KUALA LUMPUR, Oct 22 — Prime Minister Datuk Seri Anwar Ibrahim today said the Kota Kinabalu High Court’s ruling on Sabah’s 40 per cent federal revenue entitlement invites misleading interpretations, giving the impression that the federal government only takes revenue from the state without contributing to its development.
Speaking during a briefing session in the Dewan Rakyat, Anwar said his administration respects the judicial process and will review the full written judgment before deciding on further action, based on the advice of the Attorney General.
“The Kota Kinabalu High Court, among others, has directed the Federal Government to conduct a review together with the Sabah Government under Article 112D of the Federal Constitution, to give effect to the 40 per cent revenue entitlement.
“This decision invites misleading interpretations, as if the Federal Government merely extracts Sabah’s revenue without contributing to the state’s development,” he said.
Anwar said the federal government remains committed to fulfilling all its constitutional obligations to Sabah and to the Malaysia Agreement 1963 (MA63), noting that 13 of the state’s outstanding claims have already been resolved.
These include the transfer of regulatory authority over electricity supply and Sabah Electricity Sdn Bhd to the state government, recognition of Sabah’s Public Works Department, Irrigation and Drainage Department and Water Department as technical agencies, and the appointment of Sabah’s permanent representative to the Inland Revenue Board.
He said the federal government has conducted several reviews of the Federal Special Grant for Sabah under Article 112D, with the allocation raised from RM26.7 million in 2021 to RM600 million this year. Full payment for 2025 was made to the state government on September 10.
The new rate, Anwar added, is an interim arrangement while both governments work to establish a new formula for future calculations.
He said federal spending in Sabah has consistently exceeded the state’s annual revenue, with total allocations increasing from about RM13 billion in 2022 to RM17 billion for 2025 and 2026.
“Under Budget 2026, Sabah continues to receive the highest development allocation among all states, amounting to nearly RM7 billion,” he said, citing projects such as the Sabah Heart Centre in Kota Kinabalu, the Kalabakan–Simanggaris Road, and the Southern Link power transmission line.
He added that the Madani government has resumed implementation of Phase 1B of the Pan Borneo Highway Sabah, with a total cost of RM14 billion, and allocated RM1 billion for water supply projects expected to be completed next year.
On the oil and gas sector, Anwar said the federal government supports Sabah’s participation through the Commercial Collaboration Agreement (CCA) signed in 2021, which has enabled local contractors to secure projects worth RM2 billion and generated about RM2 billion in petroleum sales tax revenue for the state since 2022.
“The Madani government has made every effort to resolve all outstanding MA63 claims, increase the Special Grant rate for Sabah, and raise both management and development allocations each year for the well-being of the state,” he said.
Last Friday, the Kota Kinabalu High Court ruled that the federal government had acted unlawfully by failing to fulfil Sabah’s constitutional right to 40 per cent of net federal revenue collected from the state over the past five decades.
According to the judgment, the court issued a mandamus order compelling Putrajaya to review the revenue-sharing arrangement with the Sabah government and to reach an agreement on the state’s 40 per cent entitlement for each financial year from 1974 to 2021 within 180 days.
