A New Mechanism To Pay Our Sultans

Malaysians are paying their Yang di-Pertuan Agong a whopping RM 5,075,232 every year! In addition to that, a similar sum can be expected to be paid to the Sultan of each state on an annual basis. But despite this, should the Rulers be allowed to involve in commercial businesses?

This article seeks to suggest a mechanism that can allow the involvement of the Ruler of the State in the business field as well as allocate payments to the Yang di-Pertuan Agong in a transparent manner.

Lately, there have been on-going discussions in the public sphere regarding the role of the Rulers of the States (Sultans) in business sector. Many, including the former Prime Minister, Tun Dr.Mahathir have spoken against the Sultans involving in commercial businesses as this will jeopardise the role of constitutional monarchy of Malaysia. Many also fear that involvement of Sultans in the business sector will diminish the opportunities for the commoners to attain success in the corporate field. One of the active Sultans in the business field is Sultan Ibrahim, the Ruler of Johor. Sultan Ibrahim is well-known in real estate businesses and most recently, through his involvement in the Project 4A, an electricity power plant project that drew public contention.

Before going into the debate whether the Sultans should be allowed to do business, it is only appropriate to understand the Highnesses’ financial wealth and income every year. For the purpose of simplifying this article, let us look into the income of the Yang di-Pertuan Agong alone, which comes from the Federal Consolidated Fund. To the uninitiated, this fund accumulates the revenue of the Federal Government, contributed by the direct and indirect taxes, hydrocarbon receipts, profits from the other sources and etc. Most importantly, this is an accumulation fund which rightfully belongs to all fellow Malaysians.

Each and every year, huge amount of money is being paid to the Yang di-Pertuan Agong alone as “royal allowance” and “palace up-keeping costs”. This payment is mentioned through the Civil List Act 1982 with its recent amendment in 2006.

The Civil List Act 1982 contains four schedules. Under the First Schedule, the Yang di-Pertuan Agong is paid RM 1,054,560 per annum. Out of this, RM 608,400 is paid in the form of Privy Purse. However, this amount could be higher based on the Privy Purse received by the King when His Majesty served as the ruler of His state.

The Second Schedule allocates a total of RM 3,823,800 and should be spent on the expenses of the Royal Palace and the salaries of the palace staffs. The Third Schedule provides allocation for the Royal Consort of the King, amounting to RM 196,872. And the last schedule provides for any special (additional) allocation deemed appropriate by the Honourable Prime Minister and the Cabinet. The sum of the first three schedules brings the total amount to a whopping RM 5,075,232 per year.

It has to be reminded that this is merely a conservative estimate of the payment to the King. It is not rocket science to decipher that the actual payment could be a lot higher. The whole idea does not stop here. We have nine Sultans in Malaysia and allocations to their Highnesses every year could reach as much as tens of millions of ringgit! Not only that, the Civil List Act has undergone amendments for a total of six (6) times. And I believe the allocation for the Yang di-Pertuan Agong has been increased under each amendment.

My intention is not to oppose the benefits enjoyed by the Royal institution in Malaysia and definitely not to provoke anyone, especially the republican-minded ones to act against the Rulers. Instead it is my hope that the respect for the constitutional monarchy to be preserved. For this to happen, the subjects of the Rulers have to be made to understand that they are not “squeezed” for the Rulers to enrich themselves. Otherwise, protests like in Spain for the constitutional monarchy system to be dismantled may take place even in Malaysia. It should be taken into concern that in 2008, the monarch of the former Hindu Kingdom of Nepal was dethroned by public protest as the respect for the Ruler has disappeared.

Malaysians are now facing a more financially-tight situation especially when the Najib administration engages in fiscal consolidation measure through subsidy rationalisation and improvement to the taxation regime by introducing the Goods and Services Tax. These measures are even acknowledged and praised by ratings agencies such as Moody’s and Standard and Poor’s. Thus, we need a stronger Consolidated Fund that can spur developments domestically without incurring a budget deficit. For that, a new mechanism to pay the King ought to be introduced.

Establish the Royal Revenue Fund

The Government should establish the Royal Revenue Fund (RRF) with a one-off seed funding by using the Federal Consolidated Fund. The value of this seed funding should be decided by the bicameral Parliament. The authority to administer the RRF should be vested under the Conference of Rulers (Majlis Raja-Raja Melayu). This fund should act in a way that the income for the Yang di-Pertuan Agong and his royal consort and payments to defray the up-keeping costs of the royal palace come from this RRF. The Conference of Rulers can appoint the Sultans or their representatives as the board of directors of RRF.

Out of the revenue from this fund, a 20% (or any percentage deemed appropriate) should be used to pay for the Privy Purse and royal household expenses, instead of taking from the Consolidated Fund. The remaining 80% should be transferred to the Federal Consolidated Fund. This shows that whilst the subjects contribute to their Rulers, the Rulers also contribute to the welfare of the people. If the 20% is not spent by year-end, the balance should be transferred to the Royal Revenue (Reserve) Fund, RRRF. Should the RRF faces financial losses through business transactions and investments and subsequently registers deficits, the amount accumulated in the reserve fund should be used for the King’s royal household expenditure.

This model should be emulated and replicated in all states level. This mechanism enables the Rulers to engage in businesses (their right to participate in commercial businesses should not be denied) and sustain their royal expenditures through their own effort. However, the Rulers should be considered as equal players in the free-market orientation. Thus, no other person can turn disrespect against the Rulers as through this mechanism, the Rulers will contribute to welfare of the rakyat economically. It will also create sustainable mutual respect between the Rulers and the subjects. However, this RRF should be prohibited from competing for government tenders and projects. RRF should only be STRICTLY allowed to deal in private commercial businesses.

In addition to this, the Auditor General’s office should establish a Royal Audit unit which should be empowered to audit the RRF. The audit report should be made public and debated in Parliament. Any discrepancy found in the handling of the RRF should be subject to parliamentary censure and intervention to press the Conference of Rulers to expel the board of directors. Such actions can lead to the building of a strong democracy and constitutional monarchy.

This mechanism is modelled after the 2011 Sovereign Grant concept of the British constitutional monarchy but has been altered accordingly. The Rulers’ right to partake in commercial businesses should never be denied, however, it should never be done at the expense of the Malaysians.