Penang PKR rep moots RCI as federal-state revenue debate widens

 

Penang PKR state assemblyperson Gooi Hsiao Leung has called for a royal commission of inquiry to review Malaysia’s federal-state relations, arguing that too much fiscal and administrative power has become concentrated in Putrajaya.

The chairperson of the state legislature select committee on federal-state relations said the review should cover the division of powers, responsibilities, and financial resources between the federal government and all 13 states.

The call comes amid Putrajaya’s push to improve revenue-sharing arrangements with Sabah and Sarawak as part of ongoing discussions on the Malaysia Agreement 1963.

Sabah’s interim special grant would be increased to RM1.5 billion this year, while a new revenue-sharing deal with Sarawak similar to Sabah's is being considered.

However, the Bornean states are not the only ones seeking a bigger slice of the tax cake. Penang and Johor have repeatedly called for a greater share of federal revenue to be returned to the states.

Prime Minister Anwar Ibrahim has thus far rejected the push by peninsula states, arguing that most states receive more from the federal government than they contribute in revenue.

National issue, not just states

In a statement today, Gooi welcomed Putrajaya’s latest moves involving Sabah and Sarawak, but said the wider imbalance in federal-state relations was a national problem.

“Malaysia remains one of the most fiscally centralised federations in the world,” said the three-term Bukit Tengah assemblyperson.

Practically, this debate affects how much freedom state governments have to spend on areas such as transport, housing, welfare, infrastructure, and other public services without relying heavily on Putrajaya.

Citing a World Bank study, Gooi said Malaysian state governments accounted for about 20 percent of general government revenue and 12 percent of government expenditure in 2020.

The study, he added, found that Malaysian states had “one of the lowest shares of revenue and expenditures” among countries with federal systems, reflecting a “high degree of centralisation of authority at the federal level”.

Gooi also cited Deputy Finance Minister Liew Chin Tong, who said federal government revenue is projected at RM343.1 billion in 2026, nearly nine times the combined RM38.4 billion revenue estimated for all 13 state governments in 2025.

“Different states may have different grievances, but many arise from the same structural problem: too much money, authority, and decision-making have accumulated at the centre,” said the former Alor Setar MP.

Five areas for reform

Gooi proposed that the RCI examine five areas, beginning with a fair and transparent formula for federal transfers to states.

He said allocations should be based on objective factors such as population, development needs, poverty, infrastructure gaps, fiscal capacity, and contribution to the national economy.

“States should not have to go to Putrajaya, cap in hand, to negotiate for money which ultimately belongs to Malaysians.

“Federalism should operate according to rules, not relationships,” he said.

Gooi also called for a fiscal equalisation mechanism to ensure poorer states have enough resources to provide comparable public services, while recognising the contributions of wealthier states.

He said powers in areas such as transport, housing, social welfare, infrastructure, and aspects of healthcare and education should also be reviewed.

“Where states can deliver better and faster because they are closer to the people, give them the power and the funding to do so,” he said.

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Other proposals included reviewing state revenue-raising and borrowing powers, alongside stronger transparency and debt controls, and creating a permanent mechanism for federal-state negotiations.

Governments change, institutions remain

Gooi said matters involving allocations, devolution, and jurisdiction should not depend on personal ties between a prime minister and a menteri besar or chief minister.

“Governments change. Political parties change. Institutions remain,” he said.

“Federalism reform is not a Penang issue. It is not a Sabah and Sarawak issue. It is not a government or opposition issue. It is a Malaysian issue,” he stressed.

He added that the recent Inter-State Forum on Federal-State Relations in Penang, attended by representatives from Penang, Sabah, Sarawak, Selangor, Kelantan, Terengganu, and Perlis, showed that concerns over the federal system cut across partisan lines. - Mkini