Sabah’s 40% Revenue Share is Not Lost

By Roger Chin,President Sabah Law Society


KOTA KINABALU: Finance minister Tengku Zafrul Aziz was recently reported as saying that the 40% revenue sharing formula with Sabah is no longer applicable following a new agreement between Sabah and the federal government reached in 1969.
Article 112D of the Federal Constitution states that there shall be a review of the special grants made to Sabah and Sarawak for five-year periods beginning 1969, 1974 and thereafter at such time as the Government of the Federation or the Government of the State may require.
This first review under Article 112D was done pursuant to Sabah Special Grant (First Review) Order, 1970 (P.U. (A) 328/1970 dated August 18, 1970). The Federal Government and the Sabah Government had then agreed that instead of the 40% grant, another grant be made as follows:
i. 1969 – RM20 million
ii. 1970 – RM21.5 million
iii. 1971 – RM23.1 million
iv. 1972 – RM24.8 million
v. 1973 – RM26.7 million
The period of this new grant was specifically stated to be from January 1, 1969 to January 1, 1974.
Since then, there has been no further reviews covering the period from 1974 to the present, notwithstanding that Article 112D specifically provides for a second review to be done for the next five-year period beginning 1974. The review is now overdue by 48 years.
Article 112D makes it very clear that reviews are to be conducted between the Federal Government and the Sabah State Government jointly and never unilaterally. If on any review the Federal Government and the Sabah State Government are unable to reach agreement on any matter, it would be referred to an independent assessor, and his recommendations shall be binding on the governments concerned and shall be given effect as if they were the agreement of those governments.
As reviews are to be to be mutually agreed upon, there is absolutely no reason why the original 40% revenue sharing formula cannot also be used as the basis to arrive at any reviews under Article 112D. This is especially so when one is reminded of the original reason why Sabah and Sarawak are allocated special revenues to meet their needs above and beyond what other States receive – to assist in the quicker infrastructure and economic development of Sabah and Sarawak.
It is misplaced for the Federal Minister to imply that any review under Article 112D must only take into account the financial position of the Federal Government, as well as the needs of the State. Such considerations are merely also to be taken into account amongst others in a review negotiation between parties.
Indeed, if the Federal Government is sincere in its continued representation that it is committed to increase the special grant given to Sabah especially when it was constitutionally mandated for the second review to be made in 1974 but never done, a good start would be for review to be negotiated retrospectively from 1974 and/or prospectively from the present as the case may be with the original 40% sharing as the starting point and not with threats of that this original formula is no longer applicable.
At this juncture, it is important to emphasise that the Federal Government must be transparent in making information available to the Sabah State Government in order for all factors to be considered in order to arrive at an informed review decision which does take into account all considerations. The 1969 review was only made possible as information was made available then to the Sabah State Government to show that the amounts in the review amounted to approximately 40% of the revenue collected from Sabah then as well as the projected growth of such share in the ensuing years in the five-year period.
There can be no doubt that the infrastructure and economic development of Sabah is not on par with that of the Peninsular Malaysia and Sabah is the best party to decide on how to spend a portion of its own revenue which would only ensure faster and accurate decisions on expenditure, being well aware of the needs and actual scenario on the ground. Certainly, this must be the true intention of revenue sharing as encapsulated in Article 112C of the Federal Constitution providing for special grants and assignments of revenue to States of Sabah and Sarawak.

Related Articles


Latest Articles