Under Malaysia’s Federal Constitution, the federal government is authorised to collect tax from income, profits, property, trade and other sources, while states overwhelmingly depend on revenue extracted from the commercial exploitation or sale of land.
This meant that states are constantly looking to exploit their natural resources, such as rare earths or forests, and reclaim more land for sale to maximise their revenue – moves that have grave environmental implications, Yeoh said.
“Especially in the last one to two years, we started to see a lot of demand for greater fiscal and administrative autonomy from various state governments across Malaysia, not just in Sabah and Sarawak,” she added.
“Penang and Johor are the more vocal ones. And then of course you have Kelantan, Terengganu and to some extent, Selangor. The others are quieter, but actually they also share concerns; they just haven’t voiced it out.”
Lee Hwok Aun, co-coordinator of the Malaysia Studies Programme at Singapore’s ISEAS-Yusof Ishak Institute, noted in a 2024 commentary that under the current system, Putrajaya “enjoys 10 times more revenue than the 13 state governments, and shares precious little”.
Lee told CNA that all states would presumably “take an interest” in a common platform to make more demands of the federal government, and welcome devolution of functions and expansion of revenue.
But if the states’ negotiations were focused on natural resources and state enterprises, for instance, it would be difficult to agree on a “fair outcome” as those without such endowments would miss out, Lee said.
“A general reform such as statutory sharing of tax revenue – especially consumption tax which is more evenly distributed across the regions – holds out a better promise of consensus,” he added.
“I think the peninsular states need to coordinate among themselves first, not so much to close ranks against Sabah and Sarawak, but to find common ground on collaboration.”
