Financial Performance: Penang vs Other States


An analysis on the financial performance of Penang against five other Malaysia states namely Selangor, Kelantan, Melaka, Johor and Sarawak.

Calvin Sankaran, Free Malaysia Today

My earlier analysis of the Penang state government’s financial management performance attracted considerable interest and provoked intense debate among readers. Some the readers requested for a further analysis to benchmark Penang’s performance with other Malaysian states. Such analysis, these readers felt, would conclusively answer the question of who is better at financial management – Barisan Nasional (BN) or Pakatan Harapan/Rakyat (PH/PR), the two competing political coalitions.

Concurring with this viewpoint and acceding to their request I have expanded my analysis to compare the financial performance of Penang with 5 other Malaysia states namely Selangor, Kelantan, Melaka, Johor and Sarawak.

The analysis looks at 6 different performance indicators, namely (1) Revenue (2) Revenue Sustainability (3) Administrative Efficiency (4) Developmental Spend (5) Consolidated Revenue Funds and (6) Financial Management Rating. The reason why these Key Performance Indicators (KPIs) were chosen is to be consistent with the previous analysis on Penang.

In addition to the quantitative analysis, I’ll also added some qualitative observations of the states’ financial management based on the Auditor-General and the states’ own financial reports. The time period for the analysis remains the same – Financial Years 2007 to 2014.

1. Revenue

For Penang’s Chief Minister Lim Guan Eng, the fact that the state’s revenue almost tripled from RM295.9 Million to RM799.7 Million between 2007 and 2014 is a source of great pride. This is a point that the CM repeatedly highlights in almost every one of his ceramahs, press conferences or speeches as the conclusive proof of PR/PH’s superior financial management capability vis-à-vis BN.

While the increase of RM503.8 million is indeed impressive, however when compared to other states, it looks puny. During the same period, Sarawak had managed to increase their revenue by an astonishing RM4.8 billion while Johor and Selangor also managed to grow their revenues by RM764.2 million and RM1.67 billion respectively.

As such, in terms of revenue increase, Penang’s performance is actually well below average (placed in 4th position in the list of 6 Malaysian states).

2. Revenue Sustainability

While Penang might not have done well quantitatively, let’s look at the revenue qualitatively. When we look at the source of revenue, as revealed by the previous analysis, Penang’s increase is driven entirely by an unsustainable and undesirable practice of selling of public assets (land) to private companies.

For the period 2007 to 2014, as reported in my previous analysis, Penang’s land sales as well as taxes related to land and property development, contributed to hundreds of millions to the state’s coffers.

However for Sarawak, Melaka and Kelantan, the states’ income were mostly derived from returns of investments, quit rents, natural resources or other sustainable sources. Only Selangor and Johor show a similar trend as in Penang in depending heavily on land sales for revenue generation.

However, Johor is almost 20 times the size of Penang and has a massive land bank. Furthermore the state in collaboration with the Federal Government is developing the Iskandar Region as the new growth corridor for Malaysia. It is well-known that Iskandar is considered as one of the most important strategic initiatives for the country.

Unlike land sales in Penang which are mostly for property development that only benefit and enriches the developers, Johor’s lands are being developed primarily for public benefit and for productive usage such as industrial, medical, transportation, entertainment, IT, etc. Also in terms of scale and contribution to the state’s coffers, the Johor’s land sales are much smaller than Penang’s.