Malaysia’s 2023 State Elections: So Much Fuss For So Little Work

Malaysians are getting exercised about upcoming elections in the six Peninsular states of Kedah, Kelantan, Negeri Sembilan, Penang, Selangor, and Terengganu.

State elections have become a bigger deal now that the vast majority are held outside of the general election cycle. Until 2020, all states except Sarawak synchronised their elections with the general election. Sabah, Melaka and Johor called snap elections in 2020-22. At the November 2022 general election, only three states held state elections.

Political theatre, however, should not be mistaken for material importance. Arguably, state governments do too little to merit the expense of their own elections. Amid the spectacle, Malaysia should critically consider the meagre roles and resources of state governments. The irony is that states, in following their own election cycles, end up augmenting federal dominance and disempowering themselves.

State governments are constrained by design. Malaysia’s Constitution vests overwhelming powers and resources in the federal government. The Federal List of responsibilities encompasses expansive responsibilities, including external affairs, defence, education, trade, transport and communications. The shallower State List includes issues such as land matters, Islamic law and Malay customs and local government. The Concurrent List of responsibilities with overlapping federal and state jurisdictions includes social welfare, public health, and town and country planning.

Malaysia’s Parliament will hold sessions for 19 weeks this year. In contrast, state assemblies sit for just two weeks yearly to settle their relatively light load. State legislators busy themselves overseeing land use, rendering welfare services and dispensing aid. Chief ministers promote investment and development – leveraging, again, on the one asset they control: land.

State government revenue is also constitutionally confined. The federal government collects all substantial taxes, from direct taxes on income and profit to indirect sales and trade taxes. State governments predominantly tap into revenue based on land, forests and mines, and other sources like property rent.

In practice, power became exceedingly centralised under six decades of Barisan Nasional rule. Budgets embody the imbalance. Putrajaya’s 2023 budget of RM388.1 billion dwarfs the thirteen states’ combined expenditure of RM29.4 billion (Table 1). The government of Selangor, the most advanced state with high spending requirements, budgeted RM350 per resident, a derisory 2.9 per cent of the federal government’s per capita expenditure of RM11,942.

Table 1. Malaysian state government and federal government budgets for 2023

	Population (million)  2022	2023 Expenditure
		Total  (RM million)	Per capita   (RM)
Sarawak	2.5	10,797	4,319
Sabah	3.4	5,138	1,511
11 Peninsular states’ total	24.5	13,483	550
Selangor	7.0	2,450	350
Terengganu	1.2	1,991	1,659
Johor	4.0	1,732	433
Kelantan	1.8	1,620	900
Perak	2.5	1,190	476
Pahang	1.6	1,071	669
Kedah	2.2	1,059	481
Penang	1.7	990	582
Negeri Sembilan	1.2	550	458
Melaka	1.0	537	537
Perlis	0.3	293	977
13 state governments’ total	30.4	29,420	968
Malaysia federal government1	32.5	388,100	11,942

States are technically entitled to federal grants, but in practice, they have to plead for federal mercy. The distribution of federal funds to states is recurrently decried for its seeming unfairness and political motives.

States’ dependence on land-based revenue not only limits the amount they can collect but also induces over-exploitation and compromises environmental conservation. State governments rely on federal grants to compensate them for not issuing concessions to cut down their forests. They can readily invoke the lack of federal support to excuse inaction on a range of problems, saliently wildlife protection on the Concurrent List.

The problem is more acute in Peninsular Malaysian states. Sabah and Sarawak enjoy autonomy to levy sales taxes and export taxes on petroleum. Sarawak stands out further for collecting petroleum sales taxes. Its budget for 2023, at RM4,319 per capita, towers above the 11 Peninsular states’ average of RM550.

State governments are not entirely without agency. To operate more independently of the federal government, they have established government-linked companies and investment arms that may be more nimble and efficient. Unlike the state budget tabled in the assembly, however, such entities are less transparent and accountable. However hard they try, though, it comes back to the land issue. In 2022, for example, land taxes and land premiums accounted for 76 per cent of Selangor’s revenue.

State governments might appear empowered in holding elections at their own timing rather than following Parliament’s cycle, but the case for the obverse is arguably stronger. The lead-up to the 2023 state elections indicates that when they are held independently of Parliament, federal politics could dominate even more.

With federal government and opposition already formed, and unlike concurrent federal-state elections where both are up for grabs, the 2023 state elections needlessly gravitate to a “referendum” on Anwar Ibrahim’s unity government and the Perikatan Nasional opposition. This means that the issue of access to federal largesse will loom much larger than the growth of state resources.

Malaysia’s federal structure, of course, continues to shape politics. Rebalancing federal and state roles requires courage to push the envelope — and some unavoidable constitutional amendments. Such valour will be welcome.

State governments can implement welfare and public health programmes; the Concurrent List provides considerable room for states to deliver services currently under federal control. The more daunting venture is to expand state revenue sources, chiefly by allowing Peninsular state governments to collect taxes.

Rebalancing federal and state roles requires courage to push the envelope — and some unavoidable constitutional amendments. Such valour will be welcome.

The Pakatan Harapan-led ruling coalition may be compelled to reintroduce a consumption tax to plug revenue deficits, but this initiative risks popular fallout and loss of legitimacy, since PH abolished the goods and services tax in 2018. Transferring some federal roles to the states, alongside mandating that a share of consumption tax goes to state governments, could be one way to make the reform more novel, constructive, and palatable. The government could explain to the public the hazards of state governments’ overdependence on land-based revenue.

Realistically, the balance of power will continually tilt toward the federal government; it is a question of mitigating, not eliminating, dominance. On this score, realigning the federal and state elections — better still, enacting fixed terms across Parliament and the state assemblies — would empower state governments.

Without such reforms, Malaysia’s state elections will be a giant spectacle for political parties with scant consequences for the people.

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