Defence Budget Primer Series

Budget Series: The Defence Budget – Supply and Development 60

The general trend for the last five years has seen defence spending hover around RM13 to RM15 billion. This article outlines who the primary stakeholders the Ministry is, in effect, serving: the rakyat, foreign diplomatic missions, veterans and military pensioners, members of the defence industry, and some private sector and non-government entities.

The Title Page of the Defence Budget.

What’s in the Title Page?

This first page of the document covers the following information: a summary of the last five years’ (including the coming year) worth of defence expenditures, and a restatement of MinDef’s mission, vision, and its primary pelanggan or “clients”.

Generally, the information about the vision and mission can be safely ignored, as it is merely restating the obvious.

Note, the 2019 Budget does not include an additional RM1.45 billion to the Belanja Mengurus (Operating Expenditures). This amount was sourced later under a Private Finance Initiative. See here:

The breakdown of expenditures of the last five years provides a good enough overview for those that want to know the rough trends of defence spending. It is broken down by Mengurus and Pembangunan, which we will define in the next section. For now, what’s important to note is that over the last few years, defence spending across both categories have remained relatively stable at around RM11 to RM12 billion and around RM3.5 billion respectively for Mengurus and Pembangunan, barring yearly fluctuations.

The list of clients indicates the primary stakeholders the ministry is answerable to, yet interestingly enough one important group of people is missing from that list: currently serving MAF members. It is currently unknown to us at this time of writing why this is so, but it would seem obvious that first and foremost, the ministry’s job is to support those currently in the Armed Forces.

B/P. 60? What Kind of Title is That?

Bekalan and Pembangunan

Immediately, one of the most important definitions of the document comes to light. It is here that B/P.60, the coded title of the document, is defined in long form – B stands for Bekalan, which means Supply. P stands for Pembangunan, or Development. 60 just happens to be the number used for the Ministry of Defence.

From this definition alone, we are able to learn that the Ministry of Defence will incur both Supply and Development expenditures. What does this mean? Supply Expenditures is a type of Operating Expenditure (Belanja Mengurus). Under this category of expenditures, the Government pays for personnel, office and field supplies, utilities, and other day-to-day expenses.

Development Expenditures on the other hand is about acquiring new assets and equipment, such as new buildings, land, and vehicles. In the business world, this is also often referred to as Capital Expenditures.

As a side note, the other category of Operating Expenditures is Tanggungan (code T) or Dependencies. These expenditures are governed by Article 98 of the Federal Constitution, which means that it does not require Parliament to pass laws or enactments in order to fund these expenditures. Otherwise, as with the Supply expenditures, the line items cover a fairly similar range of expenses, such as allowances, salaries, utilities, etc.

Types of Expenses in the Malaysian Federal Budget. Operating Expenditures are those concerning the day-to-day activities and programs of the agency or ministry. Development Expenditures are those concerning the acquisition or development of certain assets or capital goods for long term use.

By contrast, Bekalan and Pembangunan expenditures are governed under Article 100 of the Federal Constitution, which requires that Parliament passes a Supply Bill (Rang Undang-Undang Perbekalan) in order to pay for government expenditures from the Federal Consolidated Fund (Kumpulan Wang Disatukan), which is basically the Federal Government’s big bank account.

Follow the money. Flow chart showing how money is used from the Federal Consolidated Fund. All Bekalan and Pembangunan expenditures must be approved by Parliament via the Supply Bill (RUU Perbekalan). All Tanggungan expenditures need not go through the same process with Parliament.

So, from this first page, we’ve learned some important basic information. We’ve learned that the defence budget is shaped around two general categories of expenditures – Operating (specifically, Supply) and Development Expenditures. We’ve learned that the general trend for the last five years, defence spending has hovered around RM13 to RM15 billion.

And finally, we have some idea of who are the primary stakeholders that the Ministry is, in effect, serving: the rakyat, foreign diplomatic missions, veterans and military pensioners, members of the defence industry, and some private sector and non-government entities. Though it would appear, the most important stakeholder is missing from this list, and that is the currently serving members of MAF itself.

So where do we go from here? Well, if we know that about RM13 to RM15 billion is spent a year on defence, the next question is, is that enough? How exactly do you spread the money around? Which activities, programs, and mission requirements are given more money, and which are given less?

And most importantly, how effective has that spending been? Are the “clients” happy? How can we tell if the spending has met its proposed requirements and needs?

We will shed some light on all of these questions as we go through the next two sections, the Kerangka Keberhasilan Kementerian and the actual Estimated Expenditures Statement.

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