A budget that brings hope to rural folks

‘ After thorough analysis and careful consideration, the state has decided to impose five percent sales tax on petroleum products. This will take effect on January 1, 2019.’

The State Budget 2019 proposal adopts six key strategies aimed at generating a higher economic growth as well as achieving a more balance economic development in the State.

CHIEF Minister Datuk Patinggi Abang Johari Tun Openg arriving at the DUN building in Kuching to present the State
Budget 2019 proposal yesterday.

First: Development Biased and Rural Focused Budget

The state will continue with its development-biased and rural focused budget to stimulate a higher level of economic activities and economic progress for the state. In the 2019 Budget proposal, a substantial allocation of RM9.073 billion is proposed for Development Expenditure.

This represents about 76 percent of the total budget, while 24 percent or RM2.841 billion is for Operating Expenditure. Of the total development budget in 2019, RM6.049 billion or 67percent allocation 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. Our continual effort in rural development is vital towards achieving our development objective in opening up greater opportunities in the rural and more remote areas for the economic prosperity of our rural community.

Second: The State Development Agenda

The state will continue with its expansionary fiscal policy with a substantial development budget of RM9.073billion in 2019, the biggest in the history of Sarawak.

Third: Digital Economy as the Key Pillar of Economic

Transformation Digital economy will continue to be one of the key thrusts of the state’s future economy.

The state government is committed to continue with the implementation of the Sarawak Digital Economy initiatives towards its vision in maximising digital technology and digitalisation to leapfrog the state economy.

Fourth: Investment Driven Economic Growth

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 would contribute significantly to the economic growth of the state.

Fifth: Private Sector as the main Engine of Economic Growth

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.

Sixth: Effectiveness of Service Delivery System

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 we are not only proposing a large development budget but a record revenue for 2019 as we are tapping into a new major revenue stream.

New Sources of Revenue Stream In order for the state to determine and take control of its development agenda in a more concerted and self-determining manner, we ought to resort to a more radical solution. One of the solutions is to find way 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, 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 Schedule 10, Part V(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 and tyres, and this has been a good source of State revenue.

Sales Tax

After thorough analysis and careful consideration, the state has decided to impose five percent sales tax on petroleum products. This will take effect on January 1, 2019.

The sales tax will be levied on petroleum products namely crude oil, natural gas, liquefied natural gas, chemical based fertilisers 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 programmes and projects.

Revenue Estimates for 2019

The total state revenue for 2019 is projected at RM10.513 billion, an increase of RM3.547 billion or 51 percent 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 a record high revenue of more than RM10.0 billion.

This level of revenue is crucial to enable us to move forward with our development agenda for the benefit of all Sarawakian.

The 2019 state revenue estimate is made up of Tax Revenue which is expected to be at RM5.268 billion or 50 percent of the total expected revenue in 2019, comprises RM4.462billion from sales tax of which RM3.897 billion is from petroleum products; RM445 million is generated from crude palm oil/crude palm kernel oil; RM90 million is from lottery while the remaining RM30 million is from tyre; RM474million from forestry of which RM267 million is expected to be contributed by forest royalty while RM207 million is from timber premium; and RM332 million from raw water and mining royalties, land rents and others.

Non-Tax Revenue which is estimated at RM4.997 billion or about 48 percent of the total expected revenue. The non-tax revenue is mainly derived from the following major components of 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 licences, service fees, permits and rentals.

Non-Revenue Receipt which is expected to be at RM9 million, mainly from forest liquidated damages, disposal of assets and forest compounds; and federal grants and reimbursements which is expected to be at RM239 million. Ordinary Expenditure Estimates for 2019 A sum of RM10.391 billion is proposed for Ordinary Expenditure for 2019.

Out of this total allocation, RM2.841 billion is 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 programmes 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 eight percent over the revised expenditure of RM2.629 billion for this year.

Out of the RM2.841 billion proposed for Operating Expenditure in 2019: -RM798million or 28 percent for personnel emoluments; -RM983 million or 35 percent for supplies and services; -RM909 million or 32 percent 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. I am pleased to announce in this august House that the state government has decided to introduce a new policy where by every newborn child as long as they are Sarawakian will be given one-off incentive ofRM1,000.00 irrespective of ethnicity, religious beliefs and social status.

This incentive can only be withdrawn upon attaining the age of 18and is meant for their further education or as capital to pursue their career. Budget Surplus for 2019 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. A surplus budget would 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.

Development Expenditure Estimates for 2019 The estimates have taken into consideration among 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 -Reprioritisation of expenditure undertaken by federal government to rationalise its fiscal position. For 2019, a sum of RM9.073 billion is proposed to finance various programmes and projects under the 11th Malaysia Plan of the state including socio-economic and rural transformation initiatives, the walkabout projects as well as initiatives under the Digital Economy.

Of the total provision for development expenditure, RM8.813 billion will be funded by the state while RM260 million is to be financed by the federal government through reimbursable loans and grants. Distribution of Development Expenditure Estimates for 2019 The proposed 2019 Development Budget of RM9.073 billion will focus on the following initiatives: Accelerating Development in the Rural Areas To hasten the pace of rural development, a total sum of RM6.049 billion is proposed in 2019 Development

Budget of which RM2.350billion is set aside for the implementation of the following projects: -RM1.535billion for Walkabout Projects; -RM500 mi l l ion for Rural Transformation Projects; -RM243million for Minor Rural Projects; and -RM72 million for Program Penambahbaikan Rumah Miskin Sarawak (PPRMS). Improving the Connectivity of the State The state is investing in more infrastructure projects such as roads, bridges and jetties to further improve its connectivity.

For this purpose, a sum of RM1.105 billion will be allocated for the implementation of various projects. To address the water supply issues, the state government will continue to extend coverage water supply especially to the rural population. A sum of RM190 million is proposed in 2019 for the implementation of various water supply projects. Strengthening Agriculture Development 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 highvalue employment opportunities. Further Development of Industrial Estates In line with the state industrialisation programme the state will continue to build infrastructure suitable for industries. For this purpose, a sum of RM85.3 million is proposed for the implementation and completion of various industrial estates, among others Demak Laut Industrial Park; Sematan Industrial Estates; Sri Aman Industrial Estates; Bau Industrial Estates; and Rantau Panjang Industrial Estates.

Providing Affordable Housing for the Rakyat In our continual effort to care for the well-being of our people, the state 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 ongoing construction of 1,827 units of affordable houses under Rumah Mampu Milik (RMM) and Rumah Spektra Permata (RSP). 

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 the State to manage its cash flow more efficiently and at the same time, ensuring financial capacity to take care of its other responsibilities of the state.

Federal Funding During the tabling of the Federal Mid-Term Review of the 11th Malaysia Plan 2016-2020, the Prime Minister Tun Dr Mahathir Mohamad has 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. In accelerating the development in Sarawak and Sabah, federal government will undertake the steps as follows: -Intensifying economic growth and development planning; -Improving infrastructure for better connectivity; -Expanding access to basic infrastructure, amenities and services; -Increasing employment opportunity; and -Enhancing the development of customary land.

We call 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 provide a more equitable allocation to the State of Sarawak, particularly for development purposes. This is imperative so that all Sarawakian can enjoy the same quality of life as our 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 National Budget is only 7.94 percent of the total development budget as compared to RM4.336 billion in 2018, which was 9.42 percent of the total development budget.

The 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 percent of the federal development allocation.