See praises state’s financial achievement, urges caution on reserves management
SEE Chee How ( PKR-Batu Lintang) has commended the state administration for the financial performance this year.
According to See, the state has an increase in revised revenue by RM779 million and no revision in ordinary expenditure and the 2017 revised budget is expected to register a surplus of RM394 million against the original estimated deficit of RM385 million.
“There is a positive gain in the actual revenue from the hill timber premium comparing to the estimated income from the same source, to the tune of RM93.8 million,” he said in his debate on the state budget during the State Legislative Assembly sitting yesterday.
However, See pointed out that the RM100 million revenue from hill timber premium appears to be far short of the revised target of RM300 million.
“And the increase in revenue earning from hill timber premium was completely offset by the reduction in revenue earning from other forest and timber premiums, and most particularly the deviation of 34.25 per cent from the estimated to actual collection of forest royalty by RM178.15 million. The estimated revenue was RM520.15 million but the actual revenue collected is only RM342 million.”
See said not only was the actual collection far short from that budgeted; it was a 30 per cent drop in revenue collection from last year, which is not proportional to the log production.
“I will be most grateful if the honourable minister will enlighten us on the reasons for the plunge in the royalty collection, whether it is due to the rampant illegal logging which is always the main culprit.”
With regards to combating illegal logging, See said it was noticed that the state administration appeared to have adopted a different policy from the former administration which had frozen the issuance of Occupation Tickets (OTs) and Letters of Authority ( LAs) for short-term timber logging, identified as the main cause for illegal logging.
“It was announced in February that short-term timber licences will be issued through open tender process. I hope the honourable minister will enlighten this House on the number of Occupation Tickets (OTs) and Letters of Authority ( LAs) for shortterm timber logging, whether issued through open tenders or otherwise, that were issued this year and how many of those OTs and LAs are still subsisting today. Importantly, how will the new arrangement alleviate the problem of illegal logging in the state?”
He said it is, however, clear that the brightest spark in terms of performance in revenue generating for 2017 is the state’s earnings from investments and in particular, dividends, which saw actual revenue earning of RM1.5 billion.
“This is 198.6 per cent or almost double the estimated dividend earning, RM755 million projected in our budget 2017. I must congratulate the Right Honourable Chief Minister, the Honourable Second Finance Minister and the Honourable State Financial Secretary for their commendable leadership.
“At the same time, I must put on record our appreciation to the staffs in the finance ministry, departments and offices for their hard work which have borne this remarkable fruit.”
See said all other states in the Federation will be envious of Sarawak for its feat, earning a whooping RM2.511 billion interest and return on investments, which is more than eight per cent returns this year from the investment of state reserves.
“I pray that the state will continue with our prudent and sound financial management of our state reserves and financial resources. This is the crucial hallmark and leverage for Sarawak and it certainly augurs well in our quest for our demand for greater autonomy and devolution of powers that Sarawak is more than capable of managing and administering the fiscal powers that will be devolved to Sarawak.
“This impressive returns from the interests and dividends of our investments is pivoted on the equally notable sum of state reserves that we have saved over the years, which I must caution the Right Honourable Chief Minister and the state government to zealously guard and protect it, to continue and advance the present prudent and sound financial management to ensure that it will continue to earn the interests and dividends which is much needed for the continuous development of Sarawak.”
In this regards, See pointed out the fallacy or misconception that the state could have earned more by cannibalising the state reserves through financing state projects.
“It must be borne in mind that even though our savings with the commercial banks can earn only up to 3.8 per cent interest per year and our borrowings can attract up to seven to eight per cent interest per year.
“However, the commercial banks that lend their money to us are to bear statutory reserves to the Bank Negara, the administrative costs and the unforeseen risk factors in bad loans and default in payment.”
See said the records published have shown that commercial banks would only lend out up to 15 per cent of the sums deposited with them.
“Comparing to the Federation, fromtherecentlyrevealednational budget 2018 which was passed yesterday, our national debt is pushed to beyond RM600 billion and the government guaranteed borrowings have reached RM285 billion. However, the country has a national foreign reserves fund of RM450 billion.
“The federation has maintained reserves in the tone of RM450 billion for quite some time, with no intention to cannibalising it to financial national projects to reduce the interests to be expended on financing them.
“We must therefore be cautious in the managing of our state reserves. It sounds well and good to say that we can make use of our reserves to finance projects such as the repair and rebuilding of dilapidated schools if the federal allocation does not materialise.
“With respect, the prudent approach is to approach the friendly foreign banks, banking institutions, international money markets and funds to secure the finance which attracts the lowest interests, and that we require the federal government to stand as guarantor for the borrowings. This is one other function that the state reserves play and serve as well. With our high state reserves and prudent management, we are rated highly, higher than the federation, with all due respect.”
See said: “Moody has rated us ‘A- with positive outlook’ while the federation manages an ‘A- with stable outlook’ before the Budget 2018, which thereafter has caused the rating agency to caution that ‘The full credit implications of the budget will depend on whether the projected increase in revenues - the fastest since 2012 - is achievable since targets rest primarily on a rise in GST collections, which in turn rely on relatively optimistic growth projections going into 2018.”
“Another international rating agency, Fitch, has equally cautioned: We see downside risk to the government’s optimistic revenue projections. Its 2018 GDP growth forecast of 5 to 5.5 per cent assumes that strong recent momentum will be maintained, but there could be some headwinds from cooling external demand.
“I henceforth pray that our state reserves will be maintained and strengthened, to make use of our strong standing to attract more investments and financial resources for the needed state projects, for the greater benefits of Sarawak.”
See (left) and Krian assemblyman Ali Biju stop for a photo-call at the DUN Complex foyer at the end of day five of the DUN sitting.