On the 25th of August, the Penang Select Committee on State and Federal Relations and Penang Institute hosted a closed-door roundtable to discuss the current state-federal relations and decentralisation as a way forward.
The event opened with Dato’ Dr Ooi Kee Beng and YB Gooi Hsiao Leung giving their respective welcoming addresses, touching on the importance of the issue and their hopes for an enriching and productive discussion ahead.
The panel sessions began with Dr. Trivia Yeoh’s presentation, where she gave a comprehensive overview of the state-federal relations in Malaysia, with particular emphasis administrative and fiscal dimensions and developments. She gave a clear outline of policy areas and jurisdiction under the respective governments, and the caveats of decision making. She also noted that political developments often influence federal-states issues, and that plays a role in the increasing demands for more state autonomy.
Stuart Mcdonald followed on with a focus on fiscal decentralisation, where he discussed the advantages, challenges and risks, alongside the available transfer and dialogue mechanism. He also proposed several ways forward, highlighting the importance of transparency and the possibly of tax reforms. He suggested that states could demand for more revenue raising powers and think about collaboration to push for more autonomy.
Dato’ Seri Farizan Darus then painted a clear picture of state budgets, using Penang as an examples, and how state-federal relations played into the formation of budget and spending. He laid out the fiscal transfers and the subsequent categorisation of the funds. He proposed that the state government should think about developing a formula for fairer allocation based on what the state contributes.
Deisigan Shammugam then delved into the growth potential of the different states, clearly depicting that each state’s potential differed widely, giving the example of Kelantan and Penang. The income divergence then leads to growing inequality between the states, citing that the country’s revenue are mostly contributed by Peninsular states. Targeted policy intervention will benefit the growth of poorer states but differentiated developmental strategies will be needed. Fiscal decentralisation and collaboration between the federal and the state will act to improve efficiency.
A common point was raised by most of the participants during discussion: that the nation will function better if cooperation between federal and the states is transparent and subjected to structures, rules and regulation. There needs to be regular federal–state meetings taking place and with clear agendas that are visible to the public. States should be given more autonomy and wider breadth of decision making. Most importantly, the flow of funds and cooperation should sit above party politics so the progress wouldn’t be stalled with the change of governments.
On implementation, the participants suggested a fixed schedule for intergovernmental meetings and transparent reporting. Training and staffing matters of the civil service was raised as both federal and state officers need the skills and capacity to deliver if any devolution of tasks is going to work in practice, especially in the lower capacity states.
In conclusion, participants agreed that Malaysia remains highly centralised, which slows decision-making and service delivery. A better balance of power-sharing and resource allocation would help states respond faster to local needs and strengthen the federation as a whole.
