IN a word, swashbuckling, that is how many would describe the economic transformation and policies put in place by the Sarawak government, particularly in the era of Premier Datuk Patinggi Tan Sri Abang Johari Tun Openg.
In figures, within the last six years since he took office, the administration has increased the State Budget significantly with the 2023 Budget amounting to RM10.797 billion, doubling the figure that was allocated 10 years ago in Budget 2013 whereby RM4.92 billion was allocated.
A big part of this spending was not only due to elevated expectations and responsibilities but was the result of increased state revenue which allows major development initiatives to be carried out for the benefit of the people.
Last year, the Sarawak government recorded its highest revenue collected thus far at RM11.9 billion for the 2022 financial year. A huge chunk of this was attributed to the State Sales Tax (SST) collection, particularly from oil and gas products.
This was a 65 per cent increase compared to the RM7.2 billion collected in 2018, prior to SST’s introduction.
The dramatic escalation of the state’s revenue is viewed by economists as being a cornerstone towards Sarawak’s development plans.
Trickled-down economics
The introduction of the State Sales Tax (SST) on petroleum products has played an instrumental role in bolstering revenue streams, asserting Sarawak’s autonomy and control over its natural resources.
Universiti Malaysia Sarawak (UNIMAS) Faculty of Economics and Business senior lecturer Dr Nor Afiza Abu Bakar said the Abang Johari’s administration, by implementing strategic economic policies, has effectively broadened the fiscal base, leading to an uptick in the state’s financial reserves.
“Sarawak’s digital economy strategy, one of the initiatives under the Premier’s administration, has boosted the state’s economic dynamism.
“By prioritising sectors like digital infrastructure, e-commerce, and data-driven industries, Sarawak has attracted domestic and international investments, contributing to revenue augmentation.
“The Premier’s approach to state development, which involves a proactive enhancement of fiscal revenues, is instrumental for a multitude of reasons,” she told New Sarawak Tribune.
Nor Afiza said increased state revenue enables enhanced public spending where, with more funds at their disposal, the government can invest more in public goods and services, thereby improving the quality of life for Sarawakians.
She viewed that the creation of better infrastructure, improved health services, and advanced educational opportunities has become more feasible with greater fiscal latitude.
“Moreover, financial autonomy empowers Sarawak to navigate its development path more independently.
“With stronger state finances, reliance on federal funding can be reduced, allowing the state to chart its course with a greater degree of self-determination. A robust state revenue framework can build a buffer against economic uncertainties.”
She said, despite global market fluctuations or local economic disruptions, a solid revenue stream would equip Sarawak with the financial resilience to withstand economic shocks.
With the new found riches, it gave a boost to not only the state’s coffers but also has a spillover effect in terms of economic and physical development initiatives.
Fellow UNIMAS senior lecturer Dr Jerome Kueh, who is an expert on applied macroeconomics and international economics, believed that the revenue collected from the imposition of SST on oil and gas is important towards the sustainable economic growth of Sarawak.
“It could facilitate budgeting and improve the state’s financial standing,” he said when speaking to New Sarawak Tribune.
He believed that the revenue can be used to utilised to support infrastructure-related construction projects and enable implementation of more people-centric initiatives.
“As a result, this helps to protect people’s welfare and lessen their burden in light of the rising prices of products and services brought on by inflationary pressure.
“In addition, increasing revenue will indirectly increase investor confidence to invest in Sarawak, leading them to perceive the state’s solid financial situation favourably”.
According to Sarawak Business Federation (SBF) secretary-general Datuk Jonathan Chai Voon Tok, Sarawak has experienced a sharp increase in its revenue collection, almost doubled in quantum since Abang Johari took over the helm in 2017.
He noted the state’s actual revenue performance for the financial year 2022, which reached a record high and exceeded its projected revenue by 17 per cent, increasing from RM10.2 billion to RM11.9 billion.
“I must commend the ability of the Premier in ‘looking for money’ for Sarawak especially the realisation of our right to impose SST under the Constitution and thereby widening and diversifying its revenue sources.
“As we are well aware, we cannot just wait for the financial provision from the Federal Government which has never been able to meet our pressing needs to develop the lagging far behind infrastructure,” he told New Sarawak Tribune.
He said as Sarawak is aggressively pursuing its development agenda, the efforts to increase the revenue are imperative.
On the topic of infrastructure, Abang Johari said the sizable revenue is channelled towards developing the rural and inland areas in the state to spur the local economic activity in the area.
This allowed improved accessibility to areas that would contain untapped economic potential where it now can be explored, creating opportunities for rural dwellers right at their doorsteps.
Meeting pressing needs
For Universiti Malaya senior lecturer and socio-political analyst, Assoc Prof Dr Awang Azman Awang Pawi, increased spending means more can be done to develop other areas in the state.
“This enables more infrastructure development projects to be implemented, especially construction projects to provide support to industries based on new hydrogen and also to build human capital through education”.
He said the livelihood of the urban population can be uplifted by implementing various projects that will improve their education while the rural population will benefit from having complete amenities.
“This includes clean and treated water supply, local development inside their constituencies, developing industrial zones as well as improving the local small to medium enterprises industry.
“Doing such will provide participation by rural dwellers to improve the local economy as well as living standards,” he told New Sarawak Tribune.
Dr Awang Azman said this ensures that the benefit of the state revenues be felt by all layers of society, ensuring that long-standing grouses pertaining to basic issues would be a thing of the past.
Meanwhile, Universiti Malaysia Sabah (UMS) Social Science senior lecturer Assoc Prof Dr Lee Kuok Tiung said by improving the rural infrastructure and connectivity, it also solves the issue of food security.
“Infrastructure means connectivity. Without proper road those from rural areas cannot bring their agricultural and forest produce sell in the semi-urban or urban area. At the same time the urban people need agricultural and livestock.
“By investing on developing road alone is not enough. You need to build other infrastructure like jetty, tamu, public toilet among others. The government also needs to have packages to help farmers work on agriculture on a larger scale for sale.
“We need to transform the subsistence farming to improve farmers’ well-being by increasing their productivity and income” he said when interviewed by New Sarawak Tribune.
With a plethora of initiatives implemented by the Abang Johari administration, things are looking up for Sarawak with a clear direction towards overall transformation.
This is the case, according to UNIMAS political analyst and researcher Dick Lembang Dugun, who noted there are over a hundred initiatives implemented by the Sarawak government throughout the Premier’s tenure.
He said the increased spending by the administration was because Abang Johari wanted to spur development in both infrastructure and economic sector in rural and urban areas.
“The initiatives that are implemented foster Sarawak’s growth, which will, in turn, benefit all Sarawakians. Under his leadership, all segments of society have benefited from the policies.
“Rural development has become his priority while, at the same time, keeping the urban population satisfied,” he said.
Addressing wealth imbalance
The old saying, “rich state, poor people” has long plagued Sarawak. It throws a damper to the fact that the state has fared well financially, only for dissenting voices to say that it is the exact opposite.
With strong financial standing and excellent ratings from international credit agencies year after year, addressing the old perception of wealth imbalance is one challenge that the Sarawak government has to overcome.
Kueh pointed out that this was exactly the case where increasing the household income and equitable distribution of wealth is crucial.
“Striking the balance between both is challenging in view with the dynamic economics environment,” he said.
He suggested that several key economic reforms can be implemented. One of which is continued efforts of infrastructure development in terms of road access, transportation and utilities in urban and rural areas.
“Besides, investment in education and healthcare is also significant as part of strengthening human capital development and healthcare system.
“The other critical element is upskilling and reskilling of workers to ensure that they are able to cope with the dynamic and competitive business environment. This may encompass empowerment and inclusivity to the people in the economic activities,” he said.
For Nor Afiza, she viewed while the “rich state, poor people” paradox is not only affecting Sarawak, it remains a pressing issue as there exists a gap in the distribution of benefits from the state’s economic growth and revenue.
She proposed several solutions to address this, chief among them is the increase in minimum wage and social welfare programmes whereby a higher minimum wage is advocated to match living cost as well as ensuring access to basic necessities and service for the low-income group.
Next is implementing a progressive taxation system to promote wealth distribution and economic equity along with providing incentives to Small and Medium-sized Enterprises (SMEs) to promote growth and foster job creation.
She also stressed the importance of affordable housing policies to make home ownership accessible as well as reforms in the labour market to reduce gender and ethnic wage gaps along with providing stronger protection for workers.
“Addressing the ‘rich state, poor people’ issue is no small feat, but with a comprehensive approach and steadfast commitment, it is within Sarawak’s reach.
“The aforementioned reforms, coupled with ongoing efforts to boost state revenues, can lay the foundation for a more equitable Sarawak where prosperity is shared by all,” she said.
In the next part of this series, the writer explores on how the inequitable distribution of wealth affects the community as well as delving into the economic policies by Sarawak government.
