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Commentary: Malaysia's Borneo states flex their muscles in the changing national political landscape

The strong backing provided by the political elite of Sarawak and Sabah to Prime Minister Anwar Ibrahim’s coalition government is helping calm Malaysia’s once-choppy political waters, but it is an alliance that comes with a price, says CNA’s Leslie Lopez.

Commentary: Malaysia's Borneo states flex their muscles in the changing national political landscape
Sarawakians enjoy a day out on the Darul Hana Bridge in Kuching. In the background is the Sarawak State Legislative Assembly building. (Photo: Rashvinjeet S Bedi/CNA)

KUALA LUMPUR: When the exploration arm of the state-owned national oil corporation Petroliam Nasional Berhad (Petronas) announced in late July the discovery of six new oil and gas fields off the waters of East Malaysia, the Sarawak state government wasted no time declaring ownership over the deposits.

In neighbouring Sabah, a court action is underway to force the federal government to honour a separate decades-old agreement over revenue-sharing of oil and gas extracted from the state by Petronas. Both moves challenge the controversial 1974 Petroleum Development Act that effectively vests all the ownership of the nation’s petroleum resources to Petronas. 

They also spotlight the growing tensions between Prime Minister Anwar Ibrahim’s government and the Sarawak and Sabah states, commonly referred to as the Borneo bloc.

Long considered the poor cousins among Malaysia’s 13 states and three federal territories, Sarawak and Sabah have become the unlikely kingmakers in the country’s changing political equation.

The two states have 32 elected Members of Parliament in the coalition government. They have been crucial in providing Mr Anwar a two-thirds majority in the 222-seat lower house.

Holding the key to political stability in Malaysia means the Borneo bloc’s demands for greater autonomy can no longer be dismissed, presenting Mr Anwar with a serious political challenge.


Mr Anwar’s closest advisors acknowledge that a new approach to managing the Borneo bloc is needed and that the position taken by previous governments of running roughshod over central components of the 1963 Malaysia Agreement is a thing of the past.

They pointed out that Mr Anwar’s appointment of six ministers from the Borneo bloc, including Sarawak’s Fadillah Yusof as one of his two deputies, into his Cabinet was a reflection of his commitment to bring change. At the unity government convention in May, he said it was the responsibility of the current leaders to uphold the agreement to “fulfil the promise made by the nation’s founding fathers” and not to gain electoral support from the Borneo bloc. 

The agreement established the nation of Malaysia with the union of Sarawak, Sabah (then called North Borneo), Singapore and Malaya in 1963, before Singapore became independent in 1965. It set out certain autonomies, in the management of its natural resources and equal status, for the two East Malaysian states.


With its large population of indigenous people who remain proud of their cultures and where religion takes a backseat unlike in Peninsular Malaysia, the disconnect between West and East Malaysia has always been palpable. 

Development has also lagged in the two states. 

While state capitals Kuching and Kota Kinabalu (for Sarawak and Sabah respectively) and key towns in the coastal regions are comparable with many cities in Peninsular Malaysia, much of the interior in the rugged forested lands remain underdeveloped. Sabah is currently recognised as the state with the highest poverty rate.  

These days, patience in the Borneo bloc for restitution is running thin and Mr Anwar will need to engage with the state governments of Sarawak and Sabah to ensure his coalition government remains intact.

The grievances are both political and economic. 

Both states have long imposed immigration restrictions to protect employment opportunities for its residents from those from Peninsular Malaysia. 

One major gripe is what Sabah saw as the federal government under former prime minister Mahathir Mohamad granting citizenships to mostly undocumented Muslim migrants from the restive regions of southern Philippines and neighbouring Kalimantan in Indonesia.

Sabah’s population more than tripled in the four decades ending in early 2000 and this was seen as a covert campaign to overwhelm the state’s once-dominant Christian indigenous groups. This remains a contentious issue.


Taking priority now are economic matters, particularly over the management of oil and gas resources.

Sarawak insists that oil and gas resources in its territory must be regulated under a colonial-era Oil Mining Ordinance 1958, which stipulates that oil and gas resources found within 200 nautical miles of its waters belong to the state.

The state government led by chief minister Abang Johari Openg wants the six new oil and gas fields discovered in the Balingian province of the continental shelf and the West Luconia area to be developed jointly with Petronas to ensure that the state receives more than the annual 5 per cent royalties that it currently enjoys. Neighbouring Sabah is also subject to the same conditions and the state government is demanding higher annual payments.

Their demands are not without merit. According to the federal government, Sarawak’s probable and proven reserves of petroleum represent 60.87 per cent of Malaysia's total reserves, while Sabah’s make up around 18.8 per cent.

In 2022 alone, the federal government received more than RM50 billion (US$10.7 billion) in dividends from Petronas, which effectively means that the Borneo bloc has been propping up Kuala Lumpur financially for decades. Demands for a higher share of revenue under new profit-sharing arrangements for oil and gas extracted from the two states means Kuala Lumpur would have to find new sources of revenue to meet the shortfall.

It is a dilemma Mr Anwar must quickly resolve to preserve Malaysia’s newfound political stability.

Leslie Lopez is a senior correspondent at CNA Digital who reports on political and economic affairs in the region.

Source: CNA/ch


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