From Jo-Anna Sue Henley Rampas
Under Article 112C of the Federal Constitution, the federal government is required to pay Sabah a “special grant”, amounting to 40% of all net federal revenue collected from the state.
This is a guaranteed constitutional obligation, not part of normal federal spending.
The article also protects Sabah’s right to earn royalties from its natural resources, including oil and minerals.
Article 112D states that this 40% formula must be reviewed every five years to reflect changing economic conditions and state needs, and the results of each review must be confirmed through an order by the Yang di-Pertuan Agong.
If the federal and state governments cannot agree, an independent assessor is appointed and their recommendation is binding on both sides.
The recent high court decision affirming Sabah’s constitutional right to 40% of its federal revenue did more than settle a legal dispute. It reignited a political consciousness. What began as a dry fiscal clause buried in the Malaysia Agreement 1963 has become a rallying cry for fairness to be a unifying symbol that transcends ethnicity, geography, and generation.
The 40% issue was once seen as an issue that concerns the KadazanDusun community, championed by civil society groups and leaders from Sabah’s interior. Today it is the language of unity.
The entitlement has drawn support from the Chinese community in Kota Kinabalu, Bajau and Suluk communities across the seabed of the east and west coasts of Sabah, Rungus villages in Kudat, and urban youth across the state.
This is now framed as a fiscal justice for Sabah, a demand for transparency in how federal revenues are collected and shared.
The logic is clear where decades of fiscal imbalance has left Sabah trailing in infrastructure, healthcare, and education. Restoring the 40% entitlement is seen as essential to closing these gaps and financing the state’s long-delayed development.
It is worth noting that for decades, successive state administrations had refrained from challenging Putrajaya directly, wary of the political repercussions.
The Sabah Law Society’s decision to seek judicial clarification broke that long silence, shifting the conversation from political rhetoric to constitutional accountability.
Their action not only reframed the 40% question as a matter of law and justice but also demonstrated the pivotal role of civil society in defending Sabah’s constitutional rights when political actors could not.
Upko was the first to act on Sabah’s growing awakening over fiscal justice. After four years in Pakatan Harapan (PH), Upko withdrew from the coalition, declaring it could no longer reconcile its “Sabah First” principles with a federal leadership unwilling to confront the Attorney-General’s stance on the 40% entitlement.
Ewon Benedick’s resignation from the cabinet was seen as both symbolic and principled, a stand against what he viewed as the federal government’s reluctance to honour Sabah’s constitutional rights. He called for dialogue, not defiance, as the way forward.
Now with the federal government choosing not to appeal the high court ruling, the narrative has shifted from confrontation to cooperation. In essence, Putrajaya’s acceptance of the ruling affirms that Sabah’s fiscal entitlement stems from constitutional obligation, not political discretion.
However, the Attorney-General’s Chambers (AGC) later clarified that while the government accepts the ruling’s outcome, it will still appeal specific portions of the written judgment.
The appeal, according to the AGC, does not challenge Sabah’s constitutional right but seeks to correct or remove certain criticisms or interpretations that could undermine institutional credibility or set unintended legal precedents.
In particular, the AGC noted that the federal government takes issue with the judgment’s suggestions that both the federal and Sabah governments had “abused power” or “violated constitutional obligations” since 1974, and with the finding that the post-2021 revenue review process was “illegal” or “irrational”.
This narrow appeal aims to safeguard administrative integrity while maintaining the government’s commitment to begin negotiations on the 40% entitlement.
For a brief moment, it suggests a national reset, a chance for constructive cooperation between Putrajaya and Kota Kinabalu.
But Prime Minister Anwar Ibrahim has clarified that detailed discussions on implementation must wait until after the election since Gabungan Rakyat Sabah (GRS) is currently an interim government. While legally cautious, it carries political consequences.
To many Sabahans, it risks reinforcing a familiar perception that federal recognition often stops short of action. If not managed carefully, it could undermine the AGC’s announcement and feed into the narrative that Sabah’s rights are still conditional on federal convenience.
Meanwhile, Upko cautioned that the partial appeal could reopen the entire case and risk weakening the high court’s ruling on Sabah’s 40% right, a concern shared by many who fear legal manoeuvres could dilute a hard-won victory.
GRS and its ally Pakatan Harapan are poised to gain politically from this announcement in the short term. It reinforces their narrative of stability, continuity, and cooperation, enabling them to project themselves as a coalition capable of achieving results through steady governance and constructive engagement with Putrajaya.
Chief minister Hajiji Noor can now campaign on the premise that Sabah’s long struggle for fiscal recognition has borne fruit under his leadership, positioning GRS as a government that delivers without confrontation. The challenge, however, lies in convincing the voters that the message of “stability” translates into tangible outcomes rather than complacent reassurance.
Meanwhile, Warisan, Upko, and STAR, alongside other local parties, may seize this window to reclaim the moral high ground. Their strategy may pivot on pressing for timelines, transparency, and tangible mechanisms for disbursement, ensuring the 40% entitlement is not lost to bureaucratic inertia.
Even Barisan Nasional Sabah, long seen as a symbol of federal loyalty, has joined the call. Chairman Bung Moktar Radin hailed the decision as “a constitutional duty long overdue”, asserting that “a right is not a bargaining chip”.
The decision by the Madani government not to appeal has eased longstanding tensions between state and federal leaders. Yet it also presents a new test of sincerity whether this commitment to Sabah’s rights will be matched by a clear and credible roadmap for delivery.
The question of Sabah’s 40% entitlement has become the central measure by which voters now judge both state leadership and federal integrity.
Whether Putrajaya responds with genuine collaboration or bureaucratic delay will determine if the Madani vision delivers real equality or merely rebrands old patterns of centralised control.
The issue has transformed Sabah’s political landscape. Where elections were once shaped by ethnicity, coalition loyalties, and personalities, the 17th state election is now a test of delivery, challenging candidates to translate constitutional recognition into real improvements in the everyday lives of Sabahans.
The upcoming negotiations, under Article 112D will ultimately test the federal government’s sincerity of whichever government takes office after the election, revealing whether this renewed partnership will lead to transparent implementation or merely descend into another cycle of administrative delay.
The federal decision may have calmed tempers and restored confidence in dialogue, but it has also raised the bar of expectation.
For Sabah’s political actors, this marks a profound shift of symbolic politics to performance politics. However, voters are no longer content with promises of autonomy; they expect delivery, transparency, and results.
Jo-Anna Sue Henley Rampas is a PhD scholar of Politics and Government Studies at Universiti Malaysia Sarawak, and co- founder of Smart Talks Sabah Podcast and former political secretary to Sabah’s minister of finance.
The views expressed are those of the writer and do not necessarily reflect those of FMT.