Under the federal government’s expenditure, the education and training sector has always been the biggest beneficiary, after the transport sector. Lumped together as one item, the allocation for education and training makes up between 14% and 15% of the government’s development expenditure.

In absolute amounts, the sum allocated for the education and training sector was RM10 billion in 2022, RM13.5 billion in 2023; this year, the sum is expected to be RM14.3 billion. The bulk of the money goes towards schools and vocational training centres.

Based on statistics, there are 10,233 government schools, of which 1,921 are government-aided while the rest are national schools that receive full funding from the government.

By looking at the numbers, one would know that generally, the funds allocated to schools are limited. For instance, in Budget 2024, the government approved an additional RM1 billion to repair toilets in all schools, including government-aided ones. On average, national schools receive RM74,000 each while the government-aided schools are allocated RM70,000 each.

Is the amount sufficient? Certainly not. But for national schools, the primary source of funding is the government. If the amount is insufficient, there are channels to appeal to the government for more funds. The funding situation is difficult for government-aided schools, which are mainly made up of Chinese and Tamil schools. Also in the category of government-aided schools are Islamic religious studies and missionary schools.

The Chinese and Tamil schools depend a lot on the private sector for their funding needs. The biggest donors to these vernacular schools are corporations. But there are rules imposed on the schools in accepting financial aid. Donations and sponsorships are only allowed from certain kinds of companies.

For instance, schools can partner with developers to build and maintain facilities. However, direct sponsorship from companies that are considered to be in the sin sector is not allowed. This means schools are not allowed to take direct financial aid from brewery, tobacco, alcohol and gaming companies.

But the companies in the sin sector indirectly contribute to the development of all schools. This is on account of the taxes that they pay, which are part of the consolidated funds that the federal government utilises for its development and operating expenditure.

Unlike normal companies, those in the sin sector are subject to various additional taxes. For instance, tobacco and brewery companies are subject to excise duty. Based on the 2024 Federal Government Revenue Estimates, the government will collect RM1.7 billion in excise duty for malt, RM3.1 billion excise duty for imported cigarettes and RM356 million in sales tax from cigarettes this year.

This is in addition to the income tax that these companies pay.

The situation is the same for gaming companies. They are subject to gaming tax, Sales and Service Tax and additional contributions for “good causes”, which differ from company to company. For instance, Berjaya Sports Toto is associated with the development of sports and culture, which goes back to 1969, when it was incorporated as Sports Toto to run the Toto betting business. Part of its proceeds has to be channelled into sports and cultural activities.

At another gaming company, all the dividends from operations are passed on to a charitable body, which in turn works with communities and other charities. The funds go towards helping communities, vernacular schools and missionary schools.

This practice is not unique to Malaysia. It is similar to the national lottery operations in the UK. The UK National Lottery’s operations used to be managed by Camelot Group, which set aside a portion of its profit for the Good Causes Fund. The private entity did not deal with the beneficiaries directly; the funds were passed to charities to distribute. Since 1994, Camelot has disbursed £47 billion, out of which £17.9 billion were disbursed in the last 10 years. In February this year, Allwyn UK Ltd took over from Camelot and has pledged to contribute £38 billion to charities in the next 10 years.

In Malaysia, vernacular schools have always received assistance from brewery, tobacco and gaming companies. For instance, Heineken Malaysia has been sponsoring some of the cost of charity fundraising dinners for vernacular schools since 1994. It picks up the bill for entertainers and related costs but does not contribute to the funds raised. These charity dinners have raised RM413 million in the last 30 years.

The fundraising model for vernacular schools has worked well - until two weeks ago - when Sepang MP Datuk Aiman Athirah Sabu came under fire for being at a Chinese school’s fundraising dinner where a sum of over RM3 million was raised, to which a brewery had allegedly contributed.

The opposition politicians were quick to point out that companies in the sin sector should not be involved in school-related activities. They also contended that it was unIslamic for Aiman, who is also the Deputy Minister of Housing and Local Government, to accept the donation.

Following the controversy, the Ministry of Education once again came up with a reminder to all schools that they cannot accept sponsorship from companies in the sin sector. As for Heineken Malaysia, it has clearly stated that it did not contribute to the donation and its role was only to arrange the performances by local artists.

The current model is working well. The brewery, gaming and tobacco companies pay more taxes than other companies. The money is part of the federal government’s development budget. Vernacular schools and other government-aided schools that receive less funding seek donations and sponsorships from the private sector. They get indirect assistance from companies in the sin sector.

If one really scrutinises the matter, in one way or another, all schools get indirect funding from companies in the sin sector because of the centralised tax collection system. This model has worked well over the years and there is no reason to fuss over it now.

M Shanmugam is a contributing editor at The Edge 

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