Federalism is often viewed as the best system for managing diverse regions and resources while ensuring national unity. And this view was strongly echoed by former Malaysian Prime Minister Tun Mahathir and Minister Tengku Razaleigh Hamzah in the a recent statement published by Free Malaysia Today.
In Malaysia, federalism plays a vital role in maintaining economic growth, especially as Sarawak and Sabah, under the Malaysia Agreement 1963 (MA63), seek more autonomy over their resources under the new Madani Government.
However, Tun Dr. Mahathir Mohamad and veteran politician Tengku Razaleigh Hamzah have both emphasized that federalism ultimately benefits the entire nation and that resource-sharing ensures equitable prosperity for all.
The Benefits of Federalism: Lessons from Other Nations
Looking at the big picture, countries like Canada and Australia have thrived under federalism, where regional autonomy is balanced with centralized control over critical sectors, such as energy and defense.
In other parts of the world, Germany and the United States offer examples of how federalism allows regional governments to operate autonomously in many respects, while key industries remain centralized.
In Germany, the federal government controls energy policy, ensuring that the country remains a global leader in renewable energy while distributing wealth fairly. This model prevents states from becoming economically isolated and maintains Germany’s global competitiveness.
On the contrary, Nigeria provides a cautionary tale of what happens when regional governments control their own oil wealth. The uneven distribution of resources has led to economic disparities, political instability, and conflict.
Malaysia’s federal system, centered around PETRONAS, avoids these issues by ensuring a more balanced distribution of wealth across all states, as Tengku Razaleigh and Dr. Mahathir both pointed out in their remarks.
Tengku Razaleigh Hamzah highlighted that Malaysia’s federal system has allowed for the redistribution of wealth from resource-rich states to those that are less fortunate, ensuring national unity. He expressed concern that decentralizing control over resources could lead to inequality and weaken the country’s economic foundation.
Malaysia’s national oil company represents the federal government’s approach to resource management, ensuring that wealth generated from natural resources is redistributed to all regions. This prevents wealthier states, such as Sarawak, from becoming disproportionately prosperous, leaving poorer non-oil producing states behind.
Economic and Fiscal Policy Benefits of Federalism
Under federalism, Malaysia’s centralized government can implement cohesive economic and fiscal policies that benefit all states.
Key projects like the East Coast Rail Link (ECRL) and Pan Borneo Highway are funded by federal revenue collected from wealthier states such as Selangor, benefiting the entire country. The central government is also able to manage macroeconomic factors, such as inflation and interest rates, ensuring stability.
Dr. Mahathir further noted that a decentralized approach to resource management would make it difficult for the federal government to maintain its financial stability.
“The federal government need the revenue from oil and gas dividend to fund projects and services across the entire country,” he explained, reinforcing the importance of a strong federal structure to ensure national progress.
In fact, Sarawak has been allocated a larger portion of the defense budget by the Federal Government to tighten the borders, particularly in the Borneo waters due to increasing territorial threat. The extension of help to other states beyond what was needed by Sarawak under the MA63.
Sarawak’s MA63 Demands and Greater Unity
However, Sarawak’s demand for greater autonomy under MA63, particularly regarding its oil resources, has been a point of contention.
Political supporters understood that Sarawak Premier Tan Sri Abang Johari is doing his best, amidst political pressure by certain quarters that are deemed “extremists” by former statesmen.
Although Sarawak and Sabah contribute a significant portion of Malaysia’s oil and gas revenue, the state leaders argue that they receive an inadequate share of the wealth generated.
And failing to generate their own investments to unlock the resources into revenue is down to the state’s former leaders, with most of them were embroiled in some level of corruption.
As part of MA63 negotiations, the federal government continue to grant the Borneo states more control over certain matters, but full decentralization of resources remains a sensitive issue for the Prime Minister, Datuk Seri Dr. Anwar Ibrahim.
Sarawak Collaborates with the Federal Government
In a recent move, Sarawak’s Premier, Abang Johari emphasized the state’s ambition to lead ASEAN’s energy transition, stating that collaboration with the federal government is essential.
This could be a lip service by politicians, but the intent is a noble one.
“We work closely with the federal government to ensure our efforts are aligned with national priorities while meeting Sarawak’s aspirations,” he said.
This underscores how federalism can drive regional and national growth by fostering cooperation in sectors like renewable energy. Sarawak’s evolving role as the “battery of ASEAN” highlights the benefits of federalism for Malaysia’s long-term prosperity.
It marks that Sarawak Premier is willing to cooperate with Federal Government for the sake of unity.
This spirit of cooperation aligns with broader national goals of equitable wealth distribution, as Tengku Razaleigh noted: “Federalism allows resources to be shared fairly, ensuring prosperity reaches every corner of the nation, including Sarawak and Sabah.”
This vision supports economic unity and collective defense initiatives, as federal allocations continue to strengthen national security in these regions.
“The growing influence of Sarawak, including its control over state oil company PETROS, could potentially challenge PETRONAS’s role if further concessions are granted under MA63.” said a political analyst based in Kuala Lumpur.
However, the risks of fragmenting control over such a vital national resource (eg: natural gas in Sarawak) would be detrimental to Malaysia’s fiscal stability.
Tengku Razaleigh, who were involved in the development of the PDA75 Act, emphasized that federal control over natural resources is crucial for ensuring that no state becomes too powerful or too impoverished.
“Sarawak’s autonomy is important, but it must be balanced with national unity,” he stated during a recent public appearance.
Federalism: A Path to National Unity and Prosperity
In conclusion, federalism in Malaysia centers on efficient and fair resource management, a crucial factor to maintaining economic growth and national unity. While Sarawak’s demands under MA63 are being addressed, further decentralizing control over natural resources would fragment the nation and lead to imbalances in wealth distribution.
The system of federalism has allowed Malaysia to rise as a nation by redistributing wealth and fostering development in less prosperous regions. And leaders must acknowledge and accept those facts.
That puts Sarawak and Sabah in a rather awkward position, leaving these two states with no choice but to allow the Federation of Malaysia to flourish.
“This is not debate of convenience, nor a marriage of convenience” expressed a political observer.
As Dr. Mahathir said, “Federalism is what binds this country together. Without it, we risk division and disparity.” By continuing to embrace federalism, Malaysia ensures that all its states, including Sarawak and Sabah, benefit from the country’s natural resources while maintaining stability and global competitiveness.
