This article first appeared in The Borneo Post on May 16, 2018
Malaysia must recognise that from now on there will always be several major states that will be controlled by political parties in the opposition to the party controlling the federal government, said Jeffrey Cheah Institute on South East Asia president Prof Woo Wing Thye.
According to him, the present system of where the federal government collects almost all of the taxes and then allocates a portion to each state is unsuitable for this new political normal.
Past federal governments had punished the opposition states by denying them much-needed development funds, thereby creating unjustifiable regional inequality, and lowering overall national growth because the economic complementarities among the states were not fully mobilised,” he said when speaking as a panelist at “Keeping the Promise of Reform” forum held at Sunway University on Monday, co-organised by the Jeffrey Cheah Institute on Southeast Asia and Merdeka Center.
Fiscal and administrative decentralisation was the reform message delivered by Woo. The forum was a platform for policy experts and Pakatan Harapan (PH) leaders to deliberate what are the key reforms that the new administration must undertake immediately in its first 100 days of power.
Woo stressed that this bitter experience of PH and simple fairness should motivate the new PH government to change the system for funding the federal government and state governments, adding that this new fiscal system must incentivise and empower both levels of government to promote economic development
“The Malaysian federal government should stop being the monopoly tax collector, and the states must now be allowed to collect adequate taxes in order to fund local development projects,” he stressed, adding that local problems are best solved by local people,” he said.
Woo attributed the overly-centralised decision-making nature of the Malaysian governance system to the small number of educated people in Malaysia in 1957 and to the Emergency.
“Circumstances are now very different from 1957: there is now a large university-educated labour force, and the Emergency has been over for more 50 years. The fiscal and administrative systems in Malaysia must now be decentralised to reflect the new economic conditions and the new political normal,” he said.
On the abolition of Goods and Services Tax (GST), Woo pointed out that the larger budget deficit faced by the government will be a manageable short term problem if the new ruling party introduces a pro-growth tax system and a pro-growth administrative system.
“It is important that there are independent centers of policy initiative spread all over the country, at least one in each of the state capital. EPU (Economic Planning Unit) in Putrajaya should be the monopoly policy-setting center,” he stressed.
He said in the regional governors in China and USA are competing to produce economic progress to climb their party hierarchy and to win re-election, respectively. This competition, he said, does not happen in Malaysia because the funding of state operations depends on the whims of the Federal government.
“Basically our Chief Ministers do not have financial resources to implement whatever good ideas they may have; and this impediment to economic development must be removed,” he said, adding that only with fiscal and administrative decentralisation would there be multiple centers of policy initiatives to accelerate the process of economic development.
Woo also said that each state must have its own funds and the authority to mobilise the local universities to contribute to local economic development such as harnessing the universities to produce technological advancements that are suitable for the local conditions.
Woo stressed that this first change government 60 years after Merdeka should not be used as an excuse to delay reform in Malaysia.
The Pakatan Harapan government can learn from the experiences of countries where long-time one-party states were ended peacefully, he said.
“I think there are many things that can be done immediately and easily because we know how to do them thanks to the experiences of Mexico, South Korea, and Taiwan,” he said.
Mexico’s Institutional Revolutionary Party (PRI) had ruled from 1929 to 2000, and the Kuomintang (KMT) party had ruled Taiwan from 1945 to 2000.
PRI in Mexico and KMT in Taiwan reformed themselves and got re-elected in 2012 and 2008,” he said, stressing that BN too can make a comeback by offering superior governance and better economic policy.
Source: The Borneo Post