PUTRAJAYA: Prime Minister Datuk Seri Anwar Ibrahim responded to criticism over the debate on Sabah and Sarawak’s tax contributions to the Federal Government, saying some parties were attempting to turn the issue into “cheap politics”.
Anwar said it was unfair for certain quarters to raise the matter now, claiming that some of them — including “former ministers and prime ministers” — had previously opposed efforts to increase allocations for the two states.
Speaking at the National Integrity Address here, Anwar said the special revenue-sharing arrangement with Sabah and Sarawak had been raised to its highest level under his administration, reaching RM307 million.
“You as civil servants know our job is to uphold the dignity and socio-economic status of all states. That’s why we cannot view things solely through the lens of a particular race, tribe, or state and deny others their interests,” he said.
“In 2025 we raised it(special grant for Sabah) from RM126 million to RM300 million, and to RM600 million for 2026. How much did we allocate for Sabah’s development in 2025 and 2026? RM17 billion,” he added.
“I am explaining all this because when we discuss governance and integrity, everything must be viewed holistically. If I don’t do this, we become victims of cheap politics.”Earlier, Anwar held a special briefing session in the Dewan Rakyat following the Kota Kinabalu High Court’s ruling on Sabah’s 40 per cent federal revenue entitlement.
He said the judgment could invite misleading interpretations, giving the impression that the Federal Government only takes revenue from the state without contributing to its development.
Anwar said his administration respects the judicial process and will review the full written judgment before deciding on further action, based on the advice of the Attorney General.
The Kota Kinabalu High Court, among others, has directed the Federal Government to conduct a review together with the Sabah Government under Article 112D of the Federal Constitution, to give effect to the 40 per cent revenue entitlement.
Anwar said the Federal Government remains committed to fulfilling all its constitutional obligations to Sabah and to the Malaysia Agreement 1963 (MA63), noting that 13 of the state’s outstanding claims have already been resolved.
These include the transfer of regulatory authority over electricity supply and Sabah Electricity Sdn Bhd to the state government, recognition of Sabah’s Public Works Department, Irrigation and Drainage Department and Water Department as technical agencies, and the appointment of Sabah’s permanent representative to the Inland Revenue Board.
He said the Federal Government has conducted several reviews of the Federal Special Grant for Sabah under Article 112D, with the allocation raised from RM26.7 million in 2021 to RM600 million this year. Full payment for 2025 was made to the state government on September 10.
The new rate, Anwar added, is an interim arrangement while both governments work to establish a new formula for future calculations.
He said several key projects listed under the 13th Malaysia Plan (13MP) take into account the priorities outlined by the Sabah government, including the Sabah Heart Centre in Kota Kinabalu (RM125 million), the Kalabakan–Simanggaris Road (RM416 million) and the Southern Link Phase 1A Electricity Transmission Line (RM200 million).
In addition, he said the Madani Government has also resumed implementation of the Pan Borneo Highway Sabah Phase 1B project, with a total cost of RM14 billion, comprising RM5 billion in development allocation and RM9 billion in loans.
“Since 2024, the government has also provided RM1 billion in financing for Sabah’s water projects, which are expected to be completed next year,” he said.
On the oil and gas sector, Anwar said the Federal Government supports Sabah’s participation through the Commercial Collaboration Agreement (CCA) signed in 2021, which has enabled local contractors to secure projects worth RM2 billion and generated about RM2 billion in petroleum sales tax revenue for the state since 2022.
“The Madani government has made every effort to resolve all outstanding MA63 claims, increase the Special Grant rate for Sabah, and raise both management and development allocations each year for the well-being of the state,” he said.
Last Friday, the Kota Kinabalu High Court ruled that the Federal Government had acted unlawfully by failing to fulfil Sabah’s constitutional right to 40 per cent of net federal revenue collected from the state over the past five decades.
According to the judgment, the court issued a mandamus order compelling Putrajaya to review the revenue-sharing arrangement with the Sabah government and to reach an agreement on the state’s 40 per cent entitlement for each financial year from 1974 to 2021 within 180 days.