example, both Penang and Selangor state assemblies tabled their respective 2011 budgets recently. As two states that contribute significantly to the nation’s wealth and economic development, it is in the interest of all stakeholders (including the Barisan Nasional Federal Government) to ensure these states are properly run and managed in order to continue attracting domestic and foreign investment. A crucial aspect of this lies in the financial management of the states’ resources. Some common themes can be easily identified between the two state budgets.

First, both state governments seem confident about developing more efficient financial management tactics, and eventually shoring up better state reserves in the mid to long-term. Penang tabled a 2011 budget of RM897.36mil, a 25.7% increase compared to its 2010 budget of RM713.79mil. Out of this, 38% contributes to operating expenditure (RM343.1mil) and 62% to development expenditure (RM554.26mil). Selangor tabled a 2011 budget of RM1.43bil, a 3.4% reduction from the 2010 budget of RM1.49bil. Out of this, 58% contributes to operating expenditure (RM860mil) and 42% to development expenditure (RM600mil).

Penang tabled a deficit budget of 12% for the year ahead, whilst Selangor tabled a balanced budget. Selangor’s Opposition Leader was nevertheless keen to criticise Selangor for its RM65mil budget deficit in 2009 during the recent budget debates. The reason given for a deficit in Penang was the social welfare allocations for targeted groups like senior citizens, the hardcore poor, schools and religious programmes. However, Chief Minister Lim Guan Eng stated that the deficit was funded by state reserves, and that he was confident the balance in the reserved funds would increase by the end of 2010 through cost-cutting measures and an increase in revenue. Selangor’s response was similar, with Menteri Besar Khalid Ibrahim saying that state revenues had exceeded its original estimates, and that with better revenue collection methods, state revenues and reserves would increase the following year.

Penang’s government was especially proud of the flattering mention in Transparency International’s and the 2010 Auditor-General’s (A-G) reports of its efforts to heighten transparency in governance and increase efficiency in financial matters. The A-G report especially, commended the government for the increase in its accumulated fund of RM75mil in 2009 compared to 2008. Penang also registered a 1.4% increase in state revenue. As for Selangor, a newspaper report mistakenly quoted from the same A-G report that RM977.7mil was apparently missing from its state accounts, when only RM206mil remained to be adjusted. The full amount was in fact accumulated over a period of seven years. Furthermore, close to 90% of Selangor’s debts of RM829mil (due to loans taken from the federal government) were incurred when the previous administration decided to privatise its water services industry, a move the current government is attempting to reverse. Clearly a deep financial mess was left behind in Selangor, which impacts upon present accounts.

The 2011 budget speech nevertheless shows how an array of measures has been taken and will continue to be taken to increase state revenue further – mainly via the collection of quit rent arrears through land and district offices. Selangor has also successfully collected RM390mil in debts owed it by the Talam Corporation, and has used part of this to start its microcredit scheme for small-time entrepreneurs and the poor.

Second, both states highlighted the need for a specific roadmap and blueprint to outline their vision, what each wants to achieve and how they are to go about it. These are both mentioned in the respective leaders’ speeches. The Penang Blueprint is being prepared by the state think-tank, the Socio-Economic and Environmental Research Institute (SERI), and is soon to be unveiled, while the Agenda Rakyat Selangor (Selangor People’s Agenda), prepared by the state’s Economic Planning Unit and the Menteri Besar’s Office, is to be launched at the beginning of next year. Although the documents are not yet published, the budget speech gives a good indication of their contents. This is all the more necessary since there are such high expectations put on the leadership of the Pakatan. Although the methods may differ, both roadmap documents are a result of extensive consultations with various stakeholders and representatives of the business world and civil society, as well as the community at large.

In promoting the economy, both states pinpointed similar industries to concentrate on. Both Penang and Selangor for example focus on policies aimed at clean, green, sustainable and liveable environments for citizens as both recognise that any economic growth will require comfortable urban living which will in turn attract investment. Specifically, the areas most discussed are the industrial sector, tourism, infrastructure and utilities, agriculture and livestock, trade and consumer affairs, education, the environment, job creation, liveable cities, public transport, cleanliness and safety, urban renewal, rural development, and selected land reform measures. State governments have jurisdiction over natural resources, hence the need to ensure that these are carefully managed. Of course the states are very different in makeup; their population size, pressing needs and expectations, existing infrastructure and proposition points vary, but the direction towards sustainable living is found in both their agendas.

This list may seem like a hodgepodge of issues that throws in everything and anything possible – especially when state governments today have limited purview over major policies due to the increasing centralisation of powers by the federal government. However, the states’ interest on many of these issues is necessary and there are attempts at tackling some of the more difficult problems faced by the people. For example, handling crime or public transport is not necessarily the responsibility of a state government but because people consider these priority areas, both Penang and Selangor have taken the initiative to outline their end-goals. Some of these may involve working closely with the Performance and Management Unit (PEMANDU) under the Prime Minister’s Department. Despite justified criticism of the latter’s ostentatious budget, some bipartisanship will be needed.

Prevalent within both documents is also the emphasis on good governance, transparency and accountability. The theme of “competency, accountability and transparency” continues, cutting across all layers of administration. Both state governments have taken bold strides towards the Freedom of Information Enactment, started open tenders for new contracts, and championed the rule of law. Selangor has initiated the Integrity Pact for state companies such as Kumpulan Semesta Sdn. Bhd. and Perbadanan Kemajuan Negeri Selangor (PKNS). These were announced in the budget speeches, and are expected to be discussed in the blueprints.

Finally, both state governments strongly focus on social welfare programmes. Manifestos from Pakatan parties announced before general elections in March 2008 contained demands for better social safety nets for those in need and for marginalised groups, which the state governments have been trying to live up to. As a result, both states adopted policies aimed at assisting the elderly, Chinese and Tamil language schools, the disabled, religious schools, and mosques and religious teachers. Selangor has some additional welfare benefits for victims of domestic abuse and children of estate workers, a fund for all children born in the state, and a policy of free water for the first 20m3 used per household. State governments are in an awkward position as they do not have authority in determining broad economic policy, but more will be expected of the Pakatan states in determining an economic model distinctively different from the Barisan Nasional style of mega-projects and financial handouts.

It is positive to note that both Selangor and Penang have common goals and ideals in attracting investment, and making their states liveable and sustainable. More could certainly be done in collaboration with the other Pakatan states to create an economic and investment corridor. This would then surely show that in Malaysia’s development, there are alternatives to pumping RM5bil into a 100-storey tower.

Leave a Reply

Your email address will not be published. Required fields are marked *