The Political Economy of Federal-State Relations How the centre influences resource distribution to the periphery Tricia Yeoh Fellow, IDEAS 20 May 2020
Perikatan Nasional (8 + 1) Pakatan Harapan (3 + 1)
Going back in time… Wave 1 from 1959 Wave II from 1971 Carving out of KL & Wave III from Labuan as Federal 1980s-1990s: T erritories Federal oversight into DPM Tun Dr. Ismail state bodies “every govt policy is Privatisation determined by party”; GLCs PM Tun Abdul Razak EPU “ kerajaan berparti” New Economic Policy
Downward Resource Distribution Grants and Loans Federal Ministries Politico-Bureaucratic Complex
Grants National Finance Council General Grants Special Grants Tax-Sharing Grants Only some are formula-based. Others are discretionary.
Loans RM million Net federal loans to all states 6000 5000 4000 3000 2000 1000 0 Net federal loans 2010 2011 2012 2013 2014 2015 2016 2017 Source: Economic Report 2014
Can State GLCs raise their own funds? The case of the Penang Statutory bodies, like state Federal government loan Transport Master Plan. governments, require federal approval. guarantees can be provided But not all state so explicitly. And many are formed as Companies. (Johor, Sarawak, Pahang)
Federal Ministries Public Schools Public Hospitals District Education Health Clinics State Police Contingents State Department Offices Community Clinics State Immigration Offices of Environment State Edu Depts District Health Offices
Politico-Bureaucratic Complex
Federal ministries and agencies that disburse funds downwards
Duplication of Village Committees
Why do constituency development funds even exist?
Policy Recommendations Greater fundraising flexibility for state and local governments CDF allocations given regardless of political affiliation CDF Bill in Parliament Abolish duplicate MPKKPs across all states
Greater fundraising flexibility for state and local governments • Greater flexibility for state and local governments to raise bonds and loans. • Strict financial and regulatory controls. • Collaterals based on cash flow, state assets • Joint determination of economic need.
CDF allocations given regardless of political affiliation
CDF Bill in Parliament • CDFs to be coordinated jointly between state govt and FDOs. • State governments to be consulted on CDFs. • Formal committee chaired by MP on development funds – state govt involved. • Bipartisan parliamentary select committee . • Review CDF system in urban areas.
Abolish duplicate MPKKPs across all states
Thank You! tricia@ideas.org.my www.ideas.org.my
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