Sarawak Chief Minister Tan Sri Adenan Satem recently expressed a typical political sentiment — Sarawak is not a state like any of the states in Peninsular Malaysia. It forged a partnership with Malaya (together with Sabah and Singapore) to form Malaysia in 1963; the two are equal partners in the federation. Therefore, the powers of the Sarawak government should not be the same as that of a state government in the peninsula; it should enjoy more autonomy.
This statement raised interesting political-economic issues — important and relevant ones that should be rationally discussed for the future of not just Sarawak but also the federation as a whole. However, I would like to reframe the context first.
The British Parliament passed the Malaysia Act on July 31, 1963 — “an Act to make provision for and in connection with the federation of North Borneo (as Sabah was known then), Sarawak and Singapore (referred to in the Act as ‘the new States’) with the existing States of the Federation of Malaya”, to quote the preamble of the Act.
The first article of the Malaysia Agreement signed earlier on July 9, 1963, spelt out the intent of the agreement — for “the colonies of North Borneo and Sarawak and the State of Singapore to be federated with the States of the Federation of Malaya as the States of Sabah, Sarawak and Singapore … and the Federation shall thereafter be known as Malaysia”. What this meant and still means is obvious — that Malaysia was in 1963 a federation of 14 states.
Adopting a position of equating all of the states in the peninsula as a group to Sarawak alone is, apart from being erroneous, tantamount to not recognising that these are sovereign states, an affront to the rulers of these states. Instead of such provincialism, discussion on this topic should focus on how to strengthen the federation economically and politically. So, the starting point is that we are all in this together, and let us figure out how to make things better for all of us.
The institutional design of a federation or a union is very important if it is to be sustainable. The design is a mesh of political and economic institutions with many intersections, and sustainability is dependent on wanting to share a common journey that is usually bound by some ideal. Successful unions are not the ones that bind similar parts, but one defined to achieve a greater common objective together.
The US is a successful union of states. What started with a union of 13 different British colonies to seek independence in 1776 grew to become a union of 50 states when Hawaii became the 50th state in 1959. Political representation by the states at the federal level is a combination of proportionality and membership. Each state sends two members to the US Senate, regardless of their physical or population size, but membership of the US House of Representatives is elected in proportion of the population.
The US is also a complete economic union in that there is monetary as well as fiscal union. This differs somewhat from the European Union where the economic union is incomplete. While there is a single market with a single currency and a central bank, there is no fiscal union in that the respective members manage their own treasury, which is problematic when fiscal discipline is uneven among members.
In the US example, all levels of governments — federal, state and local — manage their own finances. The federal government’s role is primarily in diplomatic relations and national defence and security — a seemingly limited role but one that can be both expansive and expensive.
The philosophical foundations of the American and European unions are markedly different as well — the former was meant to be decentralised, driven by ideals that value individual liberties and private enterprises. The European one has a strong centre that amalgamated formerly sovereign monarchies. One created the union to define itself in the “new” world of nations and the other, to unite historically warring states.
There are examples of more contrived models of unions; creatures of the end of empires such as Yugoslavia, which was effectively created from parts of former Ottoman and Austro-Hungarian empires, that ended savagely. The Indian subcontinent was dramatically carved to give birth to two nations in three parts. Pakistan split further into two and is still struggling with sectarianism of all kinds while India has held together well within a robust democracy and is beginning to stir economically.
What about the Malaysian federation?
The Malaysian federation is a legacy of British colonialism in this part of the world — these individual states, having had their own experiences during the colonial period, came together to form a federation, which is “founded upon liberty and justice, ever seeking to defend and uphold peace and harmony among its people …” A generic motive. Perhaps we can relook to inject some emotion and aspiration to our “Bersekutu bertambah mutu” motto à la Indonesia’s “Bhinneka tunggal ika” to bind us together.
The 9th Schedule of the Constitution defines the powers and distribution of powers of the federal and state governments — the federal, state and concurrent lists. The design was for a strong centre, thus only the federal list contains powers relating to finance, defence, security, transport, trade, healthcare and education. The exclusive state list items are matters related to land, native/Malay customs and Islam. The administration of local governments used to be the exclusive domain of states, but that has changed with a series of federal legislation.
With such distribution of powers, political representation in Parliament — the federal legislative body — as well as the functioning of the institutions of government and governance become important issues for the states. This is where rights, boundaries of rights and resource distribution decisions are made. As states do not have taxation and borrowing rights, federal-state fiscal relationships will largely be determined by federal institutions. States have every right to be concerned about these. Sarawak, for example, raised the issue of revenue-sharing and the effectiveness of the school system.
As in the US, all 13 states can nominate two members each to the upper chamber of Parliament, the Dewan Negara, but the federal government appoints the majority of its members — 44 — to make up the 70-member chamber. Representation in the lower chamber, the Dewan Rakyat, is proportional to the population, although states like Perlis and Sarawak enjoy considerably higher representation relative to their populations and Selangor being under-represented.
The issue with both these chambers of Parliament, beyond the issue of how states are represented, is their effectiveness as legislative bodies as well as public oversight institutions. Unfortunately, by even Third World standards, our legislative institutions and processes are underdeveloped. There were attempts at initiating some changes, but the basic building blocks of any legislature — the use of committees, especially select committees, is still absent today, making legislation neither participative nor educational. There is still a stunted notion of parliamentary sovereignty.
The Sarawak government did not allude to the robustness of the political process but raised some pertinent points about federal-state relationships and the effectiveness of federal institutions, although I disagree with the departure point, from which those arguments were made.
The fiscal burden on the federal government arising from exercising its responsibilities in the Constitution is already onerous without its scope creeping into the state list. There should be prioritisation for federal spending with state governments taking up a bigger role in delivering public goods and services.
The physical development agenda of infrastructure building will decline relative to the provision of services to the people. Policy interventions will likely be in the form of programmes that is service-oriented, not construction. For these services, and these can be extended to education and even security, a degree of localisation is required for it to be effective.
As it is, the federal budget is almost entirely for operating expenses, which is about running the government machinery — delivery of services. The development expenses account for only 18% of the total budget and at RM48 billion, are less than 5% of the economy, so the budget as a fiscal stimulus tool is a rather limited one. Governing will be more about delivery of services, and while some of those are “national” in character, they are plenty that are better delivered, customised to local needs and conditions, hence, a role for state governments.
As we develop economically and mature politically, perspectives and priorities change. Thus, the way we organise ourselves should also change. Further, the boundaries and effectiveness of government are bounded by its resources. Over-centralisation at the federal level is fiscally not sustainable while also being ineffective.
A federation becomes a unitary state if powers are concentrated, belying its very existence. Therefore, conversations about the boundaries of intergovernmental relations are not only relevant but also needed. However, the context must be about strengthening the commons, our federation, and Sarawak should take the lead.
Dr Nungsari A Radhi is an economist and managing director of Prokhas Sdn Bhd, a Ministry of Finance advisory company. The views expressed here are his own.
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