BUDGET 2019, tabled by Finance Minister Lim Guan Eng in Parliament last month, is the first budget in Malaysia’s history to be presented by a ruling coalition other than Barisan Nasional or its precursor, the Alliance Party. It offers us our first tangible glimpse of the concrete policy plans that the Pakatan Harapan government has for its first full calendar year in office.

By contrasting Budget 2019 with budgets over the past decade, we are able to see how changes have been made to the dispersal of funds across the various ministerial portfolios. This is important for a developing democracy experiencing the first seismic shift in its political climate. We want to see how PH addresses the issues that arose from the budgets tabled by former prime minister Najib Razak between 2009 and last year, particularly on the matter of development expenditure (DE).

An overview of these issues can be found in a report published by Penang Institute earlier this year.

Reviewing the state of DE under Najib

Of the many concerns raised about the state of DE under Najib, two stand out. The first is the steady reduction in both the share and absolute quantity of DE allocations during his tenure. This is a concerning trend, given that Malaysia is still a developing country, and there is a need for significant public investment in infrastructure, from public transport to schools and hospitals, in order to achieve the status of high-income nation.

The second, and perhaps, most consequential issue that surfaced during Najib’s tenure relates to an enormous concentration of spending power, measured in terms of DE funding, within the Prime Minister’s Department (PMD).

Prior to Najib’s tenure, the share of DE accruing to PMD stood at an average of 7.9%, indicating that the various ministries had been the recipients of sufficient and well-balanced funding for developmental programmes and policies. Under Najib, however, many DE budgetary items that would have been better placed under the purview of the appropriate ministries were, instead, parked under PMD, resulting in its bloated share size.

The PMD share of DE during Najib’s first term between 2009 and 2013 stood at 17.9%, and this figure rose to almost a quarter – 20% – post-13th general election until his ouster in May this year.

The consolidation of power and money within the executive branch of government is concerning. In place of transparency and sound governance, it opens the door to the possibility of corruption, cronyism and mismanagement of funds.

Another feature of the budgets leading up to the end of the BN era was Najib’s use of “slush fund” projects, defined as large budgetary items heavily lacking transparency.

Between 2010 and this year, the total sum of “slush funds” accounted for RM43.7 billion, equalling 44.5% of PMD’s DE, and just under a tenth of total DE across the nine-year period. These are funds that have yet to be accounted for in transparent fashion.

How Budget 2019 differs from past budgets

In contrast to the previous budgets, Budget 2019 pulls the plug on these unhealthy developments. For a start, the 2019 PMD DE allocation has been cut by 70% to RM3.7 billion. At the same time, other ministries received some of their highest DE allocations in recent years, including the Education, Health, Transport, Public Works, Home and Defence Ministries.

Five PMD DE items that received RM3.3 billion in funding last year have been repealed, while another 23 projects cumulatively valued at RM5.18 billion (as of 2019) that were previously parked under PMD have been shifted to more appropriate ministries.

Meanwhile, funding for certain projects under Najib’s “slush fund” has been cut by 77%, from RM5.5 billion in Budget 2018 to RM1.3 billion in Budget 2019. The largest of these items, the “Facilitation Fund”, has been repealed entirely after receiving more than RM20 billion between 2010 and this year. All but two projects have not seen their funding curtailed – and these have been shifted to the Economic Affairs Ministry.

Ensuring greater transparency, accountability

While these are encouraging developments, further concrete measures must be taken to ensure that similar episodes of misappropriation and misuse of DE funding do not recur, and that future annual budgets strongly adhere to the principles of transparency, democracy and accountability.

Most citizens are still in the dark as to what the current RM150 million allocation for “Special Projects”, or the RM262 million allotment for “Development Programmes”, truly entails, let alone if these items, and the funding they receive, indeed serve their purported purposes.

DE budgetary items, particularly those with vague project titles and large funding allotments, should be elaborated in detail, either within the annual budgets themselves, or separately annexed. This is important, given that the lack of transparency and accountability in Malaysia’s budgetary processes has been highlighted by the results of the Open Budget Survey conducted by the International Budget Partnership.

The scores that Malaysia routinely achieves are far from encouraging. As of last year, Malaysia ranked lower than Indonesia, Thailand and the Philippines in terms of budget transparency.

With regard to budgetary oversight, an indicator of accountability, Malaysia trails behind the three aforementioned nations and performs below par compared with the Asean region on average, a group that includes countries like Cambodia, Myanmar and Vietnam.

The annual budget is arguably one of the most important and informative policy documents published by any government, and should ideally replicate the norms set by best international budgetary practices. Moving forward, options to improve the transparency and accountability of Malaysia’s budgetary processes include greater detailing of individual budgetary items, regular publishing of accounts of actual expenditures, and conduct of periodic revenue and expenditure reviews (such as mid- and end-year reviews).

Especially since it has openly committed to eliminating corruption and restoring previously threatened democratic values, it is incumbent upon the PH government to ensure that these steps are taken. – December 4, 2018.

* Darshan Joshi is an Analyst at Penang Institute in Kuala Lumpur. He holds a Bachelor’s degree in Economics from the University of New South Wales, and a Master’s degree in Public Policy from the University of Chicago. His true passions lie in the analyses of global energy- and environmental-related issues. He views climate change as the most significant issue to face contemporary society.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.