Going to court over Sabah’s 40% revenue dispute

 

The Sabah Law Society (SLS) will be filing an application for judicial review on the state’s entitlement to a 40% special grant as provided for under Article 112C of the Federal Constitution.

At the same time, 12 Pakatan Harapan MPs and assemblymen have filed a claim in the High Court in Kota Kinabalu seeking a declaration on the state’s entitlement to a 40% share of the federal revenue. However, this group is seen by many as trying to gain political mileage with GE15 just around the corner.

Who these litigators are representing is not clear. It can only be assumed that their action is on behalf of the long-suffering Sabah people who have been left behind in national development since the Malaysia Agreement (MA63) was signed in 1963.

There is a common view in Sabah that the federal government has stolen its oil resources through Petronas – and now through the 40% tax sharing. This is reinforced by the fact that Sabah has the highest poverty rate in the country since the formation of Malaysia.

According to the Malaysian Urban Rural National Indicators Network on Sustainable Development (MURNInets) 2021 Happiness Index study, Kota Kinabalu has been ranked the second most unhappy city in Malaysia. One of the main reasons so many people are unhappy there is its dilapidated infrastructure. Poor public transport facilities, poor internet lines, frequent power cuts, insufficient water supply, and overbuilding have accumulated into an urban challenge. Lack of revenue for infrastructure development has led to poverty and unhappiness in many parts of Sabah.

One prominent activist asked why not go all the way and take the federal government and Petronas to court over ownership of Sabah’s oil and resources. He suggested that it is better to do that before the state’s oil and gas run out.

In 2019, then deputy economic affairs minister Radzi Jidin said Sabah received about RM15.6 billion in cash payments from Petronas for petroleum and gas extracted in the state since 1976. At the same time, president and group CEO Tengku Taufik Aziz said Petronas has contributed RM1.2 trillion to national development since 1976. The contributions include those to the federal government, state governments, tax collection and payment of oil royalties.

From these figures alone, Sabahans can see why the state remains poor compared to the other states. Sabah, being a major oil producer, contributes a huge chunk to the federal coffers.

The body that should sue the federal government for the 40% revenue should be the state government. Litigation is a good option to move things forward at a faster pace compared to a political process where negotiations will end up with a series of compromises along party lines or affiliations.

Sabah is ruled by the Gabungan Rakyat Sabah (GRS), which consists of Sabah Bersatu and local parties Parti Bersatu Sabah (PBS), Parti Solidariti Tanah Airku (STAR), Sabah Progressive Party (SAPP) and United Sabah National Organisation (USNO).

GRS works with Barisan Nasional (BN), with Umno being a major party. It is unlikely that the coalition will rock the boat to preserve their positions. Recently, PBB vice-president and Sarawak state minister Abdul Karim Rahman Hamzah was quoted as saying that everybody knows the Sabah administration is under the control of non-local based parties and everything is dictated by Putrajaya.

Sarawak has shown the way in litigation against the federal government. In 2019, the Sarawak government took legal action against Petronas under the State Sales Tax Ordinance 1998 for petroleum products. The matter was finally settled out of court in Sarawak’s favour. It was seen as more of a political settlement which also set the precedent for Sabah. Both Sabah and Sarawak now enjoy proceeds from the Petroleum sales tax as well as the 5% oil royalties, running into the billions.

While the litigators are fighting for what is due for Sabah, one economics professor said Sabah should also be thinking about how they are going to manage the additional money won through negotiations or litigation. He said years of corruption have made the people weary and suspicious of their leaders. The Sabah water works case is ongoing and people are watching closely, seeing how taxpayers’ money goes into some individual pockets through corruption. The case, or “Watergate” as it is commonly known, is Sabah’s version of 1MDB.

Norway puts its oil revenues into its government pension fund, the largest sovereign wealth fund in the world. The pension fund, or oil fund, is a giant savings pot that makes its money by investing in more than 9,000 companies all over the globe. Today, the fund is valued at about 11 trillion kroners or US$1 trillion.

The controversial Nature Conservation Agreement (NCA) signed by the Sabah government could have been more transparent if there was a guarantee that the proceeds would be put in a Sabah sovereign wealth fund to provide job and education opportunities and better health care for the population.

Through the years, Sabah has squandered its timber wealth and much of the proceeds have been wasted through personal interests. There was an enactment to establish the Amanah Rakyat Negeri Sabah (ARNS) in 1990. Some have claimed that several dividends were made but nothing has been heard since. ARNS should be revived as a state sovereign fund and any proceeds, whether from carbon offset, petroleum sales tax or the 40% tax revenue, should be managed professionally and invested for the benefit of all Sabahans. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.