APRIL 6 — Demanding Sabah’s rights under MA63 to strengthen our economic autonomy is necessary, and it will be a long journey. Under an asymmetrical federal system, states rely heavily on the central government for fiscal resources due to the concentration of federal power. Fiscal federalism is never merely technical; it is political in nature, often shaped by bargaining and unequal leverage, especially when states require more public funding. To a certain extent, this dependency is difficult to avoid due to centralised administrative functions and limited fiscal autonomy as prescribed under the Federal Constitution. However, one of the boldest yet economically rational ideas is to establish Sabah’s own sovereign wealth fund (SWF) so that the state government can be less dependent on the federal government while strengthening its fiscal capacity.
The central tenet for establishing a sovereign wealth fund is straightforward. Sabah is rich in resources, so revenue, royalties and taxes — particularly from petroleum, palm oil and mining — on top of the 40 per cent revenue share entitlement under MA63, should not be treated merely as income for direct spending. Rather, they should serve as capital to be invested and transformed into long-term developmental wealth. This means income from all of Sabah’s resources should be invested so the government can earn more from various investment sources, which can then finance infrastructure, industrial parks, energy and renewable energy, education, talent development, human capital and rural connectivity. Revenue from a sovereign wealth fund is also key for redistributive policies to help alleviate poverty, including direct cash transfers, child development programmes, scholarships and other social assistance.
What exactly is a sovereign wealth fund? It is a state-owned investment fund — essentially a government’s savings and investment account. The state government sets aside part of its revenue from natural resources such as oil, gas or palm oil, and can also channel in a portion of dividends paid by government-linked companies (GLCs). Instead of spending it all immediately or disbursing it through the annual budget, the government places that portion of funds into a special vehicle and invests it to grow over time. The returns from these investments are ultimately used to support long-term development. Importantly, the overriding objective is to play a catalytic role in transforming Sabah’s economy, supporting emerging sectors and improving overall economic welfare — so that every Sabahan benefits from this wealth.
International experience reinforces this point. Norway’s Government Pension Fund Global was designed to ensure that petroleum wealth is not exhausted within a single generation. Its purpose is long-term savings and macroeconomic stability, so that oil wealth becomes a permanent financial asset rather than a temporary fiscal windfall. Alaska’s Permanent Fund preserves part of the state’s wealth while distributing annual dividends to citizens. Alberta’s Heritage Savings Trust Fund in Canada reflects the same underlying principle. Closer to home, Sarawak’s Sovereign Wealth Future Fund was established to transform commodity-derived revenue into enduring financial assets for future generations.
Sabah’s revenue has increased significantly in the post-Covid-19 period, rising from RM4.5 billion in 2020 to RM6.9 billion in 2023, and remaining above the RM6 billion mark in both 2024 and 2025. This represents an increase of 53 per cent. It also marked the first time Sabah surpassed the RM6 billion threshold, making it a historic high. This improvement reflects a broadening of Sabah’s resource-based revenue base, driven by petroleum royalties, the newly introduced 5 per cent sales tax on petroleum-related products, the 7.5 per cent sales tax on oil palm biomass exports, and other taxes including mining. The 40 per cent revenue share entitlement under MA63 will provide a substantial increase to state coffers. Such broad-based revenue from resource-related activities provides a credible basis for institutional savings and investment.
Datuk Armizan Ali, Minister of Domestic Trade and Cost of Living, recently proposed the establishment of a sovereign wealth fund under the GRS manifesto during the state election. He rightly emphasised that such a fund should form part of the Sabah Maju Jaya (SMJ) agenda to secure intergenerational benefits for Sabahans. This is a forward-looking and strategically necessary idea. Tan Sri Andrew Sheng, the newly appointed Chief Minister’s special adviser, has also reiterated that Sabah has what it takes to prosper, provided there is a well-designed plan to support investment and development. In this context, the case for an SWF is compelling.
There are two possible approaches. First, the state can establish a new entity with a clear mandate, including its commercial purpose, catalytic developmental role and distributive function for Sabahans. This distributive element is crucial: the revenue must be returned to Sabahans. Such an institution must be led technocratically, insulated from vested political interests, and supported by a third-party custodian structure to ensure monitoring, transparency and discipline. However, this option would require substantial groundwork and time to build its investment ecosystem. The second, more practical option is to transform an existing GLC into an SWF. In Sabah’s case, Qhazanah Sabah Berhad is the closest fit. It already has the functions, ecosystem and institutional familiarity that can be leveraged. This would reduce set-up costs, shorten the implementation period and build on existing experience in managing state commercial interests. What it requires, however, is a major revamp and an elevated mandate.
An SWF is one way to strengthen Sabah’s fiscal capacity and empower the state government with less reliance on the federal government. Sabah must avoid the “resource curse” and instead convert resource wealth into financial assets — turning resource abundance into a genuine blessing. Ultimately, true economic growth is not merely reflected in macroeconomic numbers, but in ensuring that every rakyat can feel the wealth in their own hands.
* Associate Professor Firdausi Suffian is a political economist at UiTM Sabah.
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
