IDS doubts RM4.1bil revenue target possible
Published on: Sunday, September 20, 2020
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Credit: malaysiakini.com
Kota Kinabalu: Sabahans will be courting bigger trouble ahead if its economy, health and migrant issues are not addressed and well managed, said Institute for Development Studies (IDS) Sabah Director Datuk Dr Mohd Yaakub Hj Johari.

The State could expect higher unemployment, bankruptcy, corporate failures, business closures and joblessness with untold sufferings for ordinary Sabahans, he said in a statement, Saturday.

“The State 2020 Budget projected Sabah’s economy to register growth at four to 5.1pc in 2020. In the Budget, the State Government proposes an estimated expenditure of RM4,143.87 million against an estimated revenue collection of RM4,192.42 million.

“Petroleum royalty is expected to be the highest contributor in 2020 with total revenue estimates accounts for 40.55pc with a projected collection of RM1,700 million. Of the total Supply Estimates for year 2020, RM739.59 million is proposed for Emoluments. 

“With the world economy expected to fall into recession at negative -4.9pc this year (IMF) and Malaysia, according to Bank Negara Malaysia is expected to suffer an even steeper decline between negative -3.5 to negative -5.5pc, will Sabah be able to achieve a GDP growth of between 4 to 5.1pc? 

“The fact that Sabah economy had been spiralling downward from the highest in decades at 8.2pc in 2017 to 1.5pc in 2018 and continue weakening in 2019, does not add to our confidence that the target will be achieved,” he said.

“According to the State Government 2019 Budget, the Sabah GDP for 2019 was estimated at between 5 and 6pc, but the Department of Statistics recorded only at 0.5pc

“And this was achieved with a recovery of oil price as reflected in the revenue growth from RM1,318 million in 2018 to RM1,703.5 million last year. During that period there was a recovery in oil price from about USD 42 to about USD 67. 

“Thereafter the oil price continued to weaken to reach its historical low at negative -USD37, and currently averaging at about USD40.

“It is highly likely that Sabah GDP in 2020 will be heading into a tailspin with the decline in oil revenue, continuing weaknesses in the price of other primary commodities due to the supply chain disruption precipitated by the Covid-19, and the controlled movement order (CMO),” he said. 

“Bank Negara Malaysia recorded that the CMO imposed during the second quarter had resulted in the GDP contracted to negative -17.1 percent year on year at the Second Quarter this year (2Q20).

“The question now is whether the Sabah State Government can meet the revenue target at RM4,192.4 million. If the estimated revenue from oil royalty is not forthcoming at RM1,700 and the service sector, especially tourism, is seriously affected due to the CMO, then the State Government financial position need to be seriously addressed.

“By means of comparison, it is instructive to study the successful planning experience in charting the State 2017 Budget. It projected the state’s GDP growth at between 4.0-4.5 percent in the 2017 State Budget, with petroleum royalty estimated only at RM985 million and total revenue estimated at RM3,817.73 million, and expenditure at RM3,784.73 million. 

“But the actual GDP recorded in 2017 was 8.2 percent, the highest in decades, as well as the highest among all states in Malaysia surpassing the national GDP growth at 5.8 percent. And this was achieved amidst the slowing global economy.  Clearly, there must be something in the planning and economic management that can be learnt,” said Yaakub.

“In the 2018 State Budget, the State Government had projected a GDP growth of between 5 to 5.5pc, amid the expected increase in oil revenue to RM1,318 with the overall revenue expected to achieve RM4,169.24 million and supply expenditure planned at RM4,104.35.  

“The GDP growth projected then was unattainable due to the drastic change in policies that rattle business confidence. 

“The termination of contracts and review of government contracts had proven to be costly to the economy, which had almost grounded to a halt, with the 2018 GDP recorded by the Department of Statistics at only 1.5pc.

“What can be deduced from the above analysis is that the Sabah State Government need to accord greater attention on economic management, and provide economic leadership. 

“The public would like to know, what could be the revised GDP for the state this year.  Right now the people are in the dark, as the people are dead worried that the State Government may not have enough money to initiate pump priming and revitalise the state’s economy.

“The people should also be informed, what had been the economic benefit from the MA63 negotiation thus far,” he said.

Yaakub said the tourism sector had no doubt been badly battered by the Covid-19 pandemic. 

“The loss in the sector could easily shaved a quarter of the services sector’s contribution, which is RM39.4 billion to the total GDP (at RM85.4 billion) in 2020. 

“If this is not addressed well, through well targeted stimulus package, Sabah economy could contract to between -8.0 to -11 percent and dive into deep recession this year. 

“To make matters worse, in 2019, Sabah registered 5.8pc unemployment, the highest in at least 10 years with 117,000 unemployed of which 27,419 were graduates. 

“The services sector has been a major source of employment with 55 percent of the total workforce in Sabah.. The Covid-19 pandemic will not just blow away, as we in Sabah have seen a spike in new Covid-19 cases, mainly involving the immigrant workers, sneaking into the State through the various rat trails,” he said.


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