MALAYSIA

Malaysia is a federal country with a parliamentary democracy and a constitutional monarchy. The country has a three-tiered system of government made of the federal government, 13 state governments as well as local governments. Malaysia also has three federal territories (Kuala Lumpur, Putrajaya and Labuan), which, unlike states, do not have their own legislature or administration and are administered directly by the central government. The head of the Federal State is the Yand Di-Pertuan, elected in rotation every five years by and from the hereditary royal families of the members’ states gathered in the Conference of Rulers (out of the thirteen states of the federation, four do not have hereditary royal rulers and do not participate in the process). The federal parliament is bicameral and is made up of the lower chamber (Dewan Rakya) and the upper chamber (Dewan Negara). All members of the Dewan Rakya are directly elected to parliament every five years, while members of the Dewan Negara are partly appointed by the states’ governors and partly appointed by the King.

At the state government level, the 9 monarchical states (Johor, Negeri Sembilan, Pahang, Selangor, Perak, Kedah, Terengganu, Kelantan and Perlis) are headed by state monarchs, with mainly ceremonial functions, while the remaining states (Penang, Malacca, Sabah and Sarawak) are governed by a state governor appointed by the federal parliament. The States of Sabah and Sarawak, in East Malaysia, became part of the Federation in 1963, and retain since then a higher degree of local autonomy. The states each have a unicameral legislature, composed of state legislative assemblies (Dewan Undangan Negeri), elected every five years, simultaneously with the national elections (with the exception of one State, Sarawak, where elections are not synchronised).

The local government system is enshrined in the 1957 Constitution and comprises cities, municipalities and districts. However, there has been no election at the local government level since they were suspended in 1965. The Constitution also provides regulations for the relations across levels of government. Local governance regulations differ between the Malaysian peninsula and the states of Sabah and Sarawak. On the Malaysian peninsula, the 1976 Local Government Act, amended in 2006, sets out the responsibilities and financial provisions for local governments, while in East Malaysia, the main legislation regulating local governments is the 1996 Local Authorities Ordinance.

The relationship between the federal and subnational governments is articulated through the National Council for Local Government, which has the purpose of coordinating policies and laws between the federal, state and local areas of administration. The Ministry of Housing and Local Government (MHLG) is in charge of exercising ministerial oversight over local governments and providing for coordination on policy and legal issues, in particular through the Local Authority Consultative Council.

Federalism in Malaysia has historically been disputed. The trend in institutional reforms in recent decades has been towards the recentralization of responsibilities traditionally devolved to subnational governments and the concentration of decisions and fiscal capacity at the central level, specifically in the Prime Minister's Department. Between 2019 and 2021, however, the then ruling coalition made some unsuccessful attempts to "retake the spirit of federalism", promoting initiatives such as the effective decentralization of services such as water management, public transportation and social welfare and the return to the states of at least 10 % of the income tax generated in their territories. Recent debates have also brought to the fore the need to resume popular elections at the local level and in the three federal territories, although without success.

TERRITORIAL ORGANISATION
MUNICIPAL LEVEL	INTERMEDIATE LEVEL	STATE LEVEL	TOTAL NUMBER OF SNGs (2020)
19 city councils 40 municipal councils 92 district councils		13 states
Average municipal size: 214 344 inhabitants
151		13	164

OVERALL DESCRIPTION: Subnational government in Malaysia comprises 13 states and 151 local governments, which are not self-governing bodies as their executive heads are appointed by higher government-levels. Out of the 13 states, 11 are located in the Malaysian peninsula and two in East Malaysia, (the states of Sabah and Sarawak). There are also 3 federal territories at the regional level. Local governments include 19 city councils and 40 municipal councils in the urban territories and 92 district councils in the rural territories. In addition, there are 4 special local authorities and other agencies operate as local development authorities or corporations.

REGIONAL LEVEL: The 13 states in Malaysia are based on the historical Malay Kingdoms. In addition to the state monarchs and governors, that hold mainly ceremonial functions, executive power of states rests with the Ministers (Menteri Besar) or Chief Ministers (Ketua Menteri, in the four states without a monarch) as the head of government. They are appointed by the state’s monarch or governor, from within the representatives of the majority at the state legislative assembly, for five-year terms.

The state of Selangor is the most populous state with 6.6 million inhabitants (20% of the country’s population). It is followed by Sabah and Johor, with 3.8 million inhabitants each; collectively comprising 43.4% of Malaysia’s population.

There are also three federal territories: Kuala Lumpur, Putrajaya and Labuan. Since 2004, federal territories are under direct authority of the Federal Territories Ministry of Malaysia, who appoints the head and members of their local authority’s bodies (the mayor in the case of Kuala Lumpur and the Labuan and Putrajaya corporations for the other two territories). These territories were cities or municipalities before they became federal territories. Kuala Lumpur, for instance, became a federal territory in 1974.

MUNICIPAL LEVEL: There are three types of local governments (also called “PBT”) in Malaysia: city councils, municipal councils and district councils. City councils (Majlis Bandaraya) govern large urban centres, typically state administrative centres or capitals with populations above 500 000 and annual revenue greater than MYR 100 million. Municipal councils (Majlis Perbandaran) are local authorities for urban areas, commonly state capitals with populations greater than 100 000 and annual revenues above MYR 20 million. District councils (Majlis Daerah) are administrative structures for rural areas. Municipal councils and district councils can change type and be upgraded to cities or municipal councils respectively once they satisfy the required criteria.

Although municipalities should have elected councils and their own budget as stated by law, local government elections have been discontinued since 1965 and the enactment of the Local Government Act 1976 (Act 171). Under this act, local councillors were no longer elected but appointed by the state government, according to criteria stipulated by the state-level jurisdiction, and municipalities can therefore be equated with deconcentrated administrations.

Between 2019 and 2022 the number of local governments changed due to the upgrade or creation of 6 new municipal councils and 5 new city councils. In addition, there are four special local authorities (“Modified PBT”) in Malaysia, which are authorities in charge of administering special areas such as recent settlements that do not yet meet the requirements to be classified as districts or councils.

HORIZONTAL COOPERATION: The Malaysian constitution and laws governing local governments do not include any mention of inter-municipal cooperation. The Malaysian Association of Local Government (MALA) was founded in 2000 with the aim of promoting cooperation between municipalities and coordinating development efforts between local entities.

The Constitution provides a framework for the allocation of responsibilities across levels of government in Malaysia (Ninth Schedule). The states have responsibilities in areas such as economic affairs, transport, environment protection, housing, public health, culture and recreation and social welfare. Under the Local Government Act 2006 and the Town and Country Planning Act 1976, local governments are responsible for urban planning, sanitation and delivery of public health, among others. Local governments are also prescribed some sector-specific powers and duties via the Road Transport Act 1987, the Building and Common Property (Maintenance and Management) Act 2007 and the Environmental Quality Act 1974.

There are several overlaps among these competences, and joint responsibilities covered by the state and local governments include housing and town planning, public health, environmental and public sanitation, culture, leisure and sports and social welfare. State governments’ exclusive responsibilities include, on the other hand, the delivery of services related to slaughterhouses and electricity provision, while councils are exclusively responsible for cemeteries.

Some economic services such as agriculture, forests and fisheries, local economic development, trade and industry, and tourism are shared by the federal and the state governments.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	State level	Municipal level
1. General public services (administration)		Business licencing;Cemeteries
2. Public order and safety		Local police
3. Economic affairs / transports	Transport (shared); Roads (shared); Management of slaughterhouses, Agriculture and fisheries activities; Local economic development; Tourism; Trade and industry; Electricity provision; Ports and harbours (only Sabah and Sarawak)	Transport (shared); Roads (shared); Enhancement of local economic activity; Infrastructure development; Markets and fairs; Gas services
4. Environment protection	Forestry; Fire safety (shared); Rehabilitation of mining and eroded land; Protection of wild life	Fire safety (shared); Waste collection and disposal
5. Housing and community amenities	Housing (shared); Town and regional planning (except in the federal capital, Kuala Lumpur); Land use laws; Water supply (only in Sabah and Sarawak);	Housing (shared); Town and regional planning (shared)
6. Health	Public health and sanitation (except in the state’s capital); Disease prevention	Preventive public health measures (shared)
7. Culture & Recreation	Sports and leisure (shared); Museums and libraries; Heritage preservation; Religious facilities (shared); Parks and open spaces (shared)	Sports and leisure (shared); Theatres; Religious facilities (shared); Parks and open spaces (shared)
8. Education
9. Social Welfare	Protection of women, children and youth

Scope of fiscal data: state governments and local governments.

IMF-GFS

Availability of fiscal data: Low

Quality/reliability of fiscal data: Low

GENERAL INTRODUCTION: The general Financial Provisions of local government in the Peninsula of Malaysia are enacted by Part V Section 39 of Local Government Act 1976. Those for local governments in the states of Sabah and Sarawak are enacted respectively under the Local Governance Ordinance 1961 and the Local Authority Ordinance 1948, amended in 1996. Section 54 of the Local Government Act gives authority to state governments to determine the form and content of local government annual financial accounting. Local governments´ consolidated financial accounting is available to the public, but not included in the annual Economic Report of the Treasury. Local governments are autonomous in terms of planning and managing local budgets, and their accounts are subject to annual audits conducted by the auditor general. They have the authority to collect taxes and grant permits and licenses.

Subnational, state and local government expenditure by economic classification
2020	Dollars PPP / inhabitant			% GDP			% general government			% subnational, state and local government
-	SNG	State	Local	SNG	State	Local	SNG	State	Local	SNG	State	Local
Total expenditure	676	469	208	2.4%	1.7%	0.7%	12.4%	8.6%	3.8%	100%	100%	100%
Inc. current expenditure	447	276	171	1.6%	1.0%	0.6%	10.1%	6.2%	3.9%	66.1%	58.9%	82.4%
Compensation of employees	-	-	-	-	-	-	-	-	-	-	-	-
Intermediate consumption	-	-	-	-	-	-	-	-	-	-	-	-
Social expenditure	-	-	-	-	-	-	-	-	-	-	-	-
Subsidies and current transfers	-	-	-	-	-	-	-	-	-	-	-	-
Financial charges	-	-	-	-	-	-	-	-	-	-	-	-
Others	-	-	-	-	-	-	-	-	-	-	-	-
Incl. capital expenditure	229	193	37	0.8%	0.7%	0.1%	22.7%	19.1%	3.6%	33.9%	41.1%	17.6%
Capital transfers	-	-	-	-	-	-	-	-	-	-	-	-
Direct investment (or GFCF)	-	-	-	-	-	-	-	-	-	-	-	-

EXPENDITURE: Although subnational expenditure has been gradually increasing in the last decade, expenditure tends to be highly centralized in Malaysia. In 2020 subnational governments spent USD 676 PPP per capita, which corresponded to 12.4% of total public expenditure and 2.4% of GDP, well below the OECD average for federal countries in the OECD (43.5% and 20.6%, respectively, in 2020). State governments account for the bulk of total subnational government expenditure (around 70%), against 30% for local governments. At the local level, current and capital expenditure represents 82% and 18% respectively, while at the state level this relation is more balanced, at 59% and 41% respectively.

DIRECT INVESTMENT: Subnational government capital expenditure accounted for 22.7% of total public capital expenditure in Malaysia in 2020, which is relatively low by international standards. Capital expenditure and investment are, however, key functions of subnational governments, accounting for 33.9% of subnational government total expenditure in 2020. Particularly, it represented 41.1% of state expenditure and 17.6% of local government expenditure. These figures are significantly above OECD averages, where the share of subnational government capital expenditure represents around 13.5% of total subnational government expenditure.

During the 1980s, the Malaysian government introduced the Malaysia Incorporated Policy and the Privatization Policy with the aim of encouraging private sector participation in public investment and the financing of infrastructure. Currently, the regulatory framework for PPPs in Malaysia is administered by the Public Private Partnership Unit (UKAS) in the Prime Minister's Department. It covers six methods of PPP implementation: BOT, BLT, BOOO, BLMT, Land Swap, Contract Management, and Corporatisation. The latest guideline for PPPs is the ICT Strategic Plan UKAS issued for the period 2018-2022. According to the World Bank's PPP Knowledge Lab, since 1990, 126 PPPs have been implemented in Malaysia, with a total amount of approximately USD 53 billion. There are currently 101 active projects, amounting to USD 41 billion. There is no detailed data for the implementation of PPPs at the subnational level.

ⓘ No detailed data available for this country

Most of the budget of subnational governments in Malaysia is spent on recurrent items such as staff compensation, charges and utilities. Malaysia has one of the largest civil services among other countries of similar population and size. Other areas where significant shares of the budget have been allocated in previous years are social security (around 20% of subnational expenditure), health (15%) and environmental protection (10%).

Subnational, state and local government revenue by category
2020	Dollars PPP / inhabitant			% GDP			% general government			% subnational, state and local government
-	SNG	State	Local	SNG	State	Local	SNG	State	Local	SNG	State	Local
Total revenue	923	678	245	3.3%	2.4%	0.9%	20.8%	15.3%	5.5%	100%	100%	100%
Tax revenue	-	-	-	-	-	-	-	-	-	-	-	-
Grants and subsidies	175	144	31	0.6%	0.5%	0.1%	-	-	-	19.0%	21.3%	12.6%
Tariffs and fees	-	-	-	-	-	-	-	-	-	-	-	-
Income from assets	-	-	-	-	-	-	-	-	-	-	-	-
Other revenues	-	-	-	-	-	-	-	-	-	-	-	-

OVERALL DESCRIPTION: In 2020, subnational government revenues amounted to approximately USD 923 PPP per capita, of which state and local governments respectively accounted for 73% and 27%, respectively. This amount corresponds to 3.3% of the country’s GDP, which is higher than previous years but it is still relatively low compared to other countries in the region. There is a lack of official subnational government revenue data, and details of subnational government revenues provided by the Ministry of Finance are only available at an aggregate level, under the categories “grants” and "own source revenues", which does not allow to discern between tax, tariffs and fees and other revenue sources. Based on this categorisation, we can observe that subnational governments in Malaysia rely highly on own-generated revenues, and have a low dependency to grants. While in OECD countries, the average share of grants and subsidies in total subnational revenue is 41% in 2020 (35.5% in federal countries), in Malaysia, it is estimated that only 19% of subnational government revenue come from grants and subsidies from the central government.

States’ revenues amounted to MYR 34.4 billion in 2020, (approximately USD 21 947), of which 79% corresponded to state-generated revenues and 21% came from federal grants. Non-tax revenue from land premiums and royalties from petroleum and investment accounted for around the half of own-revenue at the state level. Taxes (and mainly land-based direct taxes) make up the rest of states’ own revenues.

Local revenues may come from three sources: locally-raised revenue, transfers or loans. In 2020, local government revenues amounted to MYR 12.4 billion (approximately USD 7 929), of which 12.6% corresponded to transfers and the remaining 87.4% was locally-raised revenue. Non-grants revenue includes direct taxes and non-tax revenue, such as licence payments, trade and investment profits, fines and user fees.

TAX REVENUE: Tax bases are set by central authorities and subnational governments have limited authority for setting rates. The larger share of taxes is levied under federal law, therefore the federal government concentrates most of the tax receipts. Subnational governments, on their end, rely mostly on several types of land and property taxation.

State taxes include mainly the land tax, which is the main source of state government own-revenue. The Federal Constitution gives state governments the right and responsibility to administer the land in the jurisdiction. As provided by the 1965 National Land Code (Section 14 NLC), each state is authorized to determine the rate of land tax imposed and it may differ from other states. The amount of land tax on the ownership of unimproved or improved land can also vary within each state according to geographical physical features (agricultural, building or industrial). Although the land tax is a main source of revenue for state governments, its performance varies across states, and based on data from Malaysia National Audit Department, a significant share of budgeted revenue from this tax are not collected (around 29% in 2017). Other state taxes include export duties on timber (in the State of Sabah), excise duties (in the State of Sarawak), taxes on mines, an entertainment tax, and an excise duty on liquor, among other smaller sources of revenue.

The assessment tax (cukai taksiran) is the main source of revenue for local governments, accounting for around 60-70% of total revenue of city councils in 2020, stable from previous years. According to the Local Government Act 1976, the assessment tax is a property tax raised on both residential and commercial buildings within a local government area to pay for developing and maintaining local infrastructure and services. Assessment rates are calculated based on the estimated annual rental value of the property.

GRANTS AND SUBSIDIES: Grants and subsidies account for 19% of total subnational government revenue, and in particular 21.3% of state government revenue, versus 12.6% for municipalities. Transfers, which may be from the tax-sharing system, earmarked for specific purposes or general purpose, can come from both the federal level and states. However, in practice, states do not have the capacity to financially support local governments, which rely on federal funding.

In 2020, state governments were the main beneficiaries of subnational government transfers, representing 82% of the total grants to subnational governments. There are three main categories of grants from the federal government to the states: tax-sharing grants, general purpose grants, and specific purpose grants. Tax sharing grants are defined under the Article 110 of the Federal Constitution which established that 10% of revenues collected nationally from exports duties on tin, on iron and mineral ores should be allocated to the states where the mineral exploitations are carried. General purpose grants provide general-purpose funds to state governments such as the Capitation Grant, the State Reserve Fund, the Contingencies Fund Grant, and special grants to Sabah and Sarawak, among others. Specific purpose grants support specific capital expenditures, as provided by the Constitution. These are the State Road Grant (road maintenance), the Services Charges Grant (compensation for states where federal projects involve 50% or more of the state officers) and the Economic Development Grants (compensation for state inequalities and promotion of less developed states).

Local governments may receive five types of financial grants: Annual Equalisation Grants, Launching Grants, Development Project Grants, Road Maintenance Grants, and Balancing Granst. Of the five, the most important are the Annual Equalisation Grant and the Development Project Grant, which is given by the Federal government to local governments through the state government in accordance with the States Grants (maintenance of Local Authorities) Act of 1981. Sabah and Sarawak states do not receive this grant since they fall under their own ordinances, respectively Local Government Ordinance 1961 and Local Authorities Ordinance 1996. Administration of grants to subnational governments occurs within the Ministry of Housing and Local Government.

OTHER REVENUE: According to the Constitution, other sources of revenue assigned to states include fees from toddy shops, fees from certain types of licenses, royalties from petroleum, gas and forestry, duties from the entertainment industry, fees in courts other than federal courts, rents on state property, interests on state balances, property revenues, among others.

The Town and Country Planning Act 1976 establishes that local governments’ revenue consists of charges and fees, licence payments, and trade and investment profits. Formally, there is a legal provision for local governments to collect drainage and sewerage rates. However, both these services are currently being provided for by private companies.

ⓘ No detailed data available for this country

Fiscal rules: The Medium-Term Fiscal Framework 2022 – 2024 (MTFF) guides budgetary planning by setting a three-year macro fiscal projection and the policy initiatives required to achieve its fiscal objectives. At the federal government level, the optimal spending level for the period was set at 13.7% of GDP with a projected revenue of 13.9% of GDP, which will eventually leave a positive current balance of 0.2% of GDP for the period. However, the overall balance is expected to be around -5% of GDP, because of incurred capital expenditure and COVID-19 recovery measures. In addition, the Medium-Term Revenue Strategy (MTRS) aims to guide Malaysia’s efforts to enhance non-petroleum revenue by outlining general revenue measures, reviewing the tax legislation and modernising the revenue administration, which may have an important impact on subnational finance.

Borrowing is regulated by several laws (e.g. 1957 Constitution, 1959 Loan Act, 1983 Government Funding Act, 1963 External Loans Act and the 1946 Treasury Bills Act). In particular, the 1959 Loan Act and the 1983 Government Funding Act set the public debt ceiling at 55% of GDP, which is defined as including the outstanding Malaysian Government Securities, the Malaysian Government Investment Issues and the Malaysian Islamic Treasury Bills.

DEBT: In previous years, subnational debt has been around 0.4-0.5% of Malaysia’s. Article 111 of the Constitution establishes that state governments are only allowed to borrow from the Federal Government, with its prior approval (except for the states of Sabah and Sarawak, which may borrow with the approval of the Central bank). For local governments, the 2006 Local Government Act establishes that councils and municipalities may, with the approval and under the conditions of the State Authority, contract loans. Such loans may be used for the acquisition of land, the construction of public buildings, for carrying out permanent works, for providing or maintaining plant equipment and vehicles and to pay off existing loans. Local governments are also allowed to issue municipal bonds, but there has not been municipal bond issuance recorded since the first one, in 2004, by the Pasir Gudang local council.

In 2020, state government debt accounted for 99% of subnational government debt, whereas local government debt remained low, corresponding to 0.2% of total subnational debt.

In 2017, the World Bank, Bank Negara Malaysia and the Securities Commission collaborated in supporting the Malaysia Green Finance Program, enabling Malaysia to launch the world's first green sukuk, a green Islamic bond used to fund only environmentally-sustainable infrastructure projects. According to the Climate Bonds Initiative, in 2021 the Malaysian sustainability bond and sukuk market stood at USD 2.6 billion, with a total of 15 green bonds, sukuk and loan deals. However, subnational governments are not allowed to issue green or social bonds.

TERRITORIAL MANAGEMENT OF THE CRISIS: The federal government of Malaysia managed the COVID-19 through a territorial approach, applying a differentiated application of restrictions and health measures (e.g. lockdowns and border closures) depending on the situation in each state, which allowed to manage the impact of the crisis throughout the years. In fact, in response to the different waves of infections, the Malaysian government has implemented various versions of the Movement Control Orders (MCO) and Conditional Movement Control Orders (CMCO) which have affected some or all regions. However, various jurisdictional disputes between the federal government and the states have occurred during the first months of the pandemic, mostly in administrative matters such as the management of public spaces, the granting of licenses, and coordination with state religious authorities, many of which issued their own guidelines.

Despite the centralised overall approach to the crisis, Malaysian states have been at the initiative of several measures and subnational policies to deal with the health crisis within their jurisdiction. The states of Sarawak and Sabah, in particular due to their greater constitutional powers, imposed their own immigration measures and issued their own communications. Other states implemented other types of measures. Selangor, for example, created its own Covid-19 task force, which used local knowledge and used analytical models to identify red zones and direct testing to specific locations, as opposed to the general federal state testing policy. Some states have developed their own testing applications, such as Penang, Sarawak, Selangor, Sabah, Terengganu and Johor. Also, several states went further than the federal government in their communication actions and translated official information into more languages, expanded educational programs, implemented multimedia communication strategies and established hotlines.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: In October 2020 the parliament enacted the Temporary Measures for Government Financing (COVID-19) Act 2020, which as a first measure modified the fiscal rule and increased the public debt ceiling by 5 percentage points, allowing it to go from 55% to 60%. of GDP. The objective of this measure was to facilitate the financing of the COVID-19 Fund, also announced in the same law. Until the end of 2021, the federal government had announced several fiscal stimulus packages totalling MYR 207 billion (USD 49 billion PPP), equivalent to 13.8% of GDP.

All 13 states implemented their own aid packages. Most states have created benefits for front line workers, mainly in the form of cash assistance. Other examples include rent waivers (rent relief), which during the first months were included in the aid packages of 8 states (Sarawak, Penang, Perak, Pahang, Kelantan, Johor, Malacca and Pearls). The states of Pahang, Kelantan and Penang included delivery of food and medicine to the poorest households. In the field of business, four states (Sabah, Selangor, Penang and Negeri Sembilan) implemented specific measures to complement the contributions of the federal government in stabilizing the economy and the activity of businesses and entrepreneurs.

The states have used their fiscal resources to deploy economic relief measures that, as of July 2020, amounted to more than MYR 4 billion (USD PPP 965 million). The amounts of states’ aid packages have shown the marked territorial differences that exist between states. As of June 2020, the states of Sarawak and Sabah had announced packages of MYR 2.3 billion and MYR 910 million respectively, while packages from the states of Malacca and Perlis were only MYR 6.5 million and MYR 2.4 million.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: The impact of the economic crisis unleashed by Covid-19 was significant for Malaysian subnational governments. According to data from the Ministry of Finance (MOF), the crisis mainly affected capital expenditure and investment, and the increase in state and local governments revenue that was trending at least since 2016 has slowed down significantly in 2020. In addition, in the case of local governments, the economic impact is expected to be reflected more strongly in the fiscal accounts for 2021.

States’ revenues, on the one hand, increased by 2.1% between 2019 and 2020, which was well below the 11.3% increase between 2018 and 2019 and the 39% increase between 2017 and 2018, and it is expected to have grown by 3% in 2021. Due to aid packages, current expenditure registered an increase of 13.2%, from MYR 12.3 to MYR 14 billion. However, development spending (capital expenditure) fell by 11.5%, from MYR 11 to MYR 9 billion ringgit.

This increase also slowed down at the local level. Local government revenues increased by only 1.8% between 2019 and 2020, while in previous years the variation was +4.2% between 2018 and 2019 and +8% between 2017 and 2018. Estimates from the MOF for 2021 indicate that municipal revenues would fall by 12.1% between 2020 and 2021.

Local government spending was also affected: after increasing by 6.6% and 11% in the previous two years, in 2020 the current spending of councils and municipalities fell by 8.2%, from MYR 9.4 to MYR 8.7 billion, although it is expected to recover by 3.1% in 2021. In the case of capital expenditure, in 2020 this fell by 27.3%, and is expected to fall by 32.6% in 2021.

ECONOMIC AND SOCIAL STIMULUS PLANS: In addition to the aid programs implemented by the states, on June 20, 2020, the Malaysian federal government announced the Short-Term Economic Recovery Plan (PENJANA), a MYR 35 billion (USD PPP 8.4 billion) strategy with the goals of empowering the population, boosting business and stimulating the national economy. This plan includes wage subsidies, hiring and training assistance for business, reskilling and upskilling programmes to enhance employability, flexible work arrangements incentives, childcare subsidies, public transport subsidies and grants and incentives for SMEs to adopt e-commerce and promote online consumption, among many others measures.