Revenue transfer to states

OUR Prime Minister, as chairman of the National Finance Council, announced two important measures that are critical for assisting states to have a bigger share of national resources which, in my view, will give real meaning to the concept of shared prosperity.

One, all water debts to the federal government would be written off. In future, state water projects would be financed not with federal loans but federal grants. This will certainly relieve states of the heavy burden of repaying federal loans. Water loans account for a major proportion of state debts to the federal government.

Two, revenue from the tourism tax will be shared 50:50 with the state governments. This would be welcomed in all states, which should be compensated for all the cleaning and maintenance costs they have to bear to make tourists feel safe and comfortable instead of being frustrated and disgusted with Malaysia for dirty beaches, broken public toilets, bad hygiene and health risks at eateries and other public places.

State governments should use the tourism tax money to promote their tourist attractions and improve local government services and not waste it on political projects.

These two measures represent a decentralisation of federal resources to the states, enabling the state and local governments to plan their development programmes with more confidence and without having to worry about where the money is going to come from. With more revenue under their control, this will expedite decision-making at the lower levels of government and avoid the politics of patronage from federal ministers who often take advantage of the mentri besar and chief ministers when approving their urgent pleas for help.

With devolution of financial powers to the states, there would be less politicking between federal and state politicians. As states become financially more autonomous, the process of democracy would also be strengthened because each state administration would have more power to decide what is best for its towns, districts and kampung.

Further decentralisation of financial and administrative controls should be considered to reduce the over concentration of power at Putrajaya, which is contrary to the concept of Malaysia as a federation of states.

We hope that at the next meeting of the National Finance Council, the Prime Minister will take up the request from several states that they be fairly compensated for their cooperation in safeguarding the environment, especially in stopping logging licences at the water catchment areas to ensure no disruption in water supply to the public.

Logging permits are a major source of revenue to states and stopping them involves a big sacrifice by their treasuries.

States are therefore justified in asking that they be compensated for cooperating in protecting the forests and keeping the rivers, mangrove swamps and wildlife as well as the orang asli settlements safe from encroachment and exploitation for commercial profits.

There should be a constitutional provision to make federal grants mandatory for states that comply with the environmental protection policies set by the federal authorities.

As the preservation of our natural resources is in the public interest of ensuring sustainable development for future generations, states deserve to get compensated with federal revenue grants for shouldering the responsibility of protecting our life from pollution and natural disasters.

Revenue transfers to states are a much better way of spreading the benefits of growth to all areas of the country and all segments of the population. They are more productive than giving cash subsidies and hand-outs to the B40 group, as these freebies will only encourage a culture of entitlement to benefits without people having to work for them.

The federal government should be generous in providing revenue grants to states so that with stronger budgets, they can make a difference at the ground level, where it matters most in our daily living.


Kuala Lumpur

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