“Bersemangat tuan-tuan, kalau lemah begini tak dapat merdeka Malaysia. Merdeka Malaysia!” – Lee Kuan Yew, 1963
Isn’t it ironic that one of the most patriotic Malay speeches ever recorded was delivered not by a Malaysian? Years later Singapore was expelled. Decades later Sarawak demands greater autonomy. Are these the costs of a federation? Like an adopted family with domestic quarrels between siblings and parents, and when a child becomes mature enough, they usually seek independence.
What does it mean to be a federated sovereign? When the Federation of Malaya was formally established in 1948, it marked more than just an administrative restructuring. It was a deliberate and symbolic rejection of centralised colonial rule. The collapse of the Malayan Union, which had proposed a unitary structure that stripped the Malay rulers of their sovereignty, made one thing clear: centralisation breeds distrust. Federalism, therefore, emerged not as a natural choice for a small and relatively homogeneous nation, but as a political necessity, a constitutional arrangement to preserve the dignity, authority, and autonomy of the Malay states and their Rulers.
It’s a paradox worth revisiting. Malaysia is not a vast country. Its population is modest, and its cultural similarities particularly among the Malay-Muslim majority often blur its internal differences. Unlike larger federations such as the United States, India, or Nigeria where federalism helps manage immense diversity or scale, Malaysia’s model was driven less by geography or demography and more by history and power-sharing. Federalism was the price of unity, a compromise to keep the states intact without flattening local identities.
This article poses a critical question: Has Malaysia strayed far from its federal ideals? If federalism was never a natural fit for Malaysia’s geography or demography, but a principled agreement to preserve autonomy, what does it mean when that principle is violated? In revisiting the origins of our federation and interrogating its current practice, this piece seeks to hold the federal government to account.
Despite its federal constitution, Malaysia operates with a distinctly centralised economic framework. From national development plans to large-scale infrastructure projects, the federal government controls the levers of macroeconomic policy, fiscal distribution, and capital-intensive development. States, meanwhile, are largely relegated to managing land matters, certain utilities, and localised services. This structural imbalance has hollowed out state-level economic agency and fostered a culture of dependency.
This arrangement is institutionalised through mechanisms such as:
- The National Physical Plan, which is devised by the federal Town and Country Planning Department. (PLANMalaysia, 2020)
- The Federal Treasury’s control over taxation, borrowing, and redistribution.
- Federal-linked entities like Khazanah Nasional, Permodalan Nasional Berhad (PNB), and GLCs, which spearhead major investments and infrastructure projects across the country such as Iskandar Malaysia, often without meaningful state contribution (Gomez et al., 2018).
As a result, states cannot craft long-term economic visions independently, nor can they raise their own revenue to match federal development pace.
The consequences are even more stark when viewed through the lens of privatisation and federal intervention in state-level enterprises. The East Coast Economic Region (ECER) illustrates how federal control often outweighs state autonomy in regional development. Although spanning states like Kelantan and Pahang, key projects such as the Kuantan Port expansion, MCKIP, and ECRL are driven by the federally-run ECER Development Council and GLCs. State governments mainly facilitate land and local engagement, but have limited say in project planning or investment priorities. This reflects a deeper structural imbalance where federal authorities dominate development agendas within state borders, sidelining local needs and capacity.
In this model:
- States surrender control over vital economic factors to private or federal-aligned entities, leaving them with little leverage in policy decisions.
- Revenues generated from these services once retained by state-linked bodies are now channelled through corporate structures that prioritise profit over public service. This could be exacerbated if the private investments fail to meet its dual mandate of both economic and social objectives.
This isn’t just an issue of economics, it’s a political question of sovereignty and stewardship. When the federal government monopolises development agendas and incentivises the corporatisation of state functions, it transforms elected state governments into bystanders in their own jurisdictions. Even state-led development corporations (such as Kumpulan Prasarana Rakyat Johor or Yayasan Sabah) are often constrained by federal licensing, funding, and regulation. (Hutchinson, F.E., 2014)
While policymakers in Putrajaya often invoke the rhetoric of unity and shared prosperity, the lived experience in Sabah and Sarawak tells a different story: one of chronic underinvestment, bureaucratic neglect, and a federalism that functions more like centralised administration than a genuine partnership. The Malaysia Agreement 1963 (MA63), long hailed as the foundation of East Malaysia’s participation in the Federation, has seen repeated ‘betrayals’, not least through the Petroleum Development Act 1974 (PDA), which centralised oil and gas ownership under Petronas allegedly without the formal consent of Sarawak. The emergence of Petros is not merely economic manoeuvring, but a political act to counterclaim a federation that has failed to honour its constitutional commitments.
Beyond resource control, federal economic planning in East Malaysia has been piecemeal, extractive, and disconnected from local realities. High-profile mega projects like the Pan Borneo Highway were riddled with delays and cost overruns. Though often showcased as federal benevolence, they remain the exception, not the rule (World Bank, 2020).
Worse still, social issues unique to Sabah and Sarawak have been sidelined in national discourse. The issue of stateless children, particularly in Sabah, has festered for decades without effective federal intervention. These are children born and raised in Malaysia, yet deprived of access to basic rights such as education, healthcare, even identity due to archaic policies and bureaucratic inertia. Federal citizenship laws under Article 15A (special citizenship discretion for minors) are rarely exercised. For example, stateless children born in Malaysia to Malaysian fathers and foreign or undocumented mothers (especially if not legally married) could be considered under Article 15A. But in practice, many of these applications are ignored or refused, despite clear humanitarian grounds.The federal government’s failure to address this humanitarian crisis reflects a deeper truth: it lacks the will or capacity to respond to the social fabric of Bornean society (SUHAKAM, 2018).
In this light, Sarawak’s assertive push for greater autonomy and revenue control should not be misread as mere populist posturing—it is a legitimate reaction to decades of neglect. It represents a demand to be treated as an equal partner in the federation, not a periphery to be managed. Federalism, if it is to survive in spirit and not just in form, must reckon with these grievances. Anything less is a continuation of a broken promise.
If the Federation of Malaysia is to survive as a cohesive and just political entity, the path forward may demand serious constitutional reforms. This includes not only restoring the rights promised under MA63 and revisiting questioned statutes like the PDA, but also reimagining the relationship between federal and state governments as one based on partnership not patronage. These are not mere concessions; they are overdue correctives to an imbalanced system. The question we must now confront is not whether Sarawak and Sabah are asking for too much but whether they have, for too long, asked too little. If federation means mutual respect, equality, and shared governance, then is Malaysia truly a federation—or merely one in name?
Truth be told, a verdict is yet to be passed on the federal government. It is only fair if my court puts the states too on trial. Yet, it is my duty as a citizen to always question authority.
References:
Gomez, E. T., Fisal, F., & Azman, N. (2018). Minister of Finance Incorporated: Ownership and Control of Corporate Malaysia. Petaling Jaya: SIRD.
Hutchinson, F.E., 2014. Mirror Images in the Malaysian Economic and Political Landscape: State and Non-State Actors in Johor and Penang. ISEAS–Yusof Ishak Institute.
PLANMalaysia (2020). National Physical Plan 3 (NPP3). Federal Department of Town and Country Planning, Ministry of Housing and Local Government Malaysia.
SUHAKAM (2018). Annual Report: Stateless Children in Sabah. Human Rights Commission of Malaysia.
The Edge (2016). “Ranhill’s Utility Play in Johor.” The Edge Markets, [online] Available at: https://www.theedgemarkets.com [Accessed 15 Jun 2025].
World Bank (2020). Malaysia Economic Monitor: Sabah and Sarawak. Washington D.C.: World Bank Group.
