In order to implement a more balanced course for national development, the Federal Government has agreed to increase State Grants to RM400 million in efforts to improve the administration of every state across Malaysia.
The matter was agreed through the 2023 National Finance Council (NFC) Meeting chaired by the Prime Minister Datuk Seri Anwar Ibrahim and attended by all menteris besar and chief ministers or representatives from each state today (April 18).
Anwar said the NFC meeting today agreed to review the RM400 million allocation, known as Pembangunan Ekonomi, Infrastruktur dan Kesejahteraan Hidup (Tahap), to improve its distribution.
“This decision reflects the unity government’s commitment in providing state governments the opportunity to implement development projects according to their respective priorities,” he said in a statement.
Anwar, who is also the finance minister, said the decision would strengthen the momentum of the country’s economic recovery.
Previously, it was reported that the government would increase the annual grant to each state from RM300 million to RM400 million under the 2023 federal budget.
Anwar added the allocation would help each state, especially Kedah and Perlis, to develop themselves.
The NFC today also agreed to enhance the use of provisions for road maintenance and other works for gated and guarded housing areas. This includes the replacement of road signs. Anwar said state authorities should ensure road maintenance projects are awarded to contractors in the G1 to G4 class and not only to large concessionaires.
He also said the NFC meeting agreed to increase the allocation for scheduled pavement maintenance for federal roads from RM750 million to RM1 billion. This would help tackle the issue of potholes, which has contributed to road accidents.
“This additional allocation will be used for the benefit of small Bumiputera contractors,” he said.
Anwar also said the government has agreed to consider progressive payments for borrowings granted to state governments for development projects under the existing plans in order to help with cash flow.
He said, this includes the review and improvement of indicators and the distribution of TAHAP Grants as a commitment of the Federal Government in providing opportunities for state governments to implement development projects according to the priorities and patterns of their respective states.
Anwar said, in addition, the state government is advised to give priority to road maintenance works in their respective states to Class G1 to G4 contractors and not just focus on a few large concession companies. He explained that this step aims to help the economic cycle of small contractors more fairly and can indirectly stimulate the country’s economic growth more fully.
At the same time, he said, the Ministry of Finance will increase the allocation of another RM250 million for the periodic maintenance of the Federal Road pavement in order to understand the importance and the need so that the road conditions are always safe and comfortable for the people.
“This is mainly to address the problem of potholed roads which are among the contributors to accidents and this additional provision will also be dedicated to the benefit of small bumiputera contractors.
“This addition makes the overall allocation for periodic maintenance of Federal Road pavements increase to RM1 billion compared to RM750 million as announced in the 2023 Budget,” he said.
Anwar said, the use of allocations under the State Road Maintenance Grant was also improved to maintain roads and other related works in fenced residential areas and have security controls as well as the replacement of road name signs and lanes for roads.
Among them involve village roads, garden roads and other road signs apart from direction indicators.
Anwar said the Ecological Fiscal Transfer (EFT) grant was also increased to RM150 million compared to RM70 million last year as a special encouragement to states that gazetted new protected areas.
For the purpose of improving the federal government’s loan to the state government, he said, the Ministry of Finance agreed to consider and amend the disbursement method to work progress payments involving new loans for development projects under the development plans.
“This approach can speed up the process of channeling allocations provided in the form of loans, helping state governments that have cash flow problems and are dependent on loan allocations to implement development projects and thus launch the implementation of development projects,” he said.
Also achieved at the meeting was the extension of the tax incentive package for investment to the state for a two-year transition period until 31 December 2024 involving states such as Kelantan, Terengganu, Pahang, Johor and Sabah.
He said it was in line with the government’s desire to balance development across the country through investment activities carried out by the private sector as well as an interim step towards the application of a more comprehensive new incentive structure.
“The Federal Government is always committed to ensuring that the relationship with the State Government is at the best level and this wish is manifested through increased allocations channeled in various forms of grants to the State Government every year.
“It is hoped that these grants can be fully utilized by the state government to carry out more balanced national development in line with the idea of a Civilized Malaysia (Malaysia Madani),” he said.
