Opposition states and KL in money tussle

Malaysia is technically a federation of 13 states but, as the four states ruled by the Pakatan Rakyat (PR) alliance are finding out, that does not always mean very much.

These opposition states cannot govern as they see fit because the federal government holds the purse strings and controls all the major services, right down to public transport.

“We have to keep going to the Prime Minister and saying, ‘Tolong sikit (help us), we want to expand the Mengkuang Dam in Penang’, or ‘We want to set up a monorail system’, or ‘We want to clean up Sungai Klang’,” opposition MP Tony Pua said in frustration.

“The states actually have very little control over development,” added Pua, who analyses economic issues for his DAP.

The tussle for the control of development funds is a reflection of the fluidity of federal-state ties 20 months after the shocking results of the March 2008 general election.

The three-party PR won five states in the election. But one — Perak — has been wrested back by the ruling Barisan Nasional (BN) coalition, leaving the alliance with Selangor, Penang, Kedah and Kelantan.

The PR had hoped to avoid the problem of financial control because it won the economic powerhouse states of Selangor and Penang. But things did not quite turn out that way.

The central government used its parallel administrative system instead to bypass the elected leaders. This was easily carried out because the central government already directly finances most of the states’ development such as the building of roads and schools.

“The federal government refuses to respect the verdict of the 2008 general election, and wants to paralyse the state governments,” said Penang MP Liew Chin Tong, adviser to the chief minister. He said the Penang government is being bypassed down to the level of village heads.

Penang Chief Minister Lim Guan Eng complained recently that the federal government refused to disburse the allocated RM25 million to maintain state capital George Town’s Unesco World Heritage Site status. The programmes are instead being run by the federal government.

Infrastructure projects such as the monorail and a new highway in Penang have also been shelved, dampening economic growth. The state budget this year is just RM477 million.

In Selangor, an official said the State Development Office — which comes under the federal government — was physically relocated away from the Selangor State Secretariat. It operates independently with development grants, without the knowledge of the Selangor PR government.

Other signals show that the BN government is keen to maintain its grip on the purse strings.

Prime Minister Datuk Seri Najib Razak recently said Kelantan will not get the oil royalty that it has demanded but will be given “goodwill payments” managed by the central government.

Just two weeks ago, Agriculture Minister Noh Omar got into a shouting match with opposition MPs in Parliament when he said it will use its own machinery to disburse money to farmers. “This is because opposition members may say that the money is from them,” he said.

Liew said that Malaysia’s 13 state budgets add up to a mere 9 per cent of the federal budget, which is RM191 billion for next year.

After paying for basics such as emoluments and administration, very little is left over for development. Worse, major infrastructure is also beyond the control of the states.

Liew said Penang state wanted to improve its ferry services, upgrade the airport and run a better bus system but it lacked both the funds and legal control.

“That’s where the frustration starts. People expect wonders but what can we do?” he said.

To bring in extra revenue, Selangor has started Ops Kutip (Operation Collect) to hunt down debtors. This includes the recovery of RM392 million owed to three state companies by a property developer.

Selangor land officers are also knocking on the doors of land-tax dodgers.

Other measures include speeding up administrative processes to increase revenue.

Penang, meanwhile, is wooing investors to undertake private projects to ramp up economic activities.

The PR’s big hope is, of course, to win federal power so that these financial issues will be resolved. But right now, that does not look too likely.

The Straits Times