Malaysian model vs. American model

On Oct 20, Malaysian Prime Minister Najib Razak announced that Malacca had achieved the status of “developed state”. This means that, even though Malaysia as a whole was still a developing country, some states were already highly developed. Another state, Selangor, achieved this “status” several years ago. (By the way, Oct 20, 2010 is written in this country as 20-10-2010.)

Upon reading the news on the Web, I couldn’t help but wondered when Perak, where I grew up, would be a developed state too. My guess is not within the next 10 years. Selangor is the wealthiest state in Malaysia, while Perak is one of the poorest.

The disparity between Selangor and Perak underlies one fundamental flaw in the government structure. In Malaysia, most taxes go to the Federal Government, which then distributes the money to individual states. Sadly, the Federal Government has been practicing “favoritism” for the last few decades. Some states get more funding, while other are neglected.

By contrast, state, county and city governments in the United States have the power to collect taxes. For example, every working people pays two types of income tax – one to the Federal Government and the other to the state government. Sales tax also goes to the states. (Oregon has zero sales tax!) Hotel tax, I believe, is determined by the cities. When I was in California some years back, I moved from one hotel to another. Some cities set the hotel tax at 10%, while others had it at 15%.

The local governments will then use the money collected to fund their projects rather than waiting for handout from Washington. Of course, there are times when the states will still need Federal money. To its credit, Washington does not practice favoritism to the same level as Putrajaya. President Obama, a democrat, has been generously enough to support states run by republicans.

I would like to see state governments of Malaysia be empowered. But I am not optimistic this will happen…