Sabah has for years been trying to negotiate a return of its entitlement of 40 per cent of its revenue as stated in the Federal Constitution, which it says is crucial for economic development.
The constitution centralises revenue collection – including all forms of taxes – at the federal level. The federal government then returns a percentage of this to the states based on their population.
Under the Malaysia Agreement 1963 (MA63), the federal government is supposed to return 40 per cent of Sabah’s revenue to the autonomous state, but this was not fulfilled from 1974 to 2022.
In 2022, the federal and Sabah governments agreed on “interim” payments to the latter till 2026 instead, pending further negotiations on the original 40 per cent agreement.
In May, Mr Anwar said Sabah’s RM16 billion federal funding allocation for 2024 – which is separate from revenue-based grants for each state – surpasses the 40 per cent it is asking for, Bernama reported.
He also said his government has done more to resolve the many outstanding issues under MA63 in the last one-and-a-half years since he became prime minister, than those who had been in power in the past decade.
But a former president of the Sabah Law Society criticised Mr Anwar’s remarks as misleading, noting that federal allocations do not flow directly into the state’s coffers and can only be used for specific expenditures like development projects.
“In contrast, the 40 per cent net revenue entitlement under MA63 is a special grant that should be directly transferred to the Sabah state government,” Mr Roger Chin was reported as saying by the Malay Mail in June.
“It is a fundamental component of Sabah’s financial autonomy and self-determination, enabling the state to invest in its infrastructure, public services, and development initiatives as it sees fit.”
However, Mr Anwar on Aug 4 clarified that the RM16 billion is Sabah’s total allocation in 2024 for spending on things like teacher salaries, road repairs and border security, and not just for development projects, Bernama reported.
“If you want to be a friend, act like one. There must be decorum when it comes to friendship. You don’t need to thank us, just show a little appreciation. If (the allocation) is not sufficient, we can negotiate, and ask for more in a friendly manner,” he said.
Mr Anwar stressed that he intended to fulfil Sabah’s rights under the Federal Constitution and that negotiations were ongoing, as he doubled down on his claim that his government has done more than previous administrations on this front.
“We should fulfil it, yes, but this year we did more than the 10 years before. Appreciate it a bit. It’s not that I need a ‘thank you’, I don’t need a thank you. But what is needed is that you accept facts and negotiate again if you’re not happy,” the Malay Mail reported him as saying.
“Other Sabah representatives in the Cabinet – Armizan, Ewon … they are always saying not enough. I also get tired of them constantly asking for more. But it’s okay, as long as they ask nicely as a friend.”
Mr Anwar was referring to Domestic Trade and Cost of Living Minister Armizan Ali as well as Entrepreneur and Cooperatives Development Minister Ewon Benedick.
On Jul 18, Sabah’s Deputy Chief Minister Jeffrey Kitingan, who is also Member of Parliament for Keningau, urged the Anwar government to prioritise the 40 per cent revenue allocation for Sabah.
The New Straits Times reported him as saying that a proposed 12-month timeframe to implement the allocation, as discussed and agreed upon in MA63 technical committee meetings on the issue, had expired that day.
“Despite this, there has been no progress or announcement regarding this critical issue,” he said. “This lack of action clearly demonstrates a lack of seriousness from the federal government.”
Meanwhile, the Sabah Law Society is pursuing a judicial review of the state’s 40 per cent entitlement claim.
On Jun 18, the Court of Appeal dismissed the federal Attorney-General’s appeal against a High Court decision to allow the judicial review, and directed the High Court to fix a date for a full hearing of the judicial review.
The law society is arguing that the 40 per cent grants from 1974 to 2021 remain payable, and that both the federal and Sabah governments had breached their constitutional duties by failing to review the payments in 1974 as required by law.
Mr Chin, the former Sabah Law Society president, reiterated on Monday that Mr Anwar should not conflate Sabah’s 40 per cent special grant with its federal allocation.
“The RM16 billion allocation addresses areas that are inherently federal responsibilities. These include education, security and infrastructure which are essential services every state expects and receives as part of the federation,” he said as quoted by the Vibes news portal.
“The special grant is designed to address the unique needs and contributions of Sabah, providing additional financial support beyond standard of the federal allocations.”
