Reviving the Spirit of Federalism: Decentralisation Policy Options for a New Malaysia

This policy paper was published as Policy Ideas No. 59 for the Institute for Democracy and Economic Affairs (IDEAS) Malaysia. It can be downloaded for free here.


Up to 2008, the spirit of Malaysia’s federalism had all but faded, given the country’s highly centralised institutions and system of political economy. It was only when five states fell to the then national opposition Pakatan Rakyat that same year that the discussion of federal-state relations, especially within Peninsular Malaysia, began to take on a more interesting tone.

Over the following ten-year period up to 2018, states – not just those run by the national opposition – began to escalate their claims on a variety of policy issues, ranging to the demands for oil rights in Kelantan, Terengganu, Sarawak, and Sabah, to self-determination of companies selected to perform waste management services in Penang and Selangor as opposed to these being selected by the federal government. Where the federal government had previously typically responded to state complaints about funding gaps by allocating more funds, the relationship between the centre and the states required a maturing beyond such paternalistic reactions.

The 2018 Pakatan Harapan general election manifesto contained a slew of offerings for such states in East Malaysia where the demands were the loudest, including returning Sabah and Sarawak to the status accorded by the Malaysia Agreement 1963, and Promise 24 even committed to “revive the true spirit of federalism”.

To read the full policy paper, click here.

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