The Reality of the Budget 2014 to Sabahans

By Zainnal Ajamain

zainal1Once a year the Prime Minister as the Malaysia Minister of Finance make his long awaited speech in Parliament pertaining to the health of the national economy and the income and expenditure in the following year.  As usual the Malaysian courtiers start fawning and giving views on how well the national budget is.  The more they open their mouth, the more they are showing their own stupidity and confirm that they are unlettered.

These are contemporary views from the people in the streets.  They don’t have any position in the state nor do they seek any.  The views in all sincerity comes right from the heart, there is no need for pretentious overtures.  Anyone who cares about Sabah can use this article as their own.  They can use it in the Newspaper, Dewan Undangan Negeri Sabah and the Parliament debate.  There is no need to thank us, belanja coffee saja pun terima kasih.

“11. Currently, the demographics beginning from Arau, Perlis to Kudat and Tawau in Sabah, through Bintulu and Batang Ai, Sarawak, indicate that Malays comprise 41 subgroups within nine major groups, Chinese 10 subgroups, Indians eight subgroups, Orang Asli 18 categories, Bumiputera Sabah more than 60 ethnic groups and in Sarawak, more than 40 subgroups.

12. The truth is, irrespective of whether we are Malays, Chinese, Indians, Kadazans, Murut, Dusun, Iban, Bidayuh, Orang Ulu, Orang Asli, Sikhs, Eurasians, Siamese, Baba Nyonya and Chitty, we are all Malaysians. Every ethnic or subgroup irrespective of numbers is important in our journey towards success.”

It is very clear this is simply Najib’s political polemics to show that as the Prime Minister he is inclusive when it comes to managing the country.  Yet in the same speech he puts Sabah and Sarawak which is the biggest contributor to the National GDP way down as far as his priority is concern.  The issue is Najib is prospering whom? The people in Sabah are not prospering for the last 50 years compared to those in Malaya?

“32. Public investment is estimated to reach RM106bil. Projects to be implemented include construction of the 316km West Coast Expressway from Banting to Taiping as well as double-tracking projects from Ipoh to Padang Besar, and later from Gemas to Johor Bahru.”

The government allocated RM106 billion for “Public Investment” which means government initiated projects.  This is for the construction of 316km West Coast Expressway from Banting in Selangor to Taiping in Perak.  This means in addition to the North South Highway, there is another West Coast Expressway to be built.  Compared to the depilated condition of roads in from Kota Kinabalu to Sandakan which is about the same distance is simply not a priority to the Najib government.

The Kota Kinabalu to Sandakan road is badly needed for the smoother flow of commerce in Sabah between the West Coast and the East Coast.  Yet, the Kota Kinabalu to Sandakan road is given lower priority by Najib in his annual budget.  The reason is perhaps simply because the West Coast Expressway cut across 2 states whilst in Sabah is within 1 state but then again Banting is in Selangor (Opposition State) whilst Sabah is supposed to be BN Fixed Deposit.  This is a good example where the planners in Kuala Lumpur never take into account the size of Sabah when allocating funds for development.  Even the political planner tend to forget about Sabah when dispensing development funds – they only look at Sabah when election is coming.

 “33. In the oil and gas sector, among projects to be undertaken by Petronas include the Sabah Ammonia Urea Project (SAMUR) in Sipitang; the integrated oil and gas production development project in Kebabangan; the regasification plant project in Lahad Datu, Sabah; and RAPID in Pengerang, Johor, which is the largest investment in Malaysia.”

For all the Sabah contribution to the Oil and gas sector, PETRONAS through the Federal government only allocated 2 projects for Sabah i.e the Sabah Ammonia Urea Project (SAMUR) in Sipitang and the regasification plant project in Lahad Datu.  Combined both project reflect less than 10% of total PETRONAS investment in Malaysia – Johore which have no oil and gas was given the RAPID in Pengerang, Johor which cost more than RM120 billion and must compete with Singapore.

In addition, when PETRONAS can build a regasification plant project in Lahad Datu why does Sabah still want to pipe its natural gas to Bintulu?  PETRONAS should build a LNG plant in Kimanis.  In this way people in Sabah will have job opportunities as well as the Sabah State Government will have additional income stream from the export tax of LNG.

 “36. In 2014, the Government will allocate RM1.6bil for development in the five regional corridors. Among the main projects to be implemented include the agropolitan project and oil palm-based industries in the Sabah Development Corridor as well as Samalaju Industrial Park and a halal hub in the Sarawak Regional Corridor.”

The allocation of RM1.6 billion for the development of five regional corridors, therefore in effect Sabah will only get roughly RM320 million.

 “44. To increase passenger comfort, the Government will upgrade several airports, such as Kota Kinabalu and Sandakan in Sabah as well as Miri, Sibu and Mukah in Sarawak. For this, the Government will allocate RM312mil. In addition, the passenger terminals in Langkawi International Airport and Kuantan Airport will be upgraded.”

The Kota Kinabalu International Airport has just been upgraded at the cost of RM1.4 billion in mid-2005.

KOTA KINABALU, Dec 18 – Global Upline Sdn Bhd (GUSB) announced that it has stopped all works to develop the Kota Kinabalu International Airport (KKIA) effective yesterday.

Its Chief Advisor, Tan Sri Ting Pek Khiing said the Ministry of Transport (MOT) failed to fulfill its promise to issue a Certificate of Practical Completion (CPC) to GUSB upon completion of section one of the works in Package 2 of the project by April 30 this year.

There were problems in issuing a Certificate of Practical Completion (CPC) for the project and thus paying the contractor.  In next year’s budget the government is giving additional funds to “re-upgrade” the KKIA for “passenger comfort”?

 “55. To increase Internet coverage in rural areas, 1,000 telecommunication transmission towers will be built over the next three years, with an investment of RM1.5bil. To increase Internet access in Sabah and Sarawak, new underwater cables will be laid within three years, at a cost of RM850mil. These investments will utilise the Universal Services Provision Fund, which is under the purview of the Malaysia Communications and Multimedia Commission.”

This means each of the towers will cost RM1.5 million to build.  This is obviously good news but this is not the bone of contention here.  The bone of contention is in using the RM850 million from the Universal Service Provision Fund to lay a new submarine cable from Kota Kinabalu to Mersing.  This cable is expected to be completed in 3 years which means to expand RM850 million a year, in 3 years the government is spending at least RM2.5 billion.  The main bone of contention is that the USP Fund is to be used in “underserved” areas NOT to lay submarine cable.  In addition, the laying of the first submarine cable by Time Telecom cost the taxpayer RM5 billion about 10 years ago.

 “70. The Government will also implement a lobster rearing project at Semporna, Sabah in collaboration with a multinational company to produce 18,000 metric tonnes yearly which will create 20,000 jobs. The project is expected to benefit more than 6,000 local entrepreneurs and increase their monthly income up to RM4,000 over the long term.”

This must be the biggest joke of the year, a lobster industry producing 18,000 metric tonnes of Lobster annually and creating 20,000 jobs?  Does the government understand the difference between industries and the job opportunities it offers? Just take a good look at the PROTON City that was supposed to be built in Tanjung Malim, according to the plan, this city will take 10 years to build and will create 20,000 jobs.  The reality is that the City never really takes off and until today the number of jobs it creates is less 5,000 people.

So who does the government intend to be the beneficiaries for this project? The Pelau people? Or is it the Binadan people? What will happen to the thousands of graduates that are coming out of the higher learning institutions in Sabah?  Instead of them “joloking kelapa sawit” the government is asking them to dive for lobsters?  Then University Malaysia Sabah and UiTM, Sabah should start introducing open sea diving as part of its required curriculum.

“102. Currently, the inflation rate is low at 2%. The Government believes that this is the best time to implement GST as the inflation rate is low and contained.”

The whole budget speech made by Najib can be considered as big Malaysian joke by just the above statement.  The inflation rate in Malaysia is low at 2%?  Obviously the fiscal and financial planners in Malaysia are wifeless and that they have never gone to the supermarket to buy sundry goods especially for the last 5 years.  If these jokers have a wife then I am certain they must be stone deaf.  For their information, the price of goods have been on the rise for the last 5 years, some by more than 50% whilst others by more than 100%.

It is obvious that the government wants to publicly announce that inflation rate is 2% because if they don’t, then all the money that you keep in the bank is actually reducing in value even when you sleep.  In a simple calculation, for example you keep RM100.00 in the bank at 3% interest, when inflation increases to 10% means even after calculating the interest rate you got your money lose 7% of its value every year.  Now you understand the reason for “capital flight” from Malaysia for more than 10 years.

 “108. The proposed GST model to be implemented in Malaysia is as follows:

First: The GST rate is fixed at 6% and to be effective from 1 April 2015, approximately 17 months from today.

This rate is the lowest among ASEAN countries compared with 10% in Indonesia, Vietnam, Cambodia, the Philippines, and Laos and 7% in Singapore and Thailand;”

At first glance the Government Service Tax (GST) does not look like much because it is only 6% and this is replacing the Sales and Service Tax (SST) which combined totaled 16%.  According to the government people, the GST will eliminate the cascading and compounding effect of SST.  The government machinery is working overtime to convince the people that GST is good for the people.  They however failed or purposely avoid from explaining the rest of the “related cost” that may be incurred by businesses when the GST is implemented.

The government never explain what happened to goods which is tax exempted, the government is also silent on the position of Double Taxation Treaty that is signed with 70 countries.  How does the government treat raw materials or partial finish products imported from these countries?  Do the manufacturers in Malaysia still have to pay the GST for each items purchased from these countries to be completed in Malaysia?  These are some of the related cost which is not disclosed.

The government never explains how the GST will affect business in Malaysia specifically to the bottom line, working capital, supply chain, long term contracts and new investments.  The GST will obviously have an impact the sale price and it is the sale price that will affect the customers (people like you and me).

Take for example buying a shirt.  Today it cost RM70.00 and the sales and service tax is already included in the price.  The items that made up the shirts are mostly tax exempt when importing.  The Double Taxation Treaty may affect the bottom line of companies when they buy products from their subsidiaries in a country which sign the treaty with Malaysia.  In this scenario the price of goods from manufacturers is RM58.80 (minus the sales and service tax).

The shirt however is made-up of textile, buttons, people cutting, sewing etc. and getting each of this item means the manufacturer must pay GST 6% for each item.  Depending on the number of items the cost of production will increase.  The manufacturer will have no choice but to pass the cost to the Distributor and the Distributor will pass the cost to the retailers.  The retailer will then pass the cost to the consumer as their sale price.  In this context, the sale price will not be RM58.80 (minus the sales and service tax), it may be RM70.00 or more.

Whatever is the case the consumer will still have to pay the 6% on top of the retail price, which means now a shirt may cost RM74.20.

If Najib says GST is good for you, he better have his head examine.

The Chief Minister of Sabah says the 2014 National Budget is good, yet as the Chief Minister he failed to realize that the GST will do away with the sales and service tax.  As the Prime Minister as well as the Malaysia Minister of Finance he cannot simply impose the GST on Sabah.  Najib must understand that sales tax is part of the safeguards discussed in the Inter-Government Committee which was the basis of the Malaysia Agreement 1963.  Imposing a GST to Sabah without going through the Dewan Undangan Negeri Sabah is the same as pushing the GST down the throat of all Sabahans – the irony is that Musa who is also the Minister of Finance for Sabah says this is good.

Sabah already have to endure 33 years of discrimination and disenfranchisement through the Cabotage Policy which is the main cause of higher cost of living in Sabah and this is acknowledge by none other than Najib himself in this same speech.  With the GST, the government is actually squeezing the Sabah people twice.  Once through the Cabotage Policy and second through the GST – still you have a Chief Minister who is also the Minister of Finance saying the budget is good.

“134. The strategy complements the National Transformation Policy. To date, 56 initiatives have been implemented using the NBOS approach of low cost, speedy implementation and high impact programmes. In 2014, the Government will allocate RM278 million to implement various programmes including:

First: Launching of the Urban Transformation Centre (UTC) in Sabah at the end of the year and 4 more UTCs with one each in Sarawak, Johor, Terengganu and Perlis, in addition to the existing 5 UTCs;

Second: Launching an additional three Rural Transformation Centres (RTCs) with one each in Sabah, Sarawak and Negeri Sembilan, bringing the total to 8 RTCs; and”

Najib is now acknowledging that since 2009 no National Transformation programs were undertaken in Sabah.

“136. To ensure a seamless network between urban and rural areas, the Government will allocate RM130mil to subsidise rural air transport, especially for rural population in Sabah and Sarawak. Holding firm to the principle of People First, the Government will also continue to subsidise uneconomical train routes in East Coast, namely Pahang and Kelantan. The move will benefit about 600,000 commuters involving an allocation of RM52.9mil.”

How many routes is currently used by MASWing for rural air transport in Sabah? The government might as well use the money to improve the bad condition of roads linking most of the rural town centers.  In this way, aircraft accidents such as those experienced in Kudat recently can be avoided.

“Third: A sum of RM865mil is allocated for the provision of uninterrupted 24-hour electricity supply to more than 16,000 homes nationwide. In addition, to address the frequent electricity supply disruption in Sabah, a sum of RM265mil is allocated to strengthen the generation and transmission system such as upgrading of the Tenom Pangi Hydro Power Station, construction of Kimanis electricity transmission lines and construction of main switch station in Sandakan;”

The whole point of the Lembaga Letrik Saabah being taken over by TNB is to provide better management aas well as funding to Sabah’s electricity supply and distribution.  Najib now acknowledge that TNB does not have the necessary fund to implement what it initially promise to do, therefore the RM265 million injections from the government.  This also means that TNB may not have the necessary management expertise it promises to provide to Sabah.  If this is the case, what is the point of TNB managing the supply and distribution of electricity in Sabah?  They may as well return LLS to the state government.

“142. The Government is aware that the Bumiputra minority particularly in Sabah and Sarawak face challenges in owning customary land. For this, the Government will allocate RM50mil for land surveying and customary land ownership verification.

Land is a state matter, why is the Federal government aallocating RM50 million for surveying and verification exercise? Is this the start for the Federal government to take over the Land and Survey functions in Sabah?

However, the most urgent matter at hand is that the “communal title” that is being created from this exercise will not belong to the native people; it is held in “Trust” by the Lands and Survey Department – specifically by the Director of Lands and Survey Department.  When something is held in “Trust” means the legal ownership of the land belongs to the Director of Lands and Survey.

“149. The armed intrusion in Lahad Datu is a black mark for Malaysia. The sacrifices and the patriotic deeds of the armed forces in defending the nation is highly appreciated. What is important is that we will not allow even an inch of our land to be taken away by anyone. Sabah will remain with Malaysia forever.

This is a misleading statement by Najib.  Firstly, the Malaysia Agreement 1963 is based on the Inter-Government Committee Report.  One of the major issues in the IGC Report is the status of cessation in the newly formed Federation of Malaysia.  According to Lord Lansdowne when a “sovereignty voluntarily forms a union, they can also voluntarily leave the union”, this means that Sabah or Sarawak can leave the Malaysia Federation as and when Sabah and Sarawak deem it necessary to leave.

Secondly, the Malaysia Agreement 1963 was signed amongst 5 sovereign countries, Britain (as witness), Federation of Malaya, Singapore, Sabah and Sarawak.  Singapore left the Federation voluntarily in 1965 but the Federation of Malay just disappeared, therefore the only sovereign country left in the Federation of Malaysia is Sabah and Sarawak.  This is the reason Sabah will remain with Malaysia forever – because the Federation of Malaya is not part of Malaysia.

“163. Statistics indicate that 2.6 million Malaysians under the age of 30 are diabetic. If left untreated, patients will face various complications such as heart disease, kidney failure, blindness and amputation. In relation to this, the Government proposes to abolish the sugar subsidy of 34 sen effective 26 October 2013. I urge all Malaysians to take care of their health and reduce sugar in your food and drinks.”

This clearly shows the desperation of the government to justify itself when lifting the Sugar subsidy.  There is no proper studies made by the government to conclusively say that 2.6 million Malaysians under the age of 30 are diabetic caused by the high intake of sugar.

But in all honesty is the price of sugar in the international market too expensive that the government needs to step in to subsidize the price?  Taking a look at the London Future Exchange the price of Refine White Sugar is USD529.40/ tonne.  This is the same as RM1,664.43/ tonne and this is equal to RM1.60 per kilo.  The retail price of sugar is RM2.50 per kilo – therefore how is it that the government is subsidizing the price of sugar? It is the people that are subsidizing the government.

Granted that the government is NOT subsidizing the price of sugar anymore.  Then it is fair to say that the monopoly for importing and distributing sugar in Malaysia by Felda Global is also lifted.  Any distributor in Malaysia can now import as many sugar as they want from any place that they want.  Maintaining the monopoly means the Malaysia government is protecting Felda Global to squeeze and profit from sugar imports and distribution.

“199. The Government is aware that prices of essential goods are more expensive in Sabah and Sarawak compared with Peninsular Malaysia, due to higher shipping and distribution costs. To help reduce prices of goods and costs, the Government will allocate a sum of RM331mil to continue the price uniformity programme and subsidies including transport cost.

200. Additionally, 60 Kedai Rakyat 1Malaysia (KR1M) will be set with an allocation of RM30mil to help reduce the prices of daily necessities.”

Najib as the Prime Minister of Malaysia acknowledge that “prices of essential goods are more expensive in Sabah and Sarawak compared with Peninsular Malaysia, due to higher shipping and distribution costs.”  Yet his solution to this problem is to build additional 60 Kedai Rakyat 1Malaysia (KR1M) and allocate a sum of RM331 million to subsidize transportation cost.

Creating an additional 60 KR1M in Sabah will not resolve the issue of price difference between Sabah and Malaya and allocating RM331 million is just a wasteful exercise.  The beneficiaries to the 60 KR1M will be the “rights holder” to the KR1M in Malaysia and the RM331 million allocations will perhaps benefit the haulage and freighter operator or commonly known in Sabah as OTAI-OTAI.

The government is still reluctant to abolish the Cabotage Policy even after repeated calls by people in Sabah.  Instead of spending these much money, why doesn’t the government just give the money to Yayasan Sabaah and buy a couple of Container Ships to ferry these goods from Port Klang to Sabah – at cost?

“204. On 16 September 1963, history was created when Sabah and Sarawak joined Malaysia. It is clearly evident that this unity and togetherness have brought blessings to Malaysia.”

Until the present Najib still could not get it right,  Sabah and Sarawak never “joined” Malaysia, we agree to “formed” Malaysia based on the safeguards outlined in the IGC Reports – which sad to say many of these safeguards has been broken for the last 50 years.

This unity obviously brought blessings to Malaysia, specifically Malaya.  It cannot be said the same to Sabah and Sarawak.  Therefore never blame Sabah and Sarawak when we finally decided to break away.

Zainnal Ajamain

Zainnal Ajamain is an economist by profession, graduating with a Masters degree from the University of East Anglia. He has held several high ranking civil service positions in government and government think tanks and has worked as a university lecturer, senior researcher, stockbroker, economist and published several papers in international media journals. He was the co-author behind the Sabah Government’s vision for development and progress in the Sabah Development Corridor and created the first Offshore Islamic Fund in Labuan. He also held the position of Senior Research Fellow in the Centre for Remote Sensing and Geographic Information Systems at the University Malaysia Sabah.  He was the Co-Founder of the United Borneo Front (UBF) and a passionate activist to abolish the Cabotage Policy.


About sifusiber
A husband & a father who wants his children to have a better future

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