Why it’s good for federal govt to transfer revenue to the states

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

One, all water debts to the federal government will be written off. In future, state water projects will be financed, not with federal loans, but with 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 tourism tax will be shared 50:50 with the state governments. This will be welcome in all states as they should be compensated for all the cleaning and maintenance that they have to spend on to make tourists feel safe and comfortable, instead of going home frustrated and disgusted with Malaysia for the dirty beaches, the broken public toilets, the bad hygiene and the health risks when eating at public places.

State governments should use tourism tax money for promoting their tourist attractions and improving local government services and not waste it on political projects.

These two measures represent a decentralisation of federal resources to the states, which will be beneficial in enabling the state and local governments to plan their development programmes with more confidence, without having to worry where the money is going to come from.

More revenue under their control will expedite decision making at the lower levels of government and avoid the politics of patronage from federal ministers who often take advantage of menteris besar and chief ministers when approving their urgent pleas for help.

With the devolution of financial powers to the states, there will be less politicking between federal and state politicians.

As states become financially more autonomous, the process of democracy will also be strengthened because each state will have bigger power to decide what is best for their towns, districts and kampungs. 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 National Finance Council meeting, 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 there is no disruption of water supply to the public.

Logging permits are a major source of revenue to states and stopping them involves a big sacrifice by state treasuries. States are therefore justified in asking that they be compensated for cooperating in protecting the forests and keeping the rivers, mangrove swamps and the wildlife as well as the Orang Asli settlements safe from human encroachment and exploitation for commercial profit.

There should be a constitutional provision to make federal grants mandatory for states which 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 to protect 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 handouts to the B40 groups 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.

Mohd Sheriff Mohd Kassim is a former secretary-general of the Treasury and the adviser to civil society group G25.

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