Malaysian Federalism Needs a Clear Strategic Direction

 

The debate over the future of the United Kingdom offers Malaysia an important lesson: a union is not sustained merely by constitutional text, political slogans or the concentration of authority at the centre. It is sustained by the way power is shared, exercised and experienced by its constituent territories.

In The Union and the State, Ciaran Martin examines the competing visions of the United Kingdom’s territorial future and identifies three broad approaches: multinational unionism, muscular unionism and pragmatic “muddling through”.

His most important observation is that the future of a union may depend less on the formal transfer of powers than on statecraft: how the central government works with, competes with or intervenes in the affairs of constituent governments.

This provides a useful framework for thinking about Malaysia’s federalism, particularly the evolving relationship between Putrajaya, Sabah and Sarawak.

Malaysia is not the United Kingdom. The constitutional histories, legal structures and political circumstances are different. Nevertheless, there is a strikingly relevant question common to both: how can a diverse political union remain cohesive without allowing centralisation to undermine the autonomy that makes the union meaningful?

Martin’s concept of multinational unionism is particularly relevant. It views the constituent parts of a state not merely as administrative units but as political communities with their own identities and institutional interests. Applied cautiously to Malaysia, this perspective draws attention to the special constitutional position of Sabah and Sarawak and the historical circumstances surrounding the formation of Malaysia in 1963.

The significance of MA63 has increasingly moved from historical debate into contemporary federal governance. The Federal Government has reported progress on several MA63-related matters, including the transfer of electricity regulatory authority in Sabah, greater procurement authority for Sabah technical departments and representation of Sabah and Sarawak in the Inland Revenue Board.

These developments demonstrate that federalism is not static. It can evolve through negotiated redistribution of administrative responsibilities while maintaining the integrity of the federation.

This is where Martin’s warning about “muscular unionism” becomes relevant.

A central government may possess substantial constitutional authority but exercising that authority too aggressively can produce a political reaction in the opposite direction. When constituent governments perceive federalism as centralisation by another name, questions of constitutional power can gradually become questions of political identity.

Malaysia should therefore distinguish between national coordination and administrative centralisation. A strong federal government is necessary for defence, foreign affairs, macroeconomic management, national infrastructure and other matters requiring nationwide coordination. But strength at the centre does not necessarily require uniformity everywhere.

Indeed, Malaysia’s constitutional architecture already recognises asymmetry. Sabah and Sarawak possess specific constitutional safeguards and arrangements that distinguish them from the other states. Official discussions of MA63 continue to emphasise these distinctive arrangements, including fiscal and administrative matters.

The second lesson from Martin concerns the danger of leaving federalism without a clear strategic direction.

Martin argues that successive UK governments struggled because they did not clearly determine whether the Union should become more centralised, more devolved or remain broadly as it was. The result was an unstable middle ground in which constitutional tensions were repeatedly managed rather than strategically resolved.

Malaysia should avoid a similar pattern.

The continuing discussion surrounding MA63 demonstrates that federal-state relations cannot be managed indefinitely through ad hoc negotiations. Negotiation is essential, but negotiation should eventually produce predictable institutional rules.

Federalism becomes stronger when governments know where authority lies, how disputes are resolved, how financial responsibilities are allocated and how constitutional guarantees are protected.

This is particularly important because fiscal federalism can become the real test of political trust.

Questions involving special grants, revenue arrangements and development expenditure are not merely accounting matters. They shape perceptions of whether federalism produces a fair distribution of resources. Recent federal statements acknowledge ongoing discussions concerning Sabah’s special grant and the constitutional framework governing those payments.

Consequently, the future of Malaysian federalism will depend increasingly on whether constitutional promises are translated into transparent and predictable fiscal arrangements.

Martin’s third insight is perhaps the most important: statecraft may matter more than constitutional rhetoric.

Federalism operates through daily government. It is visible in infrastructure, education, healthcare, public administration, economic development, regulatory authority and the ability of state governments to respond to local priorities. Citizens experience federalism not through constitutional theory but through whether decisions affecting their communities are made effectively and with appropriate local participation.

This means Putrajaya should not view greater state autonomy as automatically diminishing the authority of the Federation. Properly designed decentralisation can instead strengthen the legitimacy of the federal system by allowing decisions to be made closer to the people affected by them.

The experience of Sarawak illustrates this possibility. Recent developments have involved greater state responsibility in areas such as electricity, gas and infrastructure-related administration, while federal financial and national responsibilities remain significant.

This suggests that Malaysian federalism can accommodate differentiated arrangements without necessarily producing fragmentation.

However, the opposite danger must also be recognised. Excessive decentralisation without adequate fiscal capacity, national standards or coordination could produce uneven public services and administrative fragmentation. The answer is therefore neither complete centralisation nor unlimited devolution.

It is cooperative federalism.

Malaysia needs stronger mechanisms through which federal and state governments jointly formulate policy in areas of overlapping interest. Intergovernmental councils, technical committees and structured negotiations should not merely resolve disputes after they emerge. They should become permanent instruments for anticipating disputes and coordinating policy.

This is another lesson from Martin’s analysis: the quality of the centre-periphery relationship can be as important as the formal distribution of powers.

There is also a broader constitutional lesson.

A federation cannot rely solely on legal authority to maintain political cohesion. It must generate a sense that the federation is fair, responsive and beneficial to its constituent communities. Martin describes the contemporary UK Union as increasingly transactional, meaning that its durability depends partly on whether citizens believe the state delivers sufficient value. Malaysia should take this seriously.

The Malaysian Union therefore needs to demonstrate its value not simply through national economic growth but through equitable development, effective public services, infrastructure connectivity, respect for constitutional safeguards and meaningful participation by Sabah and Sarawak in national decision-making.

Ultimately, the future of Malaysian federalism should not be framed as a contest between Putrajaya and the states. It should be understood as a question of how authority can be organised so that the Federation remains both strong enough to govern nationally and flexible enough to respect territorial diversity.

The central lesson from Martin is not that Malaysia should copy the British model. It is that every union eventually has to answer a fundamental question: what kind of union does it want to be?

For Malaysia, the answer cannot be perpetual ambiguity. The country needs a federalism in which constitutional guarantees are meaningful, financial arrangements are predictable, administrative responsibilities are clear and intergovernmental relations are based on partnership rather than hierarchy.

MA63 should therefore not be viewed merely as a list of outstanding claims. It can become part of a broader effort to recalibrate Malaysian federalism for the next generation.

A successful Malaysian Union will not be one in which the centre exercises the most power. Nor will it necessarily be one in which the states exercise the most power. It will be one in which federal and state institutions understand the limits of their authority, respect the constitutional settlement and work together where national interests require cooperation.

The durability of Malaysia’s Union will ultimately depend not only on how power is divided, but on whether that division is regarded as legitimate, fair and workable by the people and governments that constitute the Federation.

References

Martin, C. (2024). The Union and the state: Contested visions of the UK’s future. Institute for Government & Bennett Institute for Public Policy.

Office of the Prime Minister of Malaysia. (2019). Malaysia Agreement 1963: The constitutional and historical basis of Malaysia.

Office of the Prime Minister of Malaysia. (2025, October 22). Ucapan penerangan YAB Perdana Menteri: Pendirian Kerajaan MADANI berhubung pemberian khas Persekutuan kepada Sabah.

Parliament of Malaysia. (2026, February 25). Hansard Digital: Dewan Rakyat.

Sharifah Hasidah Sayeed Aman Ghazali. (2025, October 7). MA63 strengthens Sarawak’s position as equal partner in Malaysia. UKAS, Department of the Premier of Sarawak.

28.09.2026

Kuala Lumpur.

© All rights reserved.

Republished at https://focusmalaysia.my/malaysias-federal-future-needs-more-than-ma63-progress-it-needs-a-clear-strategic-direction/