KUALA LUMPUR: Malaysian states demanding greater financial autonomy from the federal government must prove they can be trusted with the money.
As state governments push for bigger resource allocations and taxing powers, think-tank Institute for Democracy and Economic Affairs (Ideas) and market watchers warned that greater fiscal decentralisation must be matched by strict budget transparency.
This is a critical factor for businesses trying to track state spending accuracy.
Heading at a panel themed Open Budgets, Stronger Governance: Enhancing Trans-parency at the State Level during the Malaysia Open Budget Index (MyOBI) 2026 report launch, Ideas senior research manager Dara Waheda Mohd Rufin asked if states should face higher expectations around accountability if they wanted more resources and autonomy.
Terengganu Strategic and Integrity Institute researcher Kyra Aishah McAfee argued that rising state demands reflect growing friction in Malaysia’s centralised system of fiscal federalism.
“When we see more demand from states on fiscal autonomy, that shows there is a rift in current practices,” McAfee said at the report launch titled Raising the Bar for Budget Transparency.
“The federal government needs to start treating states like stakeholders, not merely branches. The structure put in place since Malaysia’s independence needs to change as states become more competitive.”
McAfee noted that strong budget governance is precise proof that a state can carry fiscal responsibility, arguing against federal practices where allocations bypass state accounts to administrative bodies like the Implementation Coordination Unit.
For analysts and corporate strategists, missing budget data remains a dire concern. A persistent lack of timely enacted budgets and year-end reports makes it nearly impossible to evaluate true state fiscal health and contract delivery.
Ideas research director and report co- author Dr Stewart Nixon said post-budget tracking is vital for market confidence.
“Year-end reports and enacted budgets are a key part of the process as they provide transparency on what has actually happened,” he said, noting that while public consultation exists, it is too often conducted “behind the scenes”.
Ideas has urged state assemblies to open pre-budget consultations directly to the business community and the public to debate economic priorities transparently.
Terengganu emerged as Malaysia’s leading state for budget transparency in the MyOBI 2026, released yesterday by Ideas, reflecting its strong performance in the public availability of budget information.
Selangor topped the legislative oversight assessment, followed by Penang and Terengganu.
While nine states improved the public availability of budget information and seven strengthened legislative oversight since the previous assessment, significant gaps remain.
No state published a complete set of essential budget documents in a timely manner, with supply bills, enacted budgets and year-end reports remaining particularly difficult to access.
Developed with the support of the Delegation of the European Union to Malaysia and implemented in collaboration with civil society organisation partners across Malaysia, MyOBI 2026 assesses budget transparency across all 13 states by measuring the public availability of budget information, legislative oversight by state legislative assemblies and opportunities for public participation.
