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Sabah’s budget and the importance of financial prudence

November 23, 2017

Writer says only a leader with financial discipline and vision, and an exceptional passion for Sabah's economic success could keep the state in good financial shape.

COMMENT

musa-aman-sabajBy John Lo

Do you know what the most outstanding point is about Sabah’s 2018 budget, presented by Musa Aman on Nov 17? The budget’s size? Its inclusiveness? No doubt these are important, but it is the surplus of RM64.89 million. Musa has presented budget surpluses over the last four years, and in most of the years since becoming chief minister in 2003.

The result is that he has accumulated more than RM4 billion in reserves for Sabah, which is a tidy sum and an excellent foundation on which to build a secure future for all Sabahans.

The surplus of RM64.89 million for the 2018 budget may not be a large sum, but running the budget surplus for four consecutive years is not easy. To do that, there must be a long-term vision and goals for Sabah.

Many past chief ministers/finance ministers have taken the easy way out of deficit budgets. They can always push financial problems to the next chief minister/finance minister.

Accumulating and leaving a legacy of money in the treasury is not popular with financially imprudent politicians. Only the exceptionally rare ones who have a genuine sense of concern and good conscience for the future generation would do it. The best example is of a caring and concerned father doing the same thing for his children.

The surplus of RM64.89 million should be looked at in the correct context of:

Economic uncertainties within Malaysia and globally
The approaching general election (GE14)
Musa has budgeted a surplus and has, at the same time, increased spending, including more special allocations in 2018. To achieve this seemingly small RM64.89 million surplus, Musa would have to keep an extremely sharp eye on cost control and make first-class efforts in revenue collection.

Keeping the economy running smoothly, coaxing it to expand with new and value-added industries, generating employment, and at the same time maintaining a healthy financial position and accumulating an impressive state reserve are complex, demanding tasks.

Harris Salleh, when he was chief minister, managed to achieve this. After that, Sabah’s economy went into a deep economic slump. Restoring economic confidence and self-respect for Sabah took more than 20 years.

Leave politics aside. Sabah has had the most number of chief ministers by far since joining Malaysia – to be precise, 15 in total. Not wishing to be derisive and with all due respect, Sabahans should consider why there were only two chief ministers who have been able to ensure steady expansion in economic development, financial stability and accumulation of decent state reserves.

For Musa to consistently keep Sabah in a healthy financial position and, at the same time, expand the economy is probably his hardest job as chief minister. This demands a realistic vision, sound economic strategy, firm and steady hands-on implementation, a fine balance between expenditure and revenue and, after all this, the ability to put away money for state reserves. Only a leader with financial discipline and vision plus an exceptional passion for Sabah to succeed economically could do it.

To resist and desist tabling a deficit budget in an election year takes humongous effort. It is so easy to give in. A deficit budget is enormously and politically tempting in an election year. So nice to dish out the goodies. So easy to be a generous hero.

Why worry about it? Why not spend over revenue? There is always the next budget to take care of this deficit after the election. The Selangor chief minister has budgeted a deficit for 2018. Lim Guan Eng has done it. Even Abang Johari has done it. Most of the chief ministers in West Malaysia have done it.

Any responsible man on the street would avoid spending to the point of incurring a deficit to protect his family from financial disasters. A successful businessperson would never want to incur expenditure over income for fear of bankruptcy.

A responsible leader who has the long-term interests of his people and future generations at heart would not resort to a deficit budget to gain popularity and fish for votes. The deficit, by any other name, is a loan or future money to be spent in the present. Payback time will come. Deficit budgets, when they become habitual, are not easy to kick. It’s like drug addiction.

Why is Singapore doing so well? Because Lee Kuan Yew maintained the highest level of financial prudence and discipline. He never used deficit budgets or spent reserves unless it was absolutely necessary.

Sabahan leaders should emulate Singapore, which places great protection on its reserve. The Singapore government can only dig into its reserve with the approval of the president and the presidential council. Sabah should not allow any spendthrift leader to dip his hand into our reserve.

As far as possible, I will not quote figures as these are available in Musa’s 2018 budget speech. The 2018 budget, albeit a modest one, was only possible because of many years of prudent management of Sabah’s economy and finances. Musa has diversified Sabah’s economy from commodity to value-add manufacturing and service industries. Musa’s economic diversification has expanded our economy in depth as well as breadth. Concurrently, he has tightened the state administration, plugged the leakage and whipped all GLCs into profitability.

Like a businessman who has already become successful with a good reserve, Musa has delivered a budget that is expansionary, with a decent increase in revenue and expenditure. This, he has done with no imposition of an additional tax burden on the people. The only exception is the higher “sin tax” on four digits and gambling, which all decent men would support.

Musa’s 2018 budget is comprehensive, responsible, will consolidate Sabah’s economic achievements to date, and opens up new and exciting opportunities. There is something for every section of Sabahans including single mothers, retirees, farmers, fishermen, independent schools, churches and temples. The chairman of the Council of Churches in Sabah has praised Musa for his inclusiveness by allocating funds for churches and temples.

I urge leaders who think Sabah’s reserves are useless unless they are spent, to restrain from this sort of shallow political talk which will inflict Sabah with future financial troubles. Sabah will need savings/reserves to maintain economic stability and to provide financial protection for all Sabahans. All countries with proven long-term success have financially prudent leaders.

The last word – if a leader could make the people well-off by simply spending savings/reserves, there wouldn’t be any poor people anymore, or he would easily be able to make everyone rich. To produce genuine economic progress is much more complex than dishing out money. It requires the leader to have a good vision, a comprehensive set of sound policies and effective implementation. Of critical importance is financial prudence, which is lacking in many leaders.

That is why Lee Kuan Yew and Deng Xiao Ping are unique in this world. Then there are so many leaders who, because of their financial imprudence and recklessness, have overspent their countries into bankruptcy. A strong reserve signifies economic strength. That’s why the world admires China, Singapore, Switzerland and Norway, and looks down on Venezuela and Nigeria. Their leaders are the best examples of individuals who have overspent their great wealth from oil and have made their countries bankrupt.

Ultimately, it is the people who have to endure great suffering due to the financial follies of their leaders. Be forewarned that a squanderer leader could bankrupt Sabah. Be wise and entrust our present and future economic well-being to a financially prudent leader.

John Lo is an FMT reader

The views expressed are those of the author and do not necessarily reflect those of FMT.


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