‘Dependence on commodity-based revenues result in Sarawak’s declining revenues’

“Sarawak followed by Sabah, have the highest revenue among Malaysian states as they enjoy greater flexibility in raising their own revenue which is further boosted by their abundant natural resources.

“However, dependence on commodity- based revenues resulted in declining revenues over the past few years. Sarawak’s sterling track record of fiscal surpluses turned red in 2016, while Sabah reported a marginal surplus in 2016 after a deficit in excess of RM200 billion the year before.”

Meanwhile, RAM observed that fiscal management varied across states and ref lects the institutional capacities of state and local governments. Most states improved their revenue collection rate as the proportion of revenue arrears to total revenue declined from an average of 24.7 per cent in 2012 to 15.7 in 2016.

In terms of arrears in debt repayment, RAM saw that seven out of 13 states show deteriorating trends in line with persistent or widening deficits.

However, from a broader perspective, the trend also ref lected the supportive intergovernmental relationship that states receive from federal government.

“State institutional practices relating to audit by the National Audit Department is generally viewed in positive light – seven states achieved full compliance for submission of financial statements within the stipulated time by various state agencies and statutory bodies, while the lowest compliance rate among states was 79.3 per cent for 2016,” it said.

“The percentage of audited financial states that received unqualified reports from National Audit Department is also satisfactory. Sarawak, Negeri Sembilan, Kelantan and Johor received unqualified reports for all audited statements in 2016.

“Broadly, institutional settings of states are satisfactory but with room for improvement.”