Kota Kinabalu: Former Sabah Cabinet Minister Datuk Yap Pak Leong said the 40 per cent income-sharing deal between Sabah and the Federal Government was the key reason why Sabah chose to join in forming Malaysia.
“Right from the start, I emphasised this share of 2/5 revenue to be a condition for Sabah to become part of Malaysia,” said Yap, one of the key players in the founding of Malaysia.
“Without this safeguard written in the Constitution, Sabah would not have been part of the formation of Malaysia,” the Sandakan Turf Club Chairman said in his talk titled “2/5 Sabah Revenue Share and Politics of Betrayal”, here, recently.
The talk was organised by a non-governmental organisation, Sabah Action Body Advocating Rights (Sabar), just days before the July 18 deadline for Sabah’s special grant issue to be resolved.
Yap said the 40 per cent revenue share was designed to ensure Sabah’s financial stability within the Federation.
“This 40 per cent share of revenue means the Federal side gets 60 per cent of revenue derived from Sabah and they can use the 60 per cent for Federal services in Sabah.
“The 40 per cent Sabah share is in addition to what the Federal Government normally does for their services, like defence and a lot of other things,” he said, adding this arrangement was not unique to Sabah.
“Following Sabah’s request, Singapore negotiated a 60 per cent share of its revenue. However, Singapore’s arrangement differed slightly.
“It (Singapore) was granted 60 per cent, but in the case of Singapore, they had to collect the revenue and to have expenses and then the 40 per cent net they would remit to the Federal Government,” he said.
Yap said the implementation of this revenue-sharing agreement began smoothly with the Federal Government calculating and paying the 2/5 revenue to Sabah for the first few years after Malaysia’s formation.
However, two very damaging events happened, disrupting the arrangement.
“One is Singapore left Malaysia in 1965 and then in 1969 we had May 13,” Yap said.
He said the May 13 incident led to the declaration of a state emergency in Sabah and the suspension of the Constitution which he believes was used as a pretext to cease payments to Sabah.
“I think some people very cleverly used this excuse that now the Constitution is suspended, there is no need to pay Sabah the 2/5 per cent revenue anymore under the Constitution,” he said, describing it as a “betrayal of the Constitution, resulting in Sabah not getting its fair share.”
Despite this historical setback, Yap is optimistic about recent developments. “I am very glad to learn that today, the State Government and the Federal Government have made promises to make amends and to let Sabah have its fair share of revenue.”
He also noted that the Sabah Law Society has brought the matter to court.
When asked about the formula for calculating the 40 per cent share, Yap admitted uncertainty but provided some insights.
“As far as I understand, at least 80 per cent of revenue can be fixed easily. The other 20 per cent may be subject to question,” he said.
He listed several easily calculable sources of revenue, including stamp duty, road tax, export tax, oil tax, licences and interest charged by the Federal Government for loans in Sabah.
Regarding the potential amount owed to Sabah, Yap said “Well, to calculate the amount from all sources, from all revenues, I do not have the official figures, so I cannot calculate.
“But I guess, as many people have guessed, that probably we should get about RM100 to RM150 billion. I mean, the Federal Government should be the one to calculate it. And if they do not do it, I doubt the State Government can calculate it,” he said.
Yap also shared the origin of the 40 per cent idea, crediting his studies in Australia. “I studied economics there, including Federal Finance and there the laws are different,” he said.
“In Australia, income tax was set by the state governments and the federal government didn’t start collecting income tax until the war. They said they would return after the World War II, but they never did. That is always how the federal government is. They do not give it back once they have it. But, you know, Australia still has that state sentiment.
“They have something called an ‘annual conference’ where the treasurer (we call them minister of finance) and the premiers (we call them chief ministers) of each state meet. They talk about things like how much money the state should get every year. Every year, they talk about it. That is how they resolve their issue,” he said.
On the question of why previous Sabah state governments such as Berjaya and Umno did not pursue the 40 per cent claim despite having good relations with the Federal Government, Yap said:
“The Berjaya State Government had also its own problems and the Federal Government at the time was under Dr Mahathir most of the time.
“Everything the Berjaya Government asked for was given to them if they had enough money to spend. Also, this 2/5 was not given because the country was still in an emergency,” he said.
On suggestions that the Federal Government might be unlikely to honour the 40 per cent agreement, Yap urged patience and the importance of following legal and constitutional processes.
“The solution lies in patience. Now, as I said before, Federal Government in it, State Government in it, Sabah Law Society in it, the courts are in it. I hope something will come out,” he said.
On the idea of Sabah leaving Malaysia over the issue, Yap rejected it as a viable solution.
“Some people say, we should leave Malaysia. If you leave Malaysia, you are forgoing RM100 million. So, what is the point of leaving? Isn’t it? If your debtor does not pay you, you say, I have nothing to do with the debtor. Then you lose everything. So, it’s not a solution.”
In response to a suggestion that Sabah could increase its sales tax on oil as a way to recoup some of the disputed funds, Yap agreed this could be a potential solution.
“At the moment, the State Government is collecting five per cent sales tax, is it? On oil and so on. And that is about RM1.5 billion a year, sales tax. Now if we increase that to 10 per cent, that means you got another RM1.5 billion. Why don’t you do it? The State Government has the power and the right to do it,” he said.
On the issue of “Sabahanisation”, he said it can be referred to the Malaysia Agreement 1963’s provision for federal departments in Sabah to be staffed by Sabahans.
“This decision is in Malaysia Agreement 1963. You can try to pursue it. Get all the federal departments, the employees be filled by Sabahans. You can pursue that,” he said.
Questioned about the apparent lack of adherence to constitutional procedures and what hope Sabah has of receiving its 40 per cent share, Yap remained optimistic.
“The hope is in the good sense. The good sense will be generated by the present Federal Government, the State Government and the courts. Let’s see what they come up with. After all, the Court of Appeal was unanimous in saying the Federal Government must calculate and pay the 40 per cent,” he said.
Yap also provided insight into his personal role in the conception of the 40 per cent idea. “My name is linked to the 40 per cent. It is true,” he acknowledged.
“What happened was, during that time when Malaysia was proposed, many political parties were formed. Like in Sabah, there were many. Among them is the United Party in Sandakan, consisting of towkays, like Khoo Siak Chiew, Peter Lo and so on.
“So, Donald Stephens for financial safeguards asked United Party to come up with a plan and in our meeting in the United Party, I was given the task to make a proposal together with the late Datuk, I think G.H. Barad, the British planter.
“So, we came up with the idea of this 40 per cent because of my Australian connection. We made a resolution and then we gave it to the late Datuk Peter Lo, who then gave it to Donald Stephens.
“Stephens then gave it to the Malayan, Singapore, Sarawak and Britain authorities. Then, after talking about it, we decided to accept the 40 per cent. That is how it was,” he said.
To a question about the different revenue-sharing arrangements for Sabah, Sarawak and Singapore, Yap said, “Singapore case 60 per cent, while Sarawak prefer to have fixed amounts to be increased every year afterwards.
“They (Sarawak) ask for fixed amounts for five years, and then later to increase on the five years, every five years afterwards. That is how they work,” he said.
.jpg)
