HOBART: With mere months to go before the second anniversary of Anwar Ibrahim becoming Malaysia's prime ministerphoenix game, the current delicate state of relations between Putrajaya and the Borneo states of Sabah and Sarawak could pose significant political challenges for him and the unity government.

There isn't a consensus among the Malay establishment regarding how to handle an assertive Sabah and Sarawak, despite the general agreement that Malaysians are now much more aware of the Malaysia Agreement 1963 (MA63), and how the Borneo states were marginalised over the past 50 years.

For the past six years, both Sabah and Sarawak have been insisting that Putrajaya rigorously abide by the spirit of the promises in MA63. In MA63, they are referred to as "safeguards”, but they are really a collection of assurances prior to the formation of the federation that both states will have a high degree of socio-political autonomy from the federal government.

Prior to 2018, the dominance of the Barisan Nasional (BN) ruling coalition meant that they could ignore all the MA63 promises made. In fact, voters in Sabah and Sarawak were commonly described as “fixed deposits” for BN, for consistently supporting the party and helping it remain in power. This all changed when BN lost power in 2018 and the Borneo states began agitating for the return of MA63 rights.

Since then, Putrajaya has formed various MA63 committees to decentralise some of the powers back to Kuching and Kota Kinabalu, and increase infrastructure projects and development funds for both states, such as the Borneo Highway.

With many of the simple devolution problems have been resolved, the main ones are up for discussion now. All the progress achieved over the past few years could be undone by these core issues.

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The continental shelf off the coast of the Borneo states is the first problem. These regions are abundant in gas and oil, and advances in technology will enable mineral extraction from the deep water in the near future.

The federal government owns all oil and gas resources, as stipulated by the Petronas Development Act (PDA 1974). The Borneo states contest this, arguing that since they were included in the legally delineated limit of British colonial territory in 1954, the continental shelf truly belongs to them.

According to MA63, when the federation was formally established on Sep 6, 1963, all legislation passed before then automatically became operative. Thus, the legal ownership is still with Sabah and Sarawak.

In the event that the Borneo States successfully win this legal interpretation, Petronas will no longer be able to conduct its oil and gas exploration off the coast of the Borneo states without engaging in direct negotiations with Sabah and Sarawak.

There are far-reaching political consequences, not to mention even more far-reaching financial consequences. At least 20 per cent of Malaysia's development budget is accounted for by Petronas alone.

An even bigger consequence of Sabah and Sarawak getting control of the oil and gas resources on their continental shelves, is oil and gas-producing states in the peninsular. Terengganu and Kelantan, likewise, will undoubtedly demand control of their oil and gas fields if the Borneo states are successful. This could effectively mean the end of Petronas’ oil and gas monopoly.

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Another key issue is representation in parliament, specifically a return to the one-third composition for Sabah and Sarawak as stipulated in MA63.

Back in 1963, Malaya had 104 seats in the then 159-member federal parliament, while Sarawak, Sabah, and Singapore were given 55 seats, or 34.6 per cent. When Singapore left the federation in 1965, Singapore’s 15 parliamentary seats were not redistributed to Sabah and Sarawak. Thus, both states ended up with only a quarter of seats in parliament.

This leaves Sabah and Sarawak in an unfavourable position as a successful constitutional amendment requires a two-thirds majority vote in parliament. In other words, Peninsular Malaysia alone could change the constitution without any support from the Borneo states.

Sarawak has formally submitted a proposal to the federal Cabinet to increase the number of seats from Sabah and Sarawak to 35 per cent. This will require a constitutional amendment. There are many who are against this, believing that it will give too much power to the Borneo states.

Mr Anwar, in public at least, has been silent, suggesting that there is no consensus. If the Borneo states get the 35 per cent, this will fundamentally change the nature of federal-Borneo relations. It means that Putrajaya will have to consult with Kuching and Kota Kinabalu on any constitutional issues thereafter.

SABAH’S REVENUE

The third main issue is the constitutional requirement to refund Sabah 40 per cent of the net revenue collected from the state.

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.

From the early 1970s, the federal government stopped paying. The Sabah government then was too weak politically to pursue this issue. The current stalemate is due to disagreements over the actual amount plus the arrears, called the “lost years”.

The Sabah state government has proposed several formulasphoenix game, while the federal government has its own formula as well. No matter which formula is used to calculate the amount, it will at least be in the region of RM20 billion (US$4.6 billion), money the federal government does not have.

The Sarawak Legislative Assembly seen from the Darul Hana Bridge in Kuching, Sarawak. (Photo: CNA/Fadza Ishak)

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