Tuesday, July 8, 2008

Guan Eng wants RM4.7 billion CASH!

Lim Guan Eng, the Penang Chief Minister now demands RM4.7 billion cash allocation from the Federal Government in lieu of the Federal Govt's cancellation of the RM2 billion monorail, RM1.5 billion Penang Outer Ring Road, RM1.1 billion Mengkuang Dam expansion and RM100 million in lesser projects including the Penang Hill furnicular train. See MALAYSIAKINI: CM: Give us the cash, we'll do our own projects.
The RM4.7 billion originally formed part of an RM6.152 billion allocation for Penang's development under the 9MP, which is 3.1% of the 9MP's RM200 billion budget. The Penang state govt has plans to use the RM4.7 billion principally for food agricultural development and projects that addresses the alleviation of the financial burden of Penangites in this period of fuel price hike and rising food prices.
Is this a fair request? I think it is and I'll tell you why.
State govt cannot raise funds via borrowing
The Federal Constitution forbids state govts from directly raising funds via borrowing from third parties or the public (Sabah and Sarawak are not restricted in this way). State govts may only borrow from the Federal Govt. The question is, what if the Federal Govt refuses to lend the money? How will Penang fund its development?
Where does the "savings" of RM4.7 billion go?
Only Pak Lah and Nor Yakcop knows. Will they bother to explain this? They have to explain where this "saving" goes to under the 9MP because the public has the right to know whether the alternative use of these funds have greater merit than Penang's claim to the allocation.
Penang's contribution to the federal coffers
Penang has one of the largest Gross Domestic Product in Malaysia, probably second only to Selangor. Penang is a manufacturing, tourism and services hub. Businesses resident in Penang certainly contributes a sizeable revenue to the Federal Govt in the form of income tax, service tax, customs and excise duties. Isn't it illogical for the Federal Govt to slow down the economic development of Penang? This is especially so at a time when there are clear signs of an economic slowdown? Isn't this a case of cutting off the nose to spite the face?
The BN federal govt should really review their political strategy. Their playbook appears to be to financially starve recalcitrant Pakatan-controlled states. They have done it on Kelantan and, previously, Sabah. This type of strategy reflects the arrogant use of power. Furthermore, when this strategy is used against a key economic state like Penang, it is not difficult to miss the message that BN is announcing is that it is prepared to injure Penang's economy to punish Penangites. In the process such an action will also impair the overall M'sian GDP. It's a crazy thing to do.
I think Guan Eng should rightly be "obssessed" with the mis-allocation of the RM4.7 billion. And, I think the BN federal govt should practice a policy of engagement with the Penang state govt to consult with and, discuss, development options.


Anonymous said...

I think it's pure naivety on BN to think that they can shift the allocation in 9MP to a non-PR state and expect it to produce the same bottomline. We can see the effect of Pak Lah's administration by cutting down on the govt pump-priming. When the economy engine turns cold, it's a humongous task to restart it.

What I would like to know is what options do PR have ? I am sure when the Federal Constitution was drafted, British known for their farsightedness, would have put a provision for such scenario.

Right ?

de minimis said...

Unfortunately the Federal Constitution is heavily slanted towards the federal govt in matters of revenue collection. As I have said in the blog, the worst part of the Federal Constitution is that it prevents states from borrowing from any other party than the Federal Govt.

Sabah & Sarawak are in a special position since they secured in the constitutional provisions the right to borrow from parties other than the Federal Govt.

I am researching into the options that the state can use to overcome this impediment. One way could be setting up special-purpose corporate vehicles for specific projects that can be listed in stock exchanges. It's a work-in-progress.