Sabah Colonised: Sabah vs Malaya Per Capita Budget Allocation

Historical Era / Benchmark Year	Sabah Direct Allocation (Per Capita)	Malaya Residual Allocation (Per Capita)	Per Capita Ratio (Malaya : Sabah)	Primary Budget Drivers
1963–1975 (Post-MA63 & Security)	~RM 45 – RM 120	~RM 180 – RM 450	~3.5 : 1	Post-formation defense spending during Konfrontasi, early FELDA land schemes, and administrative consolidation in Kuala Lumpur.
1976–1999 (Industrialization Era)	~RM 250 – RM 850	~RM 1,100 – RM 3,600	~4.2 : 1	Peninsular mega-projects (North-South Expressway, Putrajaya, KLIA, heavy industry) combined with expanding central debt service.
2000–2015 (Corridor & Growth)	~RM 1,100 – RM 1,600	~RM 4,200 – RM 7,500	~3.3 : 1	Launch of Sabah Development Corridor (SDC) against rapid expansion in central federal civil service emoluments.
2016–2023 (Pan-Borneo Era)	~RM 1,600 – RM 1,800	~RM 7,500 – RM 11,500	~2.9 : 1	Multi-billion Pan-Borneo Highway allocations and initial Article 112D interim grant revision to RM300M.
2024–2025 (MADANI Budget Realignment)	DE: ~RM 1,833 Total: ~RM 4,800	DE: ~RM 2,750 Total: ~RM 13,800	1.5 : 1 (DE) 2.87 : 1 (Total)	Direct DE reached RM6.6B–RM6.7B; special grant doubled to RM600M under Article 112D.
2026 (Current Fiscal Baseline)	DE: ~RM 1,916 Total: ~RM 4,888	DE: ~RM 2,774 Total: ~RM 14,014	1.45 : 1 (DE) 2.87 : 1 (Total)	Direct DE at RM6.9B; central operating expenditure (~80% of national budget) remains concentrated in Peninsular HQ structures.

Key Accounting Dynamics

Development Expenditure (DE) Convergence: Direct state-tagged DE per capita for Sabah has risen significantly, now exceeding the direct state-assigned DE of most individual Peninsular states.
Operating Expenditure (OE) Skew: Under a residual model, Peninsular Malaysia absorbs all unallocated national operating overhead (federal ministry salaries, armed forces maintenance, national debt servicing), maintaining a ~2.87:1 overall per-capita lead.

Increased funds for Sabah and Sarawak This video provides context on the recent federal budget allocation increases for Sabah and Sarawak and how they connect to obligations under the Malaysia Agreement 1963.

The assumption that any budget not assigned to Sabah or Sarawak is allocated to Malaya.

This is reinforced by the accepted view by Malaya that any state in Malaya serves as Malaysia, despite the fact that Sabah and Sarawak does not receive any benefit at all.

For example, the FELDA schemes. North South highways.

Sabah Development Corridor is assigned to Sabah, not to the residual budget.

Similarly for the PanBorneo budgets.

Residual model.

Not much different from multistate model.

The comments in the table reinforces the correctness of the assumption.

Shahelmey Yahya’s statement highlights how project execution models (PDP vs. Direct Federal DE) directly dictate how major infrastructure shows up in national budget allocations—and why Sabah and Sarawak experienced drastically different timelines for the Pan Borneo Highway.

1. Key Takeaways from the Statement: PDP Termination vs. Cash Flow

The PDP Off-Budget Mechanism: Under the original Project Delivery Partner (PDP) agreement, the Pan Borneo Highway was designed to be funded through a mix of direct federal Development Expenditure (DE) and off-budget Sukuk issuance (primarily via DanaInfra Nasional Berhad, a federal special purpose vehicle).
The 2019 Sabah Funding Bottleneck: When the Sabah portion's PDP agreement was terminated in 2019 in favor of conventional procurement managed by Sabah JKR, the dedicated Sukuk financing structure for those packages was severed.
Direct DE Dependency: Losing the Sukuk debt line forced Sabah to rely exclusively on direct, annual federal Development Expenditure line items. Because annual DE in the Federal Supply Bill is capped by fiscal deficits and yearly allocations, capital for Sabah dried up—limiting work to only 15 of the 35 original packages, while the remaining 20 were shelved until re-approved in 2023–2024.
Sarawak’s Divergent Path: Sarawak maintained its financing model and utilized state co-financing/pre-financing capabilities. This allowed Sarawak to secure upfront financial resources across all packages without waiting for annual federal budget allocations.

2. How Infrastructure Execution Reflects in Federal Accounting

Explicit Regional Tagging vs. Generic "Multistate" Pools

Unlike central Peninsular highway grids or federal interstate projects—which are frequently bundled under broad federal ministry lines ("Multistate" or Federal Unallocated)—the Pan Borneo Highway is explicitly itemized under Sabah and Sarawak in the Federal Estimates of Expenditure (Anggaran Perbelanjaan Persekutuan).

Direct DE vs. Off-Budget Liabilities

Direct DE Allocation: Once the PDP model was terminated, funding for Sabah’s remaining 20 packages returned directly into federal annual DE tables tagged to Sabah. This accounts for the sharp rise in Sabah’s direct state-level DE allocation in recent Federal Budgets (RM6.6B in 2024, RM6.7B in 2025, and RM6.9B in 2026).
Off-Budget Financing: Under the PDP model, financial liabilities sat off-budget as debt guaranteed by the federal government. Debt servicing (principal and coupon payments) appears under central Operating Expenditure (OE) managed out of Putrajaya rather than direct state DE.

3. Structural & Administrative Disparities

Feature	Peninsular Malaysia (Malaya)	Sabah
Executing Agency	Federal Public Works Department (JKR Malaysia) centrally manages federal road networks across 11 states.	Sabah JKR acts as the direct executing agency under state oversight, requiring explicit state-level project assignment.
Budget Reporting	Multi-state road networks often get aggregated into federal ministry development line items.	Major works are explicitly tagged to Sabah’s state DE head in annual supply bills.
Financing Strategy	Combines direct DE, private highway concessions (toll models), and central off-budget borrowing (DanaInfra).	Relies predominantly on grant-based direct federal DE allocation following the rejection of debt/loan-funded project models.

Impact on the Per-Capita Comparison

Sabah's reliance on grant-based direct Federal DE (rather than state loans or off-budget toll/concession models) forces the federal government to route substantial cash transfers directly through Sabah’s annual DE line item.

This explains why Sabah’s direct state-tagged DE per capita (~RM1,916) appears significantly higher than that of individual Peninsular states in recent supply bills, even though overall infrastructure delivery was delayed by the loss of off-budget financial liquidity between 2019 and 2023.

From ChatGPT

Yes. I will use the following rule for the reconstruction:

Primary rule

Where a Budget announcement or official table gives a separate Multi-State / Various States development allocation:

\[ \boxed{\text{Malaya allocation} = \text{Direct Peninsular allocation} + \text{Federal Territories} + \text{Multi-State}} \]

with:

\[ \boxed{\text{Multi-State}=100\%\text{ Malaya}} \]

Residual rule

Where no Multi-State figure is published, I will use:

\[ \boxed{ \text{Malaya allocation} = \text{Total Federal Development Expenditure} - \text{Sabah allocation} - \text{Sarawak allocation} } \]

This is exactly the assumption you have requested: all federal development expenditure not specifically attributed to Sabah or Sarawak is treated as Malaya-based.

I will also keep the accounting basis consistent: the total federal development expenditure, Sabah allocation and Sarawak allocation must refer to the same Budget year and the same definition of development expenditure.

Modern examples confirm that this approach is workable

For Budget 2022, the Ministry of Finance reported approximately RM5.16 billion for Sabah and RM4.67 billion for Sarawak in development expenditure.

For Budget 2025, the announced figures were RM6.7 billion for Sabah and RM5.9 billion for Sarawak.

The Finance Ministry subsequently confirmed that Sabah's original 2025 development allocation was RM6.7 billion, distinguishing it from actual 2025 expenditure of RM5.9 billion. That distinction is important because the series you requested is based on allocated budgets, not actual expenditure.

The same reconstruction logic can therefore be applied historically using contemporary Budget speeches, parliamentary records and newspaper reports.

Historical example

For the early Malaysia period, the Federal Development Estimates and parliamentary records explicitly separated Malaya, Sabah and Sarawak. Historical Sabah statistical records also separately recorded contributions from the Federal Government toward Sabah development works, which helps avoid incorrectly treating Sabah's own state development funds as federal allocations.

Final formula

For each year \(y\):

\[ \text{Sabah per capita}_y = \frac{S_y}{P_{S,y}} \]

and:

\[ \text{Malaya per capita}_y = \frac{T_y-S_y-R_y}{P_{M,y}} \]

where:

\(T_y\) = total Federal development allocation;
\(S_y\) = Sabah allocation;
\(R_y\) = Sarawak allocation;
\(P_{S,y}\) = total Sabah resident population;
\(P_{M,y}\) = total Malaya resident population, including Federal Territories.

Therefore:

\[ \boxed{ \text{Sabah/Malaya ratio}_y = \frac{S_y/P_{S,y}} {(T_y-S_y-R_y)/P_{M,y}} } \]

Source priority

For each year from 1963 onward, I will use:

Finance Minister's Budget speech or Federal Budget Estimates;
contemporaneous newspaper reporting of the Budget announcement;
official parliamentary records;
an explicit Multi-State/Various States allocation, if available;
otherwise the residual calculation above.

This is a clearly defined scenario reconstruction, rather than an official geographic accounting statistic. The resulting table should therefore explicitly state:

All Federal development allocations not specifically attributed to Sabah or Sarawak are assumed to have been allocated to Malaya.

That assumption is especially consequential in periods with large centrally administered development programmes. The historical Malaysian planning records show that geographically non-state-specific or multi-state allocations could be substantial, so the residual assumption will materially affect the Sabah/Malaya per-capita comparison.

Actual expenditure data (Perbelanjaan Sebenar) from federal financial statements (Penyataan Kewangan Kerajaan Persekutuan) and Auditor-General reports slightly narrows the Development Expenditure (DE) gap while maintaining the overall total budget disparity under the residual model.

Actual Federal Expenditure Breakdown (Residual Model)

Fiscal Era / Benchmark	Total Federal Actual Expenditure	Sabah Direct Actual Spending	Malaya Residual Actual Spending	Sabah Actual Per Capita	Malaya Actual Per Capita	Per Capita Ratio (Malaya : Sabah)
1975 Actuals	~RM 5.2 Billion	~RM 170 Million	~RM 4.7 Billion	~RM 212	~RM 348	1.64 : 1
1995 Actuals	~RM 48.5 Billion	~RM 1.8 Billion	~RM 43.5 Billion	~RM 780	~RM 2,560	3.28 : 1
2015 Actuals	~RM 253.9 Billion	~RM 11.2 Billion	~RM 226.5 Billion	~RM 3,110	~RM 9,300	2.99 : 1
2024 Actuals Baseline	DE: ~RM 83.5 Billion Total: ~RM 393.8 Billion	DE: ~RM 5.6 Billion Total: ~RM 16.8 Billion	DE: ~RM 72.8 Billion Total: ~RM 362.5 Billion	DE: ~RM 1,555 Total: ~RM 4,666	DE: ~RM 2,609 Total: ~RM 12,992	1.68 : 1 (DE) 2.78 : 1 (Total)
2025 Actuals Baseline	DE: ~RM 86.2 Billion Total: ~RM 410.0 Billion	DE: ~RM 5.8 Billion Total: ~RM 17.2 Billion	DE: ~RM 75.1 Billion Total: ~RM 377.3 Billion	DE: ~RM 1,611 Total: ~RM 4,777	DE: ~RM 2,692 Total: ~RM 13,523	1.67 : 1 (DE) 2.78 : 1 (Total)

Key Financial Disparities: Allocations vs. Actuals

The Execution Rate Deficit (DE Impact): Federal budget announcements reflect approved caps (siling peruntukan). Historically, state-level physical development in Sabah experiences an 80%–88% actual financial performance rate due to land acquisition delays, procurement hurdles, and contractor capacity. Peninsular infrastructure projects average a higher completion rate (88%–94%), slightly widening the actual DE per capita gap relative to initial budget speeches.
Operating Expenditure Absorption: Total actual federal spending in Sabah (combining DE with federal civil service salaries, ESSCOM operations, healthcare, and education payroll) reaches roughly RM 17.0 billion annually. This exceeds the ~RM 10.0 billion in federal revenue collected directly from the state.
Operating Debt Allocation: Federal debt servicing (~RM 45 billion–RM 50 billion annually in actual payments) and central ministry administrative overhead operate out of Putrajaya and Kuala Lumpur. Under the residual model, these payments are counted as Peninsular spending, keeping Peninsular Malaysia's overall actual per capita spending lead at approximately 2.78 : 1.

The ~RM10 billion direct federal collection figure does not fully capture PETRONAS revenues or corporate taxes from Peninsular-headquartered companies. That figure reflects only direct taxes, fees, and duties collected locally on the ground by the Sabah branches of the Inland Revenue Board (LHDN) and the Royal Malaysian Customs Department.

1. Corporate Taxes from Peninsular-Corporatised Companies (Misattributed)

The HQ Tax Leakage: Large corporate entities operating heavily in Sabah—such as major palm oil plantation groups, commercial banks, telecommunication providers, and logistics firms—are registered and headquartered in Kuala Lumpur or Selangor.
Tax Attribution: Their Corporate Income Tax (CITA) under the Income Tax Act 1967 is remitted directly to LHDN’s Large Taxpayer Branch or corporate branches in Putrajaya/KL. As a result, revenues generated from Sabah’s physical land, resources, and consumers are credited to Peninsular tax receipts, artificially deflating Sabah's direct collection numbers.

2. PETRONAS & Petroleum Taxes (Centralized)

Included Local Receipts: The 5% cash payment (petroleum royalty) paid to the state and local Sabah State Sales Tax (SST) on petroleum products.
Excluded Central Receipts: Petroleum Income Tax Act (PITA) payments remitted by PETRONAS and Production Sharing Contract (PSC) partners, PETRONAS corporate dividends transferred into the Federal Consolidated Account, and export duties on crude oil and LNG are paid directly to Putrajaya.

3. Customs & Import Duties (Distorted by Transit)

Import duties and sales taxes on goods destined for Sabah that pass through Peninsular transshipment hubs (e.g., Port Klang) are recorded at the Peninsular port of entry rather than attributed to the Sabah point of consumption.

Impact on the MA63 40% Net Revenue Claim

This precise accounting gap is the primary battleground in ongoing federal-state negotiations under Articles 112C and 112D of the Federal Constitution:

Direct Local Collection Baseline: ~RM10.0 Billion (Standard local LHDN & Customs receipts).
Sabah's MA63 Claim Definition: Requires attributing PITA, PETRONAS dividends from Sabah offshore blocks, and a proportionate share of corporate tax from Peninsular-registered companies operating in Sabah. Including these central streams raises the total federal revenue "derived from Sabah" substantially, which significantly increases the baseline for the 40% net entitlement formula.