Wrong to stop 40% revenue payment to Sabah, says lawyer

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PUTRAJAYA has failed to pay Sabah its annual 40% revenue entitlement since 1974 even though it is mandated under the federal constitution, MySabah legal adviser Tengku Fuad Ahmad said.

The special grant from the federal government based on the state’s annual revenue is also mandatory under the Malaysia Agreement 1963 (MA63).

But after 1973, the federal government failed to carry out a review of the grant every five years as required under the MA63 and Article 112D of the constitution.

These were the findings of the MySabah team, formed by Sabah Umno leader and Foreign Affairs Minister Anifah Aman, when they conducted research in London in May and October last year as part of the state’s efforts to determine its rights at the time it agreed to form Malaysia with Sarawak, Malaya and Singapore in 1963.

The long-simmering issue of Sabah and Sarawak rights and autonomy has gained more traction in recent years as politicians and grassroots activists there demand equal status for both states with Peninsular Malaysia and recognition as sovereign entities when they formed Malaysia.

Fuad told The Malaysian Insight that Sabah’s entitlement began with RM20 million in 1969. Grants were paid out each year after that with the last at RM26.7 million in 1973.  

After that, the federal government did not carry out a review.

“The only reason the federal government gave in 1974 was that ‘The federation is not in the financial position for there to be a review’,” he said.

“Under Article 112D, it is mandatory for the 40% revenue entitlement to be reviewed every five years, but it never happened in 1974.   

“Article 112D provides for a government-to-government negotiation for the purpose of agreeing on how much Sabah is entitled to under the special grant as stipulated in Part IV of the Tenth Schedule – 40% revenue entitlement.”

Fuad said 1974 might have been a difficult time for the committee responsible for the review, following the death of then deputy prime minister Dr Ismail Abdul Rahman who headed the committee.

However, Fuad said, there was no valid reason the review should have been forgotten as it was legally mandated.

“Only through a review could representatives from the Sabah and the federal governments decide whether there was a need to revise the special grant,” he said.

According to Fuad, the special grant can be “modified, substituted, varied or abolished” with the consent from both the Sabah and the federal governments.

Fuad expressed surprise that the review did not take place because the 40% revenue-sharing clause has been a crucial part of Sabah’s decision to form Malaysia together with Sarawak, Malaya and Singapore in 1963.

“It was the key negotiating factor, without which North Borneo (Sabah) may not have agreed to form Malaysia.”

Based on the recently declassified information in London, Fuad said the 40% revenue was the deal-breaker for Sabah to agree to form Malaysia during the negotiation phase.

As late as March 1963, Sabah was still unsure whether Malaysia could be a reality due to the division of resources, he said.

“The telexes indicate that the then deputy prime minister Abdul Razak Hussein was largely responsible for brokering the deal with Sabah (led by then chief minister Donald Stephens at the time).

“And the deal-breaker was the 40% special grant. This is why it is very surprising that Sabah leaders at the time did not insist on a review in 1974,”   he said.

Razak had proposed that Sabah give up its power to collect income tax in exchange for the 40% revenue entitlement and therefore, the 60:40 formula was introduced.

Fuad said Sabah leaders negotiating the deal to form Malaysia wanted a fixed formula so they would be able to estimate the amount of grant the state would receive annually.

“Sabah had given more (60%) to the federal government in return for the financing of its police, army and navy to ensure the state’s security that was under threat from Indonesia which was claiming its rights over Sabah.”

The Indonesia-Malaysia confrontation lasted from 1962 to 1966.

MySabah, which was initiated by the Sabah government, comprises professionals and retired politicians from across the political spectrum.

With its findings, the group submitted papers to the Sabah cabinet and the Sabah Rights Review Committee to verify and analyse the MA63, the intergovernmental committee report (IGC) and other documents related to the formation of Malaysia.

Government sources have said Prime Minister Najib Razak is in the know about MySabah’s findings. Najib has touched on MA63 on various occasions, including the Parti Bersatu Sabah congress on November 19 and the Malaysia Day celebrations this year.

Sabah has been touted as a fixed-deposit state for the ruling Barisan Nasional, which must hold a general election by August.

But sentiments have changed, according to surveys, over various issues, including a desire for greater state autonomy, the state of the economy and concerns over the long-standing issue of illegal immigrants. – December 15, 2017.