Published December 15, 2008

MALAYSIA INSIGHT
2 states take money destiny in own hands

By PAULINE NG
KL CORRESPONDENT
Email this article
Print article
Feedback

IF STATES held by the Opposition suspected that federal government funding was likely to be dicey after the unexpected tsunami that was the March general election, the global financial crisis has made it doubly harder.

With so many sectors and states clamouring for more money, funding will obviously have to be prioritised. Which is why the initiative taken by some states to better manage their own destinies is a step in the right direction.

Penang, which fell to the Opposition coalition Pakatan Rakyat, for example, has managed to attract RM8 billion (S$3.3 billion) in investments in the first nine months of the year, compared to RM4.8 billion for the whole of 2007.

A number of these investments would undoubtedly have been the result of past efforts by the previous Gerakan state government.

But Penang is not sitting on its laurels. Its new chief minister, Lim Guan Eng, last week told an international economic summit in Hong Kong of plans to transform the island state into a smart shop - with a focus on moving up the information and communication technology (ICT) chain - from a sweatshop.

Penang may be a sweatshop of sorts, but by Malaysian standards, it has one of the highest per capita income. It is considered one of the largest electronics manufacturing hubs in the region, multinational companies often citing its highly skilled and talented workforce as a key reason for locating their plants there.



The Pearl of the Orient has a lot going for it, the latest being Unesco's bestowal of World Heritage City status, an honour that it won together with Malacca. Tourists to Penang readily rave about its heritage buildings, delicious hawker food and scenic beauty. Little wonder then the island is one of the most popular states with many foreign retirees looking to relocate there under the Malaysia My Second Home Programme.

Infrastructure being a vital component in Penang's transformation plans, the state has invited proposals from the private sector to address its public transport problems, this taking of the bull by the horns coming after the federal government shelved plans for a promised monorail and outer ring road project.

Wisely, Penang has decided that it should attempt a solution rather than waiting indefinitely for the requisite funds.

Other Malaysian states are also starting to think of leveraging on their individual strengths and attractions.

Terengganu, for example, has turned the annual monsoon rains to its advantage with the Monsoon Cup, drawing visitors to the state at season when most would stay away. Even so, Terengganu has some of the country's best beaches and diving spots and its rustic charm is a hit with home-stay visitors looking to experience village life.

The state is also resource-rich. Although a Barisan Nasional governed state, it will soon be making history of sorts through the establishment of its very own RM10 billion sovereign wealth fund which would be initially seed-funded by the federal government.

The current Malaysian King, and also the state's ruler, Tuanku Mizan Zainal Abidin has proposed the establishment of the Terengganu Investment Authority fund to ensure that the 5 per cent annual royalty that the state receives from Putrajaya as oil and gas payments is spent wisely and in the long-term interest of the state, rather than on dubious projects which have brought little improvement to the state.

It is an open secret that Tuanku Mizan has been less than impressed by how the royalties have been spent over the past 20 years and wants the professionally run fund to invest in projects that will pay a steady stream of income when the state's oil and gas reserves are no more.

How well the two state governments will manage their mandate remains to be seen. But the states' initiatives could possibly be a source of conflict for Putrajaya. While it ought to laud any move to be less dependent on federal funding, it must also be keenly aware that the states might well demonstrate far greater returns on investment simply by better policies, planning and accounting, as well as less wastage.