Rethinking federal-state relations

FEDERAL-state frictions are known to all of the 25 or so federations in the world. Malaysia is no exception.

Lately, several Malaysian states have vigorously challenged the inequitable sharing of power and wealth between the central government and the governments of the 13 constituent units.

This rising discord should make us realise that growth and evolution are natural and necessary in any federal setup.

Federalism is a journey and not just a set of institutions and procedures.

In the last few weeks, Johor and its loyal supporters have come out with some remarkable assertions.

First, Johor has a special status based on its unique and rich tapestry of history as a sovereign and independent nation before Merdeka.

Second, Johor is not just a state of Malaysia but a partner to the Federal Government.

Third, 20% to 30% of revenue earned by the Federal Government from Johor should be returned to Johor for its development.

All three issues are rich and imbued with legal, political and economic dimensions. They can be touched upon only cursorily.

Johor’s sovereign status: Without doubt, Johor was not part of the subservient Straits Settlements. It was not part of the Unfederated Malay States (UMS) of Perlis, Kedah, Kelantan and Terengganu.

It was not a partner with Perak, Selangor, Pahang and Negri Sembilan in the Federated Malay States (FMS). It had a constitution of its own as early as 1895.

There is a British case of Mighell v Sultan of Johor (1894), which recognised the sovereign immunity of the then Sultan of Johor in British courts.

Federation of Malaya Agreement: However, when Johor participated in the Federation of Malaya Agreement of 1957 and the ratification of the 1957 Merdeka Constitution, it ceded its sovereignty to the government of the new Federation of Malaya.

Supreme Constitution: The new Federation came with a supreme Constitution, which contains a number of provisions that do not gel with the assertion that Johor is not a state of Malaya/Malaysia but a partner to the Federation of Malaysia.

Article 1(2) of the Constitution proclaims that “the States of the Federation shall be Johor, Kedah, Kelantan, Negri Sembilan, Pahang, Perak, Perlis, Selangor and Terengganu”.

Article 4(1) proclaims that this Constitution is the supreme law of the Federation. Under Article 162(6), it is provided that any pre-Merdeka law, which violates the Constitution, can be modified or nullified.

Article 71 and the Eighth Schedule contain “Provisions to be inserted in (all) State Constitutions.” If any state fails to comply with the provisions of the Eighth Schedule, Parliament can intervene under the authority of Article 71(3).

This means all state constitutions, including the Johor constitution of 1895, are subject to the Federal Constitution.

Conference of Rulers: His Majesty the Sultan of Johor is a member of the Conference of Rulers and takes turns with his brother Rulers to grace the throne of the Yang di-Pertuan Agong for five years on a rotational basis.

Under Article 181(1), the Constitution safeguards the sovereignty, prerogatives, powers and jurisdiction of the Rulers within their respective territories but subjects these to the provisions of this Constitution.

Citizenship: Under Articles 14 to 22, there are provisions for a common Malaysian citizenship and the states of the federation have no power to confer a separate citizenship on its residents.

Right to movement: Under Article 9, citizens of Malaysia have a right to move freely throughout the Federation and to reside in any part thereof. Unlike Sabah and Sarawak, the states of Peninsular Malaysia do not enjoy any special power to control immigration into their territories.

Division of powers: The legislative, executive, judicial and financial powers of the states are prescribed in Articles 73 to 112D and Schedule 9 of the Federal Constitution. The distribution of powers is very uneven and is concentrated in the hands of the federal authorities. Any state or federal legislation or action that trespasses into the realm of the other can be invalidated by the courts under Articles 4, 162(6) and 128.

Special position of Sabah and Sarawak: It is noteworthy that in 1963 when Malaya was transformed to Malaysia, Sabah, Sarawak and Singapore agreed to constitute Malaysia on very special terms.

Article 1(2), though merely symbolic, names the states of the Federation, and mentions Sabah and Sarawak as separate regions.

The 1963 asymmetrical federal system gives to Sabah and Sarawak many special legislative, executive, judicial and financial powers, which are not allocated to Peninsular Malaysia states.

These special terms are enumerated in at least 80 or so provisions of the Federal Constitution and in two separate Legislative Lists in Schedule 9 called the Supplementary State List and Supplementary Concurrent List. There are no such special Lists for Johor because Johor is a state and not a separate and special partner like Sabah and Sarawak.

Fiscal federalism: Money represents power and one test of a true federal system is that the financial resources of the federal government and regional governments must be evenly matched. In 1957, this was not so. However, in 1963, some special provisions were inserted for Sabah and Sarawak.

Some have estimated that nearly 90% of the revenue from taxes, fees, duties, assessments, etc, is allocated by the Constitution to the Federal Government. This was because the duties of the Federal Government, such as defence, internal security, policing, citizenship, education, elections, banking, trade, commerce and industry, shipping navigation, public works, medicine and health, were enormous. Its disproportionate duties went hand in hand with disproportionate rights.

Though the states are entitled to revenue from land tenure, permits for mines, agriculture, forestry, markets and fairs, boarding houses and places of amusement, these are not enough to meet their needs. Hence the legitimate demand for more fiscal federalism. Federal allocations such as capitation grants, road grants, loan and discretionary grants are also insufficient.

It must be noted, however, that except in relation to Sabah and Sarawak, which have special fiscal rights, the demand by Johor (and earlier by Penang) is not a constitutional right but a request and an aspiration that will require significant constitutional amendments.

Rights will come with increased duties and expenses. Further, all Peninsular Malaysia states will have to be treated alike.

Johor’s demand for better sharing of revenue is based on solid evidence, but it is something that requires thorough consultation, research, and an appreciation that with enlarged sources of income, items of expenditure will also have to be increased.

The views expressed here are entirely the author’s own. He is a Tunku Abdul Rahman Professor at Universiti Malaya.