The only natural resource under federal government jurisdiction is petroleum.
Be that as it may, there are necessary requisites within the Malaysian constitution for the country to be labelled as a federal polity. It goes without saying that the division of powers and sphere of competencies in the Malaysian constitution does not imply absolute equality of powers.
In the Malaysian context, the 1957 constitution was deliberately put together to facilitate national administration. The Ninth Schedule of the Federal Constitution spells out the distribution of legislative power and responsibilities between the federal and state governments. The federal government is given jurisdiction over subjects of a general nature. External affairs, defence, internal security, civil & criminal law & the administration of justice, federal citizenship and naturalisation, federal government machinery, finance, trade, commerce, and industry, shipping, navigation, and fishery,
PETALING STREET | Trade, commerce, and industry, shipping, navigation, and fishery, communication, transport, health, education, and federal works, and power are under federal jurisdiction. communication, transport, health, education, and federal works, and power are under federal jurisdiction. On the contrary, the functions vested with the state governments include land, local government, local public services, licensing theatres and cinemas, state public works, state government machinery, state holidays, and turtles and riverine fishery. Islamic laws and customs as well as other native laws and customs in Sabah and Sarawak are vested with the state governments. The concurrent list covers social welfare, scholarships, town and country planning, drainage and irrigation, housing, culture and sports, and public health( Mohd Salleh bin Abbas, 1978; Loh 2009).
As land is a state matter, land-based property taxation has been handled by state administrations. The only natural resource under federal government jurisdiction is petroleum. Under the Petroleum Development Act( PDA)
1974, all states give up their rights to petroleum resources found within their states. Ownership and control of petroleum and gas are transferred to the federal-owned company Petronas. Petronas is given the responsibility to exploit and mine oil and gas in the country and is required to pay the state and federal governments 5 % royalty each. Petronas receives 49 % whereas the producer company receives the remaining 41 % of the gross value of petroleum production. In addition, the federal government taxes producer companies( Sarawak Shell, Sabah Shell or Esso). Only Sarawak, Terengganu, Sabah, and Kelantan have petroleum resources. It should be pointed out that should petroleum resources be located beyond the state’ s threemile territorial waters, the federal government can choose to deny this royalty to the state government.
The result is a very uneven distribution of revenue and therein financial resources between the federal and state governments.
The federal government is required to provide two major grants to the state governments, namely the capitation grant, based on the state population size, and the state road grant, for maintenance of roads. It should be noted that the federal government has sole jurisdiction and discretion over the disbursement of all development funds, on which the Ninth and Tenth Schedules are silent( Jomo and Wee Chong Hui, 2014). At any rate, the federal government can, technically speaking, deny development funds to the state governments. For example,
14 PERDANA MAGAZINE 2016