A City Budget defined as a fiscal plan, explains the services, activities, programs and projects to be provided by the City to the citizens. In addition, it sets out anticipated revenue and expenditure for accomplishing a number of services within a time frame.
While Budgets are set by City Halls around the world, they all vary in terms of the allocation and availability of resources as cities rarely have enough money to be able to appropriate all the funds requested to all departments and activities and, as a result, there is considerable competition for whatever money is available.
Therefore, the process of budgeting includes establishing a balance between costs and services while at the same time representing decisions made with regards to the quality, quantity and financing of activities and projects to be undertaken.
Kuala Lumpur City Hall, more commonly known as Dewan Bandaraya Kuala Lumpur (DBKL) announced its 2020 Budget back in December 2019. With the theme set as “Joyful City, Shared Prosperity” (Bandar Raya Ceria, Kemakmuran Bersama) and an allocated amount of RM2.972 billion (approx. USD$725mil), the Budget is set to improve both residents’ living standards and well-being.
With Datuk Nor Hisham Ahmad Dahlan acting as Mayor for the second year, he explains that RM1.826 billion (61.5%) of the Budget would be for Operating Expenditure and RM1.146 (38.5%) would be for Development purposes. (MalayMail, 2019).
The former has been divided into five main components — services and supplies at RM1.142 billion (62.5%); salaries, wages and employee benefits at RM504.8 million (27.6 %); handouts and fixed payments at RM103.2 million (5.7%); overtime payments at RM67.4 million (3.7%) and other expenditures standing at RM9.5 million (0.55%)
The latter, on the other hand, will consist of RM696.5 million, (60.8%) from DBKL, and the remaining RM449 million (39.2%) of the funds will come from the government and other sources, as seen below.
According to Mayor Nor Hisham, DBKL is expected to generate RM2.523 billion in revenue for 2020, up from RM2.465 billion (a 2.35% growth) the year before. The amount is estimated without the sum of RM449 million in funds received from the government and other funding for development projects. In terms of DBKL’s main revenue, it comes from the assessment collection, which contributes RM1.24 billion (49.1%) to the overall revenue.
With one of the main aims of the Budget being to improve wellbeing, a total of RM746 million has been allocated for road, drainage, slope, and council home housing projects, as well as free services of GO-KL buses. As Malaysia prepares for Campaign “Visit Malaysia 2020”, DBKL has allocated RM7.5 million to upgrade and repair heritage buildings in the city.
Still within the ASEAN region, the Budget analysis continues to Indonesia, Thailand and Singapore. Located in South East Asia’s largest economy, The Jakarta administration and the City Council negotiated a Rp 87.9 trillion (US$ 6.25 billion) Budget for 2020, a 1.2% increase from 2019’s revised budget of Rp 86.89 trillion in. After much deliberation, it was finally set, but still faces criticism due to programs considered as problematic.
After Indonesia, South East Asia’s largest economy in terms of GDP is Thailand. With Bangkok’s fiscal year between the months of October and September, the asked sum of 83 billion baht by The Bangkok Metropolitan Administration (BMA) will be used to improve five key aspects, cleanliness, convenience, safety, quality of life and self-sufficiency of people’s lives in the capital. The amount requested matches BMA’s revenue from its various projects, tax collections, and contributions from the central government.
Out of the City Budget, 3.6 billion baht is designated to improve the city’s cleanliness, 8.6 billion baht to improve accessibility and convenience, and 655 million baht to make the city’s streets safer. A sum of 3.3 billion baht to improve quality of life and a further 139 million baht to promote and develop self-sufficient communities will also be allocated.
Singapore – the city-state, who places 5th in terms of GDP in South East Asia, has yet to announce its 2020 Budget. But there is no doubt that this year’s budget will not be as big as last year’s, that was set as a strategic plan to allocate resources to build a strong, united Singapore. Under five main themes: A safe and secure Singapore, a vibrant and innovative economy, a caring and inclusive society, a global city and home for all and fiscally sustainable future, the 2019 Budget saw an allocation of funds into various fields which included social spending, a sum of S$4.6 billion over the next three years on economic measures in Budget 2019, where S$3.6 billion will go towards helping workers and another S$3.1 billion into a new Long-Term Care Support Fund. Under the 2019 Budget, Singapore offered many incentives for the people, meeting particularly two of their five themes.
Moving Far East, towards Korea and Japan, City Hall Budgets encompass a much larger scale. In October 2019, The City Government of Seoul announced that a record budget nearing 40 trillion won ($34.4 billion) had been drawn up for 2020 with aims to improve the capital’s social welfare through an expansionary fiscal policy. With an accurate figure of 39.5 trillion won set, the Budget would see a 10.6% growth in 2020, up from 35.7 trillion won in the previous year. The expansion is funded by the issue of municipal bonds worth 3 trillion won at an annual interest rate of 1.8 percent.
Just like New York City, a portion of the Budget is set for social welfare. With the total amount set as 12. 88 trillion won ($10.9 billion), it is the first budget to exceed the 12 trillion mark. New York on the other hand, has a budget over $125 million for this sector. In addition, budgets for job creation, housing development, industrial economy and general administration increased significantly, with 5.3% of the budget allocated for the aim of creating 393,000 jobs. Seoul also announced plans of injecting 4.7 trillion won into housing support for newlyweds and childcare system when announcing the 2020 Budget. A sum of 497.7 billion won has been designated for the younger generation, and a further 811.1 billion won for air quality improvement.
With Japan’s capital set to host the 2020 Olympic Games, the Tokyo Metropolitan Government has over the years of preparation, allocated a sum of over 2.16 trillion yen ($19.9 billion).
The Metropolitan Government expenditure is significantly different from the expenditure of other local authorities, due to the fact that the government is responsible not only for the administration at a prefectural level, but also for part of the administration in the ward area, which elsewhere would be carried out at the municipal level.Another reason is the special ward financial adjustment allocations, an expenditure item found only in Tokyo.
Although Malaysia, is unlikely to host such a grandiose event in the near future, the South East Asian Games (SEA Games) hosted by Kuala Lumpur in 2017 had a RM450million budget set out by the then Prime Minister.
Moving to Europe , Switzerland’s second largest city, Geneva’s city budget for 2020 is planned at CHF 9.143 million ($9.42 million), a shortfall of CHF 590 million from the forecast revenue of CHF 8.533 million, as costs rise significantly due to higher health insurance subsidies (+176 million) and the bailout of state employee pension fund (+213 million) as well as company tax changes. The Canton’s budget of over CHF9 million includes increased spending on hospitals and government staff with a total amounting to CHF103 million.
Towards the North-east, just over 2500 kilometres away, is the capital of Estonia, where the City Council of Tallinn in December 2019, approved a 824 million euro Municipal Budget that aims to prioritise the needs of children and families and improve their well-being. Education continues to be of top priority, where operating costs under this sector makes up 40% (263million euros, including central government funding). The planned education sector investments amount to nearly 49 million euros with plans to renovate a number of schools and nurseries throughout the year.
More than 50,000 euros have been designated for the implementation of various prevention and intervention programs to tackle school bullying. An additional sum of nearly two million euros have been earmarked for the support of children with severe or profound disabilities.
As for transport infrastructure, an 8 million euros budget has been set as a priority to repair neighbourhood roads and walkways, an increase of 60% from 2019. The city will invest a total of 70 million euros in this sphere of constructing tracks for pedestrians, cyclists and recreational sports that will continue to promote physical activity and provide more opportunities for recreation.
As for urban maintenance, three million euros have been allocated to further recondition parks and green zones. Tallinn will also continue its efforts to develop community farming across districts will continue. Other areas of the Budget include funds set aside for major recreation and leisure projects that include a 5.7 million Theatre project as well as an 800,000 euro extensive Culture Centre renovation. Money has also been envisaged for the Tallinn Zoo and Botanica Gardens, totalling 7 million euros.
A city farthest from Kuala Lumpur struck a $92.8 Billion Budget deal for the 2020 Fiscal Year in June 2019 between New York City Mayor Bill de Blasio and City Council Speaker Corey Johnson. The deal plans to bolster the city’s reserves and place 285 more social workers in public schools. Support for other Council priorities are taken into account as well, and include a $250 million boost for the city’s reserve funds and a $33 million investment in libraries. $89 million has been set aside to pay outside pre-kindergarten staffers the same as Department of Education employees, this initiative is known as “Pay Parity for Teachers”, a signature by de Blasio.
In addition, de Blasio’s administration has agreed to pay public defenders and civil legal-services providers on par with the city Law Department over the next four years starting in the 2020 fiscal year. A sum of $250,000 has been allocated for abortion services, a first for the nation. The money is reportedly set to go to the New York Abortion Access Fund, that will help abortion become more affordable.
Besides the budget allocation towards Social welfare, the Deal provides positive results for the city’s General Reserve fund, increasing it by a total of $150million to $1.15billion. The Retiree Health Benefits Trust Fund will see an additional $100 million, increasing the total to $4.57 million, which will result in the city achieving its highest reserves ever.
The graph below illustrates the city population as well as the population density. Not only is Tokyo the most populous amongst the 8 other cities, it is the most populous in the world, but that doesn’t mean it has the biggest budget. The biggest, in this case, is New York City, whose budget is almost 5 times that of Tokyo. But population wise it is 4 times as small. Therefore, there is no positive correlation between the fact that the larger the city population, the bigger the size of the budget.
As a city with over 7.9 million inhabitants, Kuala Lumpur’s population is much larger compared to its closest neighbour Singapore and Geneva and Tallinn, but its budget is significantly smaller. When looking between Kuala Lumpur and its ASEAN counterparts, the former spends more on operating expenditure and development projects whereby Indonesia’s capital focuses its budget spending on programs that benefit the public, such as physical fitness test programs. Bangkok, in addition, works to improve five key aspects, as people’s lives are greatly valued. Singapore’s Finance Minister, Heng Swee Keat also described that a significant amount would be designated in helping people as well as providing incentives and benefits for the nation’s citizens.
What Kuala Lumpur can take as an example from the four nations discussed above is considering a more “Citizen-inclusive” budget where funds would be allocated towards security, convenience and health care support.
Tokyo is the world’s most populous city, with a population density of 17,109 inhabitants per square kilometre, and a city that has hosted not just one, but 2 Olympic Games, and another one set for the coming Summer. DBKL, unlike Tokyo sets the budget just for Kuala Lumpur. Tokyo’s Metropolitan Government on the other hand is responsible for administration in both prefectural and ward areas, meaning the scope of work of Tokyo’s City Hall is much larger as compared to Kuala Lumpur’s.
From European perspective, budgets are allocated for education, which Kuala Lumpur is lacking. If Kuala Lumpur is able to allocate more towards the future, it may be able to improve its education system and internationalize it on a global scale, levelling up to Switzerland and Estonia. New York City, along with Seoul, Bangkok, Singapore, Jakarta and Bangkok is another city on the list that allocates a certain amount of the budget towards social welfare and has the biggest budget out of all cities mentioned, highlighting its financial capacity and resources.
Overall, based on all nine city budgets, the main takeaways for Kuala Lumpur, in order to reach a global scale just like the others, is to consider a portion for social welfare, as well as safety, cleanliness and education, so that it can, in the future, become an advanced nation.
Written by Yasuna Ogimura, Intern at 27 Advisory, Bachelor of Business and Commerce (Accountancy and Banking and Financial Management), School of Business, Monash University. Yasuna has an interest and passion for financial services and investment banking. After her internship she aims to pursue a career in finance.
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