Sabah 2012 Budget Is the Biggest Ever RM4.048 Billion

Sabah Chief Minister Musa Aman has turned the fortunes of the state around since he came to power in 2003. He has come down hard on corruption, has improved infrastructure and infused new life into a creaking state machinery.

Sabah achieved sound financial management 11 years in a row with clean bill certification awarded by the Auditor General. Sabah also achieved the highest ratings of “AAA” by RAM Ratings Services Berhad for 3 consecutive years. Sabah also obtained ISO certification by Moody International for efficiency and proper state budget management for 3 consecutive years. Sabah under Musa Aman achieved record annual GDP growth, averaging 5%, in the eight years, 2004-05 to 2008-11. For 2012 the growth is projected 5% again when the State 2012 Budget was unveiled yesterday by Musa Aman amidst a backdrop of rising uncertainties in the global economy.

The release of the 2012 Sabah budget yesterday has left many Sabah observers relieved by what Sabah Chief Minister cum Finance Minister Musa Aman didn’t do: He avoided throwing Sabah’s economic recovery off course. The widespread view is that he has handled two major issues — the state’s Wellbeing and Prosperity — with aplomb.

The budget for the next fiscal year 2012 presents a balanced approach to long-term economic planning and short-term considerations of sustaining … the momentum in economic recovery. The budget reflects confidence and clarity and many describe the budget as “prudent and progressive”, and one businessman friend called the budget … pragmatic and practical.

In presenting previous budgets in his role as finance minister between 2001 and 2003, Musa Aman was as populist as they come. Today, his approach is different. “Fiscal policy has to be guided by the required framework for fiscal prudence,” Musa said as he unveiled the budget, proposing to spent RM4.048 billion next year making it the biggest State Budget ever in the history of Sabah.

The overall focus of the government on improving its fiscal position and increasing fiscal transparency is highly commendable. Musa Aman said the huge supply expenditure was estimated after taking into account the states financial strength and estimates of revenue totaling RM3.69 billion. The major revenue contribution is to come from sales on crude palm oil, petroleum royalties, income and interest from investment, land and forestry and another RM1.521 billion from the Federal Government.

Moving toward better fiscal management and transparency would mean a number of benefits, including increasing the efficiency of the economy, improving Sabah’s attractiveness as an investment destination and providing the government greater fiscal flexibility if — or perhaps when — it has to deal with future economic shocks.

Musa Aman who is also the finance minister has done “a decent job”, the 2010 Auditor General Report showed several actual figures that reflect the highest achievements in the states financial history such as:
1) State Reserves exceeding RM3 billion
2) State Revenue exceeding RM4 billion
3) Actual surplus amounting to RM730 billion
4) Development expenditures at RM1.17 billion
5) No arrears on Federal loans ( Under Musa Aman Sabah Government has paid all its dues to the Federal Government)

I’m sure the latest budget may lay the foundation for bolder measures in coming years. However, it is often the budget’s less bold and often boring bits that matter the most. That is, the reams of tedious fiscal arithmetic that go into determining whether the various commitments that the finance minister makes in his budget speech can be easily funded from the revenue or hinge on some preposterously optimistic assumptions. On this criterion, the budget fares rather well.

To critics of Musa Aman’s 2012 Budget, Keep in mind that Pakatan Governments would kill to be in the position Sabah is in, to grow at 5%, Sabah has endured the economic downturn with modest impact, and its economy “grew well” in 2011, “so let us not worry too much”.

Musa Aman has maintained relief for some sectors. For example, the implementation of infrastructure and public utilities programmes will involve an allocation of RM1.285 billion of which RM458.8 million is for water supply, Rm270.63 million for road and RM63.58 for sewerage. And then to strengthening further the agriculture sector RM335.95 million would be allocated so that there is high yield in local food production. Even in the tourism sector RM158.84 will be allocated and mind you tourism from January to September 2011 registered RM3.662 billion of which RM1.45 billion was from foreign tourist and RM2.212 billion from domestic tourist. Even the manufacturing sector will be getting allocation of RM98.15 million.

Sabah is addressing foreign direct investment (FDI), too. The Sabah Government under Musa Aman is working with the Federal Government and wants to make FDI user-friendly by consolidating regulations and guidelines into one document. This will enhance the clarity and predictability of our FDI policy to foreign investors. Musa Aman expects foreign investors to bring in big money — an estimated in billions.

If Musa Aman has his way, Sabah’s GDP will grow well beyond current expectations. One of his priorities is to revert quickly to the high-growth path of 9%, then find the means to hit double-digit growth. The economy stabilized in the first quarter of 2010-2011 itself, when it clocked a GDP growth of 5%, as against 5.8% in the second quarter of the preceding year. It registered a strong rebound in the second quarter, when the growth rate rose to 5.5%. With the advance estimates placing the likely growth for 2010-2011 at 5%, Musa Aman said “we are indeed vindicated in our policy stand.” The final figure may well turn out to be higher when the third- and fourth-quarter GDP estimates for 2010-2011 become available. He expects growth in the next fiscal year to be higher.

Many things do indeed seem to be going his way. The growth rate in manufacturing in December, for example, was 7% — the highest in two decades. There are also signs of a turnaround in merchandise exports, with growth in November and December after a decline for some months.

Indeed, Sabah has become miracle economy, defined internationally as those with over 5% growth. The best news comes from Sabah, historically the biggest failure. From 2004-05 to 2008-11, Sabah averaged 5% growth annually. It was virtually Malaysia’s fastest growing state, on par with Selangor and Penang. That represents a sensational turnaround. Musa Aman deserves an award for the most inclusive revolution of the decade and he deserves kudos for making Sabah stage a huge turnaround.

I must qualify this story. Fast growth in poor states does not automatically mean that growth has reached all poor people.

But let us celebrate the emergence of Sabah as miracle economy. This is surely one of the biggest achievements of the decade.