The 2019 State Budget proposal, which was tabled during the first day sitting of the State Legislative Assembly yesterday, adopts six key strategies aimed at generating a higher economic growth as well as achieving a more balance economic development, which will be development biased and rural focused budget to stimulate a higher level of economic activities and progress.
In the 2019 Budget proposal, a substantial allocation of RM9.073 billion is proposed for Development Expenditure, which represents about 76% of the total budget, while 24% or
RM2.841 billion is for Operating Expenditure. The budget manifests the State government’s commitment to intensify the implementation of programs and projects to further accelerate development.
A total of RM6.049 billion or 67% of the total allocation of RM9.073 billion will be provided for the development of rural areas. This provision is much higher as compared to RM2.982 billion in 2017 and RM3.062 billion in 2018.
The continual efforts in rural development are vital towards achieving the development objective in opening up greater opportunities in the rural and more remote areas for the economic prosperity of the rural community.
Digital Economy as Key Pillar
The digital economy will continue to be one of the key thrusts of the State’s future economy, which the State Government is committed to implement through Sarawak Digital Economy initiatives towards its vision in maximizing digital technology and digitalization to leapfrog the State economy.
The State will continue to drive its economic development through further broadening investment that will create long-term sustainable economic growth. The investment will focus on higher value-added activities in the manufacturing, agriculture and services sector, as well as resource-based industries such as oil and gas, agro-based, bio-tech and forest related industries that will contribute significantly to the economic growth of the State.
In addition to the investment incentives given by the Federal government, the State offers attractive incentives in terms of competitive price of land, low down payment for purchase of industrial land and the provision of other facilities to ensure an environment that is conducive for the business community.
The private sector has been the key driver of the Sarawak’s economy. To facilitate private sector investment, the State will continue with the measures, among others, the provision of basic infrastructure to enhance connectivity, provision of basic amenities and establishment of training institutions as well as industrial estates.
These are essential elements to enable private sector to flourish and contribute significantly to the State’s economy. The State will continue to embark on the implementation of e-Government to further enhance Government service delivery such as providing seamless and cashless payment gateway as well as a more open data policy for value-added transactions.
In this regards, adequate funding will be allocated for the enhancement of service delivery.
The 2019 Budget proposal is indeed “An Extraordinary Budget”. This is because the State Government is not only proposing a large development budget by record revenue for 2019 as the State is tapping into a new major revenue stream.
New Sources of Revenue Stream
Looking at the current reality and assessing the situation objectively, Sarawak, despite 55 years of independence, is still lagging very far behind in its development as compared to that in Peninsular Malaysia.
Indeed, it is saddening to see that the people have not been able to enjoy good quality of life with the necessary infrastructures and amenities, particularly the rural community. Therefore, the State has not much choice, but to be self-determining in development efforts to undertake the massive works ahead.
Such efforts include putting the infrastructure and basic amenities like roads and bridges, provision of water and electricity supplies, education, healthcare and many more in place. These investments are capital intensive and hinge upon the ability to secure new sources of revenue stream to fund the implementation of the development agenda.
But the usual method of funding the development through the annual allocation from both the State and Federal budget is definitely not sufficient to support the development agenda
Hence, the State Government has to resort to a more radical solution in order for Sarawak to take control of its development agenda in a more consorted and self-determining manner.
One of the solutions is to find ways to fund these much long awaited infrastructure projects and basic amenities throughout the State. It is obvious that the yearly State development expenditure budget will need to be increased accordingly. This calls upon the State to look for new sources of revenue stream and at the same time tapping into available alternative funding.
The State Government, in its efforts to expand its revenue base, has studied the provisions in both the State and Federal Constitutions and the relevant laws. As in the Tenth Schedule, Item 7 of the Federal Constitution, the State is allowed to impose State Sales Tax.
Under the State Sales Tax Ordinance 1998, the State imposes sales tax on crude palm oil, crude palm kernel oil, lottery tickets, which has been proven to be a good source of revenue for the State.
Chief Minister, Datuk Patinggi (Dr) Abang Haji Abdul Rahman Zohari Bin Tun Abang Haji Openg, who is also the Minister of Finance and Economic Planning, in tabling the Budget proposal, said the State, after thorough analysis and careful consideration, has decided to impose 5% sales tax on petroleum products with effect from January 1, 2019. The sales tax will be levied on petroleum products namely Crude oil; Natural gas; Liquefied natural gas; Chemical based fertilizers; and Gas to liquid products.
The revenue expected from the imposition of sales tax on these petroleum products is estimated to be at a sum of RM3.897 billion in 2019. The higher revenue expected from this new revenue stream together with the other sources of revenue as well as alternative funding will help to support the State in its undertakings on major development programs and projects.
The State will be able to accelerate its development to be at par with that of Peninsular Malaysia; narrow the disparity gap between the urban and the rural areas; improve the quality of life of the people especially the rural community and Achieve the State’s vision to become a high income State by the year 2030.
He said this fiscal flexibility would enable the State to manage its financial resources effectively and thus, allow the state to speedily implement more rural infrastructure, water and electricity supplies, internet, schools, clinics as well as agricultural and other economic programs.
Datuk Patinggi Abang Haji Johari said the State Government has a strong commitment to ensure that Sarawakian will no longer be deprived of the basic needs and the opportunity to a better life and a brighter future.
He said the total State revenue for 2019 is projected at RM10.513 billion, an increase of RM3.547 billion or 51% as compared to the revised revenue estimates of RM6.966 billion for 2018. This will be the first time the State is expected to achieve such record high revenue of more than RM10.0 billion. This level of revenue is crucial to enable the State to move forward with the development agenda for the benefit of all Sarawakian.
He said the 2019 State revenue estimate is made up of Tax Revenue, which is expected to be at RM5.268 billion or 50% the total expected revenue in 2019, comprises the RM4.462 billion from sales tax of which RM3.897 billion will be from petroleum products while RM445 million will be generated from crude palm oil/crude palm kernel oil and RM90 million will be from lottery.
Datuk Patinggi Abang Haji Johari said a sum of RM474 million will be from forestry of which RM267 million is expected to be contributed by forest royalty while RM207 million will be from timber premium and RM332 million from raw water and mining royalties, land rents and others.
The Non–Tax Revenue is estimated at RM4.997 billion or about 48% of the total expected revenue which will be derived mainly from the following major components: RM1.990 billion from cash compensation in lieu of oil and gas rights; RM1.500 billion from dividend income; RM1.006 billion from interest income; RM250 million from land premium; RM120 million from cash compensation in lieu of import and excise duties on petroleum products; and RM131 million from others, including licenses, service fees, permits and rentals.
The Non-Revenue Receipt, which is expected to be at RM9 million, will be derived mainly from forest liquidated damages, disposal of assets and forest compounds and Federal Grants and Reimbursements, which is expected to be at RM239 million.
Datuk Patinggi Abang Haji Johari said a sum of RM10.391 billion is proposed for Ordinary Expenditure. Out of the total allocation, RM2.841 billion will be for operating expenditure, which consists of RM232 million for Charged Expenditure and RM2.609 billion for Recurrent expenditure.
A sum of RM7.550 billion is proposed to be appropriated to the Statutory Funds of which RM7.3 billion is for the contribution to Development Fund Account to finance development programs and projects. The remaining RM250 million is for appropriation to Contingencies Trust Fund.
The proposed allocation of RM2.841 billion for Operating Expenditure next year is an
increase of RM212 million, which is about 8% over the revised expenditure of RM2.629 billion for this year.
Out of the 2.841 billion proposed for Operating Expenditure, RM798 million or 28% will be for personnel emoluments while RM983 or 35% will be for supplies and services; RM909 million or 32% for grants and fixed payments, including operating grants to Statutory Bodies and local authorities, servicing of public debts and payments of gratuities, pensions and scholarships; RM52 million for the procurement of assets and RM99 million for other operating expenses.
Datuk Patinggi Abang Haji Johari said the State Government has decided to introduce a new policy whereby every newborn child as long as they are Sarawakian will be given one-off incentive of RM1,000.00 irrespective of ethnicity, religious beliefs, social status or political affiliation.
He said the incentive can be withdrawn upon attaining the age of 18 and is meant for their further education or as capital to pursue their career. In 2019, the State Government shall allocate RM40 million based on the average of 40,000 babies born each year.
Budget Surplus for 2019
Datuk Patinggi Abang Haji Johari said taking into account of an estimated total revenue of RM10.513 billion and a total proposed Ordinary Expenditure of RM10.391 billion, the proposed 2019 Budget is expected to generate a surplus of RM122 million which will enable the State to continue building up its financial reserve.
This is to ensure its healthy financial position and financial sustainability in the long run. Of course, there are speculations saying that the State Government may touch the reserve. No reserve being touched. We know how to manage our economy,
He said the proposed Development Expenditure Estimates for 2019 have taken into consideration amongst others priority, high impact and people centric projects particularly in the rural areas; commitment to complete the implementation of the on-going projects; capacity to implement projects during the year; and reprioritization of expenditure undertaken by Federal Government to rationalize its fiscal position.
Datuk Patinggi Abang Haji Johari said a sum of RM9.073 billion is proposed to finance various programs and projects under the 11th Malaysia Plan of the State including socio-economic and rural transformation initiatives, the walkabout projects and initiatives under the Digital Economy.
Of the total provision for development expenditure, RM8.813 billion will be funded by the State while RM260 million will be financed by the Federal Government through reimbursable loans and grants.
He said the proposed Budget for the year is fairly distributed to ensure a sustainable and balanced development throughout the State particularly between the urban and the rural areas.
He said the State will continue to invest in a range of initiatives to ensure that the on-going provision of vital services will benefit Sarawakian from all walks of life. The proposed 2019 Development Budget of RM9.073 billion will focus on the following initiatives to accelerate development in rural areas.
A total sum of RM6.049 billion is proposed in 2019 Development Budget of which RM2.350 billion is set aside for the implementation of the following projects:- RM1.535 billion for Walkabout Projects; RM500 million for Rural Transformation Projects; RM243 million for Minor Rural Projects; and RM72 million for Program Penambahbaikan Rumah Miskin Sarawak (PPRMS).
A sum of RM1.105 billion will be allocated for the implementation of various projects, amongst others Jalan Sg. Bidut / Kpg. Tutus / Kpg. Sebedil /Kpg. Bungan Kecil; Jalan Dari Sibu Jaya Ke Jalan Kong Yit Khim; Construction of Pasai Siong Hilir Road; Road Construction from Marudi to Mulu via Long Terawan; Jalan Ulu Tubai menuju ke Mentawai / Gunung Buda; Jalan Pakan, Ulu Julau, Ulu Kota Pakan (Phase II); Jalan Nanga Menuan / Nanga Setepus; Upgrading and Rehabilitation of Belaga to Menjawah Road; Jalan Baru Tatau ke Kuala Tatau; Jalan Kampung Sebauh to Jalan Sebauh Hilir; Jalan Kampung Igan to Rumah Panjang Sungai Ilas and Kampung Sah, Kebauw, Batang Igan.
The other projects comprising roads, bridges and jetties are Jalan Rantau Panjang / Rassau di Batang Igan Fasa 1; Jalan Ijok / Teguyo / Lempaong / Batu Pesok / Rantau Layang; Nanga Kesit – Ulu Lemanak – Engkari Road, Lubok Antu; Jalan Kpg Tuie / Kpg Suri; Sg. Limbang Bridge, Sg. Bunut No. 2 Bridge and connecting roads; Construction of Jambatan Long Lama, Batang Baram; Balance Cantilever Bridge over Batang Kemena at Sebauh and Marudi Bridge over Batang Baram.
The State will also build four more bridges for the benefit of the people, namely Muara Lassa Bridge, Mukah; Batang Rambungan Bridge, Lundu; Bintulu-Jepak Bridge crossing Kuala Kemena, Bintulu; and Batang Lupar Bridge, Samarahan / Betong.
A sum of RM190 million is proposed for the implementation of various water supply projects including Water Supply from Kota Samarahan to Sebuyau, Samarahan; Pipeline from Assyakirin Reservoir to Nyabau Water Treatment Plant Intake; Program Membaik pulih dan Menaik taraf Sistem Pengeluaran Air Negeri Sarawak; Program Retrofit & Treatment plants & reservoir; Bau / Lundu / Sematan Regional Water Supply; Program Pipe Renewal; Upgrading of Berawan Water Treatment Plant; Trusan Regional Water Supply; and Dalat Water Supply- Phase II.
Datuk Patinggi Abang Haji Johari said the State aims to become a net exporter of agricultural produce and products to meet the demand of both the domestic and global markets. This vision could be achieved by transforming agriculture into a modern, competitive and sustainable sector, capable of generating new innovative businesses and high-value employment opportunities.
The agriculture sector needs to be modernized and commercialized through leveraging on
advanced technologies. A sum of RM315 million is proposed in 2019, which among others, to provide for Venture capital program and to strengthen the business model for the agriculture sector and Crop Industry Development.
The crop Industry Development includes Establishment of permanent food productionpark at various divisions; Agro-park at Samarahan and Sarikei; Fertigation project in Mukah; and Crop development programs such as paddy, fruits, rubber, oil palms, vegetables and herbs.
The Rural Development programs include development of rural growth Centers namely Inland fishery, aquaculture, livestock and veterinary related projects; Agriculture education and promotion; and Mechanization and agricultural infrastructure.
Datuk Patingg Dr Abang Haji Johari said the State will step up the implementation of the rural transformation projects with sufficient allocation being allocated for the provision of basic facilities and amenities including roads and bridges, rural water and electricity supplies as well as other people centric projects under the 11th Malaysia Plan.
The State will continue with the expansionary fiscal policy with a substantial development budget of RM9.073 billion in 2019, the biggest in the history of Sarawak. The development programs will definitely open up larger areas and create more jobs and business opportunities. The development programs will ensure the State economy will become more vibrant and resilient, which eventually will bring economic prosperity to all Sarawakian.
The state, in the continual effort to care for the well-being of the people, will continue to build quality and more affordable houses targeting at the lower income group. For 2019, a sum of RM141 million is proposed for housing development including financing of new and on-going construction of 1,827 units of affordable houses under Rumah Mampu Milik (RMM) and Rumah Spektra Permata (RSP).
The implementation of RMM involves seven locations namely Darul Hana in Kuching; Ranggau, Limbang; Kampung Datu Baru, Sibu; Kampung Bunga Rampai, Bau; Beratok, Serian; Kampung Tabuan Melayu and Kampung Tabuan Foochow; and Kampung Kapit Baru.
Besides, five locations have been identified for the construction of affordable houses Under Rumah Spektra Permata (RSP) namely Kemuyang, Sibu; Lundu; Igan, Mukah; Tian Matu, Mukah; and Sematan.
The 2019 Development Budget also proposes to allocate a sum of RM270 million for the redevelopment of traditional villages, which include Darul Hana Redevelopment Project; Kampung Redevelopment for Tabuan Melayu and Tabuan Foochow; Kampung Sejingkat Redevelopment; Project Penempatan Kampung Sungai Bedaun, Kuching; Sandfilling and Infrastructure Works at Kemuyang, Sibu; and Kapit Baru Redevelopment Project. .
A further sum of RM63.4 million would also be set aside for the implementation of 25 kampung extension or residential schemes throughout the State to provide residential lots complete with the necessary infrastructures and utilities services. This effort is aimed at raising the living standard of our rural community.
The State Government has also planned for the three development agencies in RECODA that is Upper Rural Development Agency, Ulu Rajang Development Agency ODA, which is given RM1.5 billion, Highland Development Agency in Baram area, RM1.5 billion and the North Development Agency in the northern part of Sarawak another RM1.5 billion, all from the State fund.
Datuk Patingg Dr Abang Haji Johari said the State, in line with the State industrialization program, will continue to build infrastructure suitable for industries. A sum of RM85.3 million is proposed for the implementation and completion of various industrial estates, which include Demak Laut Industrial Park; Sematan Industrial Estates; Sri Aman Industrial Estates; Bau Industrial Estates and Rantau Panjang Industrial Estates.
A sum of RM18.4 million is proposed for the implementation of various entrepreneurship programs and projects for SMEs, which include Samalaju SME Cluster and Anjung Usahawan in Lawas, Sundar,Trusan and Gedong. The development of SMEs will remain a priority so as to achieve a more inclusive and balance growth.
Rebuilding of Dilapidated Schools
There are a total of 1,020 dilapidated schools in the State of which 415 are considered critically dilapidated. Education is a subject under the purview and responsibility of the Federal government as enshrined in the Federal Constitution but the current state of schools particularly those in the rural schools require immediate attention.
In fact, the previous Federal Government in 2018 Budget approved RM1.0 billion specialallocation for the repair and upgrading of the dilapidated schools. The new Federal Government ought to fulfill this obligation by providing the funding as approved. In fact, the amount is hardly sufficient as much more than RM1.0 billion is needed to repair, replace and rebuild all the critically dilapidated schools in the State.
Unfortunately, the 2019 Federal Budget did not indicate any allocation for dilapidated schools in Sarawak. It is disheartening to see children, who have long been suffering from such poor quality condition, are forced to study in such inferior learning environment.
The state has to step in to facilitate the development of schools in Sarawak using State fund and will continue to do so next year. A sum of RM81.7 is proposed to be allocated to rebuild, repair and upgrade the dilapidated schools including providing water and electricity supplies.
The development allocation as proposed in the 2019 State Budget shows only a partial picture of the overall public sector expenditure in the State as programs and projects that are funded directly by the Federal Government and through alternative funding are not reflected in the State Budget proposal as highlighted.
The State is committed to spend about RM11.0 billion in the next two years for the implementation of various projects including water and electricity supplies as well as road network.
New financial model
The State is leveraging on a new financial model namely, via the Development Bank of Sarawak (DBoS) as well as opportunity in the capital market to source for competitive alternative funding.
Utilisation of alternative fund raised through DBoS and capital market would allow theState to manage its cash flow more efficiently and at the same time, ensure financial capacity to take care of its other responsibilities of the State.
The ability to leverage on these alternative sources of funding would ensure funds are readily available to support the development momentum of the State. In this way, the State could have the fiscal flexibility in strategizing its development agenda and managing its cash flow to meet its expenditure and at the same time building adequate reserves to meet any economic uncertainties and for a sustainable future.
Datuk Patingg Dr Abang Haji Johari said a total of 282 walkabout projects costing RM6.3 billion have been approved for implementation. Most of these projects are roads and bridges, water and electricity supplies, housing and social amenities. These projects aim at providing better public facilities and amenities particularly to the rural economy.
Out of the 282 approved projects, 257 projects are in the pre-contract stage, 20 projects are under construction and five projects have been completed. Most of these projects are scheduled for completion by the end of 2020.
To date, a total sum of RM1.45 billion has been allocated to various implementing agencies to implement 4,812 projects throughout Sarawak. A total of 2,496 projects or 52% had been completed as at August 31, 2018 while the remaining 2,316 projects of 48% are still at various stages of implementation.
The Prime Minister, Tun Dr Mahathir Mohamad, during the tabling of the Federal Mid-Term
Review of the 11th Malaysia Plan 2016-2020, presented the new direction of the Federal Government, which among others, include the reduction of development expenditure ceiling from original allocation of RM260 billion to RM220 billion to consolidate its fiscal position.
However, despite the reduction in the development expenditure ceiling, he has given assurance that priority will be given to development in Sarawak and Sabah to spur both States to higher economic growth.
The Federal Government, in accelerating the development in Sarawak and Sabah, will undertake the steps to intensifying economic growth and development planning; improve infrastructure for better connectivity; expand access to basic infrastructure, amenities and services; increase employment opportunity; and enhancing the development of customary land.
The State Government calls upon the Federal Government to fulfill these promises made. Sarawak has contributed significantly to the national economic growth as well as to the Federal Government coffer in terms of collection of taxes and revenue from oil and gas.
It is only fair that the Federal Government provides more equitable allocation to the State particularly for development purposes. This is imperative so that all Sarawakian can enjoy the same quality of life as their counterpart and to narrow its development gap with that of Peninsular Malaysia.
The allocation for Sarawak of RM4.346 billion as announced in the 2019 Federal budget is only 7.94% of the total development budget as compared to RM4.336 billion in 2018,which was 9.42% of the total development budget.
The 2019 Federal budget does not reflect a fair and equitable allocation to Sarawak despite the promise made by the State Pakatan Harapan to make sure that Sarawak and Sabah will get 30% of the Federal development allocation.
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