KUALA LUMPUR (Oct 22): Malaysia’s federal government will study and consult the attorney general (AG) before taking its next course of action following a court decision on Sabah’s claim for 40% share of revenue.
The government has yet to receive the written judgement but stressed that Putrajaya will respect the legal process, Prime Minister Datuk Seri Anwar Ibrahim said during a special briefing at the Dewan Rakyat on Wednesday. Any further action will take into account the interests of Sabah and Malaysia as a whole, he said.
“The federal government cannot detail any matters that are still in dispute in the court,” Anwar said, though he outlined his administration’s efforts and progress with Sabah.
The briefing follows Kota Kinabalu High Court’s Oct 17 decision in favour of the Sabah Law Society’s judicial review challenging the federal government’s failure to comply with constitutional financial provisions.
The court also issued an order directing the federal government to conduct a review with Sabah to determine the state’s 40% entitlement for each financial year from 1974 to 2021. The review must commence within 90 days and conclude within 180 days.
The ruling comes ahead of the Sabah state election on Nov 29, prompting political parties to urge the Attorney General’s Chambers not to appeal the decision.
WATCH: Putrajaya not just siphoning Sabah’s revenue, says PM
“This decision invites misleading interpretations as if the federal government is only siphoning off Sabah's revenue and not contributing to Sabah's development,” Anwar said.
The federal government spent more on Sabah than the annual revenue of around RM10 billion it earned from the state in 2022-2024, he said, noting that allocation for Sabah reached RM17 billion in 2025 and 2026.
It is likely that most of the revenue source accrued to the federal government is from the Petroleum Income Tax, as well as the 5% royalty on every barrel of oil and equivalents produced from the waters adjacent to the state. The mining sector contribute an outsize percentage of Sabah's economy, or around 23%.
Official data shows that Sabah produces around 41% of Malaysia's oil and condensates, making it the largest oil producer in the country. The northern Borneo state also produces up to 18% of Malaysia's natural gas production.
On the other hand, the federal government transferred RM1.44 billion in 2023 directly to the state government of Sabah, on top of development expenditure spendings as well as subsidies that are enjoyed by every citizen of the country.
In 2026, the federal government allocated RM7 billion in development expenditure for Sabah, as per Budget 2026.
A review of the special grant to Sabah, which was carried out and gazetted in 2022, 2023 and 2025, was also consistent with Article 112D of the Federal Constitution, said Anwar.
Article 112D calls for periodic reviews of the special grants owed to Sabah and Sarawak. These reviews, meant to be conducted at regular intervals, allow the federal and state governments to agree to alter, abolish or substitute such grants.
“The gazetted review has also been tabled in Parliament,” he said.
Anwar also highlighted progress under his administration related to the Malaysia Agreement 1963 (MA63), with 13 claims already resolved, including the transfer of regulatory powers over electricity supply and Sabah Electricity Sdn Bhd to the Sabah government.
Anwar stressed that the federal government remains committed to resolving outstanding MA63 matters, enhancing fiscal transfers to Sabah, and increasing both operating and development allocations for the state.
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