By Tunku ‘Abidin Muhriz

The battle between Kelantan and the federal government over cash payments for oil and gas production is much more than about oil or gas, money or the law. Legal arguments for both sides have already been exchanged in special newspaper advertisements and online features, and there is speculation that the matter may go to court. Whether that happens or not, there is a more important and long-term aspect of this conflict, since one day soon the oil will run out and no state will be able to fight for any cash payments whatsoever – whether termed “royalty” or “compassionate funds”.

I am of course referring to the relations between states and the federal government. Identifying as a “federalist” has many different meanings depending on where you are: in the USA the term originally meant favouring a strong central government, while in Canada the term has a completely different history with its geographically-focused linguistic differences. Today in Europe, “federalism” is derided by those who seek to protect the sovereignty of individual countries vis-à-vis the European Union.

The Malaysian genealogy of federalism has several competing versions. Perhaps the most common narrative posits that the federation was a by-product of opposition to the Malayan Union: an opposition which was supposedly borne out of concerns of equal citizenship and threatening the dominance of “the Malays”. In fact, it is often difficult to find any further justification for the Federation of Malaya than the fact that it was opposed to the evil Malayan Union plan.

For sure, the Malayan Union plan dreamt up by Britain’s post-war Labour government was atrocious – bereft of historical context and foisted upon the Rulers through intimidation and blackmail. It was a complete miscalculation of the role of a post-war imperial Britain, and it is no surprise that retired Malayan Civil Service officers who had served in Malaya prior to the war, together with the Conservative opposition in the House of Commons, supported the Malay Rulers and Malayan politicians in reversing the travesty.

There are nonetheless good reasons to dispute the traditional narrative. One is simply historical: there was a precedent for federation in the Federated Malay States since 1895 (although some scholars begin with the establishment of the federation of Negeri Sembilan in 1773), which for the most part resulted in political stability and economic growth through tried-and-tested institutions, even though there were sometimes conflicts between those favouring or opposing greater centralisation – not on the grounds of race or religion – but rather in cognisance of differing cultural practises and local physical conditions.

Indeed, many Malayan federalists adopted their position because of their belief in efficiency and democracy. This moral reasoning is still valid today: the closer power is to the people, the better policies can be formulated to take local considerations into account; state and local governments provide bulwarks against central government to provide more freedom, choice and competition. Some took this logic much further than federation: so in addition to the contest between the PUTERA-AMCJA and UMNO constitutional proposals, there were secessionist movements in Penang, Johor and Kelantan which advocated complete independence.

Today, the strongest calls for secessionism (in the blogosphere, at least) come from Sabah and Sarawak – two states which would have never joined our nation had we not been a federation to begin with. But as the Kelantan oil cash payments issue shows, state pride is still very much alive in the peninsula too.

It was instructive that Tengku Razaleigh Hamzah was ticked off for putting state interest above party interest for speaking out on the issue. To me it’s a no-brainer. Of course loyalty to one’s state comes first, for that is the basis on which one is a Malaysian at all! As long as central institutions treat the states with respect, they will always be proud to be part of Malaysia in return. Remember, Kedah had been an independent sultanate for over eight centuries, but that didn’t stop our first Prime Minister hailing from there.

Indeed, central government should understand the real feelings of state loyalty, historical context and above all the potential efficiency gains and superior policymaking that decentralisation through our federal system could provide, besides the choices that would ensue from greater competition between states.

Schedule Nine of the Federal Constitution and the 18 and 20-point agreements are thankfully being rehabilitated through the good work of the MyConstitution campaign and IDEAS’ own programme of upcoming workshops. If we all respect those, then oil cash payments will be peanuts.

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Tunku ’Abidin Muhriz is President of the Institute for Democracy and Economic Affairs (IDEAS).

This article first appeared in The Sun on 26 February 2010.

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