THE State Select Committee on State and Federal Relations has urged the Federal government to introduce key reforms to create a fairer and more balanced federal system for Penang and other states.
The proposals were presented by Gooi Hsiao Leung (PH–Bukit Tengah), who chairs the committee, during a press conference at the State Legislative Assembly in Light Street today.
Below are the committee’s recommendations: –
i) Fairer fiscal arrangement – Penang should receive a larger share of the taxes collected in the state, along with transparent equalisation transfers for poorer states.
ii) States should be granted greater authority over transport, public works, housing, and social welfare to enable more effective planning and implementation.
iii) Stronger revenue and borrowing powers – States and local councils should be allowed to raise funds through state bonds or local taxes, subject to proper oversight.
iv) Federal-State Relations Commission – A dedicated body should handle negotiations, finances, and dispute resolution, ensuring collaboration and fairness between federal and state governments.
v) Stronger local governance – Local government elections should be restored, and councils like Penang Island City Council (MBPP) is empowered to make key decisions affecting their communities.
Gooi said these reforms are essential to building a federal system that is fair, efficient, and cooperative, benefitting Penang and Malaysia as a whole.
He added that despite being a major contributor to the national economy, Penang receives only a small share of the revenue it generates.
He noted that Malaysia’s highly centralised fiscal system affects Penang’s development and the delivery of public services.
“While Penang contributes significantly to federal tax revenue, the annual federal transfers it receives represent only a fraction of what it generates.
“The Federal Government collects more than 90% of the country’s total tax revenue, while states collectively receive only about 2% through federal transfers. This clearly illustrates the extreme fiscal centralisation in Malaysia.
“Penang has also long struggled with federal control over local matters, such as public transport, which are decided in Putrajaya. Limited funding further hampers the state’s ability to fulfil its mandated responsibilities,” he said.
Story by Tanushalini Moroter
Pix by Law Suun Ting