Selangor Journal
The Selangor State Secretariat Building in Shah Alam. — Picture by SELANGORKINI ARCHIVES

Selangor’s financial freedom roadmap

By Danial Dzulkifly

SELANGOR is positioned to lay the foundation for fiscal decentralisation from the Federal government, owing to its skilful ability to manage its own finances in recent years.

Backed by its successful debt settlement with the Federal administration and a governance policy aligned with the ambitious First Selangor Plan (RS-1), the state is now strategically focused on diversifying revenue streams beyond land-related transactions and business licences.

The imperative for a diversified revenue stream becomes evident as Selangor pursues multifaceted policies under the five-year blueprint, aiming to stimulate new economic sectors, generate high-paying jobs, and enhance upward social mobility via various social intervention programmes.

Notable initiatives include creating special economic zones like the Sabak Bernam Development Area (Sabda), the Integrated Development Region in Southern Selangor (Idriss), and the Selangor Maritime Gateway (SMG), a major economic zone designated along Sungai Klang.

Menteri Besar Dato’ Seri Amirudin Shari has also unveiled plans to form the Greater Klang Valley administrative region, uniting the cities of Petaling Jaya, Subang Jaya, Shah Alam, and Klang, which is expected to officially become a city next month.

The aim of the initiative is to create coordination among these cities in unifying their bylaws, increasing the efficiency and efficacy of public service delivery, and consolidating their resources.

A visionary undertaking currently under consideration is the Kita Selangor Rail Line project, which proposes connecting railway services from Klang to Kuala Selangor, Tanjong Karang, and Sabak Bernam.

The alignment also links the Kuala Lumpur International Airport (KLIA) railway to Tanjong Sepat and Sungai Pelek, transforming Selangor’s west coast into a railway services corridor.

Amirudin also announced plans to establish a Local Authorities Service Commission, with a bill anticipated in the third quarter of next year.

It aims to enhance the local authorities’ responsiveness and efficiency, specifically in addressing public complaints, and to reduce response time to 24 hours.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid speaks during an interview with Bernama on Malaysia’s economic situation, in Kuala Lumpur on January 25, 2023. — Picture by BERNAMA

Bank Muamalat chief economist Mohd Afzanizam Abdul Rashid emphasised the need for flexibility in Selangor’s fiscal management.

In an interview with Selangor Journal, he advocated discussions between the state government and its Federal counterpart to explore tax revenues and diversification measures.

“The state predominantly depends on land-related sales or, by extension, the property sector. To diversify income, discussions on decentralisation in economic activities and various tax collections must be undertaken,” Afzanizam said.

Drawing parallels with Sabah and Sarawak, he said discussions were held within their state governments about expanding revenue from the Federal government, including a share of the oil and natural gas collected from within their territories.

Examining Selangor’s fiscal governance and record, Afzanizam noted the state’s projected debt repayment of RM19 million to the Federal Government this year and its impressive revenue collection of RM2.571 billion, surpassing the RM2 billion target.

“Fulfilling its debt obligations showcases responsible financial management. Selangor has the credibility to manage its fiscal affairs independently.

“Granting them (all states) more autonomy is the most suitable approach, and it should be on a case-by-case basis, with other states demonstrating their ability to handle autonomy effectively.

“I think it cannot be a one-size-fits-all solution… and other states must demonstrate to the Federal government that they can handle it as well,” he said.

Passengers waiting to board the Light Rail Transit (LRT) at the LRT Pasar Seni station, Kuala Lumpur, on May 25, 2021. — Picture by BERNAMA

Forward-thinking Moves

In a strategic move to reduce the reliance on private vehicles, Selangor is embarking on a comprehensive expansion of its public transportation system, which will significantly help the public and save on costs.

“Public transportation is usually synonymous with urban areas. Now, it is being expanded to Kuala Selangor, Tanjong Karang, and Sabak Bernam, where residents typically use cars to travel to the city. This would ease their transportation.

“A large project like this will undoubtedly bring economic benefits. It will also create a new population, housing projects, shops, and various facilities which can be improved,” Afzanizam said of the Kita Selangor Rail project.

The current RM3 million budget is insufficient as it is designated for research, and a more substantial allocation would be required to implement the project.

He also lauded the state administration’s move to address the escalating solid waste crisis by spearheading a groundbreaking initiative to develop the Sultan Idris Shah Green Energy (SISGE) Plant (Phase Four).

Citing data from the Housing and Local Government Ministry, Afzanizam said Selangor’s estimated daily solid waste reached a staggering 7,670 metric tonnes in 2021, amounting to 2.8 million metric tonnes annually.

“Considering Selangor has the largest population in Malaysia, it also has the highest amount of solid waste. Therefore, developing a green energy plant is necessary as landfill space decreases.

“Moreover, it can convert waste into energy; a wise solution as it not only addresses the issue of landfill sites but also generates beneficial green energy for all, aligning with the National Energy Transition Roadmap (NETR) 2050, which was launched in August last year,” he said.

The Bantuan Kehidupan Sejahtera Selangor (Bingkas) initiative replaces Kasih Ibu Smart Selangor (Kiss) as part of the state government’s drive to enhance social welfare and eradicate poverty in Selangor. — Picture by SELANGORKINI ARCHIVES

Focus on Social Mobility

With Selangor successfully settling its debts to the Federal government, the state has expanded its fiscal capacity, paving the way for an expansion of productive initiatives.

This increased financial stability not only signifies Selangor’s responsible fiscal management but also presents an opportunity for the state to delve into strategic investments which can bolster its social welfare programmes.

“I believe that if the state government were to issue its own bonds, it could attain a AAA rating, given its ability to clear its debts,” said Afzanizam, pointing towards the potential for Selangor to secure a robust credit rating, which testifies to its financial good health.

However, he raised a cautionary note against Selangor falling into a moral hazard by continuously providing cash aid or direct assistance without incorporating an element of upward social mobility.

“If we grow overly dependent on assistance, it could lead to potential declines in productivity and foster a lackadaisical attitude towards work or business. It is imperative for us to carefully consider the fairness of our approach.

“Any form of aid should be outcome-based and possess a clear direction. Assistance is crucial, but it must contribute to tangible results,” Afzanizam said.

Cash payments, for example, should be steadily reduced over the next five years.

He added this reduction is not a cut in commitment but a strategic move to reallocate resources to numerous programmes, concurrently aiding people in improving their living standards.

“The economic focus is on upward social mobility, with a vision for individuals engaged in business to thrive in a progressive environment over the next five years, gradually becoming self-reliant and less dependent on government assistance, for example.

“Consequently, the budget allocation for cash payments diminishes each year, reflecting the success of complementary policies prioritising developmental initiatives. It is these policies which should be at the forefront of Selangor’s emphasis,” Afzanizam said.

This article first appeared in the Selangor Journal monthly January 2024 edition, published on January 22, 2024
A view of Masjid Sultan Salahuddin Abdul Aziz Shah from the air, during the joyride conducted by Systematic Aviation Services Sdn Bhd as part of the Selangor Aviation Show (SAS) 2022, in Shah Alam on September 9, 2022. — Picture by REMY ARIFIN/SELANGORKINI

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