Review our federalism contract

Slightly more than half a century has passed since the establishment of the Malaysian Federation. September 16, 1963 saw the birth of not only a new country, but also a new covenant for the peoples of Malaya, Sabah, Sarawak and, at the time, Singapore.

Enshrined in our Federal Constitution, this covenant promised a brighter future for all Malaysians, in the form of inclusive and sustainable socio-economic development, where the natural riches of our country would be shared by all.

In spirit, not in practice

Five decades on, the reality today does not appear to reflect the promised dream of our nation’s pioneers. Although our wealth, as measured by our gross domestic product (GDP)and gross national income (GNI), has grown by leaps and bounds, so much so that the government is now able to claim that we are on the verge of becoming a high-incomeeconomy by 2020, this purported economic prosperity is not felt on the ground.

Consider the fact that the median wage of Malaysian workers stands at a paltry RM1,700 a month. This means that at least half of our working population is categorised as low income. This group also has no financial assets or liquid savings.

It is no secret that Malaysia suffers from blaring inequality – in fact, the highest level in Southeast Asia according to the World Bank.

Within our country, this wealth gap assumes a clear geographical pattern. Inequality exists not only between Sabah, Sarawak and the peninsula, which is more predictable, but even within the peninsula, where the socio-economic situation between the west coast states of Penang and Selangor is worlds apart compared to Kelantan and Terengganu in the east coast.

In light of the obviously asymmetrical corollaries where socio-economic development is concerned, it is therefore timely to consider whether our existing system of federalism is still relevant.

The most centralised federation in the world?

As our name implies, our country is a federation, that is to say a political structure generally consisting of federated states united under the umbrella of a central government. Other examples of federated countries include the United States, Australia, Germany and India.

In federations, there is usually a power-sharing agreement. Typically, state governments have autonomy over many areas that involve everyday life, whereas the central government is normally responsible for state matters, foreign relations and external security.

The division of power between the federal and state governments in a federation is usually determined by the constitution and cannot be altered at whim by the central government.

This is where Malaysia is a bit unique. Far from assuming the usual characteristics of a federation, the legislative, administrative and fiscal practices in our country would put most unitary states to shame. In fact, it would not be far-fetched to say that Malaysia could be considered among the most centralised federations in the world. The extent of the over-centralisation in our country is telling from one single fact – that the central government takes up more than 90% of all government expenditure annually.

I would also wager that anyone would be hard-pressed to find another federation, especially one as large as ours, in which public transport, even in the remotest regions, is managed by a central agency under the Prime Minister’s Department.

It is a similar scenario for many areas of governance that are typically run by local authorities, such as public housing, solid waste management, utilities, social welfare and even education.

Instead of being managed and regulated at the state or municipal level where these issues belong, they are all managed centrally by the federal government. In a recent development, even the management of public toilets will be assumed by the federal government beginning 2016.

Imbalanced development

While it is clear that over-centralisation can be inefficient in certain areas, a centralised system does have its benefits. Normally, central control over development planning should result in regional balance.

Unfortunately, this is not the case in our country where economic and infrastructural development has been quite exclusively concentrated in the Klang Valley.As a result, many previously dynamic secondary cities such as Penang, Ipoh and Johor Baru have been left behind by progress.

In this context, whatever successes that states like Penang have achieved have actually been in spite of this over-centralised structure. Imagine that the Penang government operates on a budget that is smaller than the annual expenditure of some Malaysian universities.

And for a state that contributes half of Malaysia’s electrical and electronic exports, a third of manufacturing exports, two-thirds of medical tourism receipts and nearly a tenth of the nation’s GDP, it is a scandal that the democratically elected state government is only able spend less than half a per cent of the national budget.

It is an even bigger travesty when we consider the resource-rich, oil-producing states ofSabah, Sarawak, Kelantan and Terengganu, which have all been starved from development and have among the highest rates of poverty in the country, despite contributing substantially to the nation’s coffers.

Time to review our federalism contract

It is obvious that our current federalism framework requires re-examination. This is especially so in the post-2008 environment, in which the BN federal government no longer holds a legislative monopoly.

Where previously the federal and state governments were for the most part aligned to the same party, today this is no longer the case. The fact that opposition parties now rule in many key states has brought to fore the fault-lines within our existing federal system.

When a state government is unable to determine the path of a bus route in its own city, or take loans to fund infrastructure development, or even take care of its own public toilets, it is clear that the system is broken.

Therefore, the effort towards breaking this centralised monopoly over decision-making must be encouraged. A carefully planned formula of decentralisation is necessary in order to rebuild our federation into one that truly respects the rights of the states in its domain.

Only with a properly devolved system of governance can we hope to achieve our forefathers’dream of a great democracy with higher economic growth and socially equitable development. – December 24, 2014.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.