This article first appeared in Forum, The Edge Malaysia Weekly on June 15, 2026 - June 21, 2026

Ask most Malaysians when the nation was founded and they will say Aug 31, 1957. That is, in fact, Merdeka — the day Malaya became independent.

But Malaysia, the country we live in today, was not born until Sept 16, 1963, when Malaya joined North Borneo (now Sabah), Sarawak and Singapore to form a larger federation.

The document that made it possible was the Malaysia Agreement 1963, known today in political shorthand as MA63.

For most people in the peninsula, MA63 is a term half-remembered from school. But for the people of Sabah and Sarawak, it has never been a footnote.

It is the foundation of their place in the country, and understanding it is the first step to understanding why federal-state government relations in Malaysia look the way they do.

MA63 was a treaty. It was signed in London on July 9, 1963, and later registered with the United Nations as an international treaty in 1970.

That international character is important. Sabah and Sarawak did not join Malaysia the way a new state might be added to an existing country. They came in as founding members of a new federation, on terms that had been negotiated and agreed in advance. Those terms were not merely vague aspirations.

Before the merger, the two territories set out their own conditions, known in Sabah as the “20 Points” and in Sarawak as the “18 Points”, for joining.

These were submitted to an inter-governmental committee — chaired by the British minister Lord Lansdowne, with Malaya’s deputy prime minister Tun Abdul Razak as his deputy — which worked these into a detailed set of safeguards designed to keep meaningful control in local hands over the matters that touch daily life and identity most closely, namely, immigration, religion, native land and customary rights, the use of English and the native languages, the structure of the state administration, and the financial terms of their place in the federation.

Some of these protections are still visible today in ways ordinary Malaysians experience without thinking about them. A citizen from the peninsula flying into Kuching or Kota Kinabalu still passes through immigration control, because Sabah and Sarawak retained authority over the entry of persons into their territories.

That is not a quirk of administration. It is a living piece of MA63.

For many in the Borneo states, the decades that followed the founding of Malaysia felt like a slow narrowing of those terms.

Some powers that had been local, over time, came to be exercised from the centre. Two states rich in oil and gas and timber saw a gap in development open up between Borneo and the peninsula.

By the time the term “MA63” entered everyday political language, it carried a clear emotional charge — a sense that some of the original terms had not been fully kept.

It is worth being fair to both sides of this history because the subject is too often reduced to blame.

From the Borneo perspective, the grievance is real and specific, rooted in commitments many believe were later diluted.

From the national perspective, the early decades were shaped by the genuine work of building one country out of very different parts. A young federation facing real pressures of security, development and cohesion often saw strong central coordination as the responsible course, and the federal government committed substantial resources to both Borneo states along the way. That was nation-building in hard conditions, not bad faith by any one government.

Both of those things can be true at the same time.

The useful question today is not to reduce six decades of history to a single culprit. It is to ask how the country honours, in full, the terms on which it was built, and restores trust on all sides.

Nowhere is that question sharper than in oil and gas, and it is worth explaining plainly, because it is so often reported in fragments.

Petroleum across Malaysia was centralised under federal law in 1974 through the Petroleum Development Act, which vested the resource in the national oil company, Petroliam Nasional Bhd (PETRONAS), with the producing states receiving a royalty in return.

For many years that arrangement held. More recently, Sarawak established its own state oil company, Petroleum Sarawak Bhd (Petros), and through its Distribution of Gas Ordinance took a larger role in regulating the distribution of gas within its borders.

That has raised a genuinely difficult question of constitutional demarcation: where the line falls between federal authority over petroleum and a state’s authority over activity in its own territory.

In May 2025, the leadership of the federal and Sarawak governments signed a joint declaration setting broad parameters for a way forward, recognising both the Petroleum Development Act 1974 and Sarawak’s gas ordinance, as well as Petros’ role as the gas aggregator in the state.

Separately, the underlying questions of how those laws fit together have been the subject of applications by the parties to the Federal Court. It would not be appropriate to say anything here on the merits of those questions, which are for the courts and not for public commentary.

What can fairly be said is that the federation, in parallel, has chosen to keep talking, to pursue agreement where agreement is possible, while turning to the courts on the questions only a court can settle.

Whatever the eventual outcome, that combination of negotiation and orderly legal process is the mark of a federation trying to manage its hardest tensions through its institutions, rather than through confrontation.

For a long time, MA63 lived mostly in speeches and election manifestos. What has changed more recently is that it has been given a structure — a working process that takes the claims one at a time — rather than treating them as a single impossible demand to be either granted whole or refused.

The results are concrete and a matter of public record. By the government’s own count, 13 of the 29 MA63 claims under negotiation have been resolved — nine under the present government and four under its predecessor — with the rest at various stages of discussion.

Control of Bintulu Port, long a symbol of the wider argument, is being transferred from federal to state control.

Development allocations to the two Borneo states have been raised to record levels. The MA63 special grant under Article 112D had earlier been raised to RM600 million each for Sabah and Sarawak. In May 2026, Sabah’s interim special grant was raised again, this time to RM1.5 billion, pending the mechanism for its long-standing revenue entitlement under MA63.

At the most senior level, the principle that the formation of Malaysia in 1963 carries equal weight with the independence of Malaya in 1957 is now written into the Federal Constitution itself: a constitutional amendment passed in December 2021 and in force from 2022 defines the federation, in Article 160(2), by reference to both the 1957 Federation of Malaya Agreement and the Malaysia Agreement 1963.

People will still have different views on whether the pace is fast enough, and that debate is healthy. But the direction is now clearer, and the method, namely, settling entitlements through orderly process and partnership rather than confrontation, is the right one for a country that wants to stay whole.

It might be tempting for some to read MA63 as an “East Malaysian issue”, or worse, as a tug-of-war, as it were, in which whatever Sabah and Sarawak gain, the peninsula must somehow lose. That framing is mistaken, and it is worth saying so clearly.

Honouring MA63 is not a transfer of wealth from one part of the country to another. It is the older and simpler idea that a federation should keep the word it gave when it was formed.

A Malaysia that keeps that word is not a weaker country. It is a stronger one — more united, more trusting and more confident, because every part of the federation can see that its place is secure.

Sabah and Sarawak, assured that the terms of their entry are honoured, are not a “problem” for the federation to manage. They are part of its foundation, as much as any state of the peninsula.

Sixty years on, MA63 is not only a question of history. It is a question of trust — of how Malaysia continues to honour the spirit of its formation, strengthen the partnership between its regions, and keep faith with the place each was promised within it. The answer to that question belongs to all of us.

J J Chan is a barrister-at-law of Gray’s Inn, London, and an advocate & solicitor of the High Court of Malaya

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