Neville Chamberlain’s approach in the late 1930s offers a subtle historical lesson for those facing difficult decisions today. He believed that making strategic concessions could buy time and secure peace, a gamble rooted in hopes of preserving stability. 

Yet, the outcome proved that sometimes, giving ground can lead to even bigger challenges later on, allowing advancement by the enemy. It contributed to the outbreak of World War II.  

In a similar vein, Putrajaya’s current efforts to appease Sarawak through concessions might seem like a prudent way to maintain unity for now. But the question remains: how long can this strategy hold, and at what cost?

Putrajaya is facing mounting pressure as Sarawak pushes harder for greater autonomy, threatening to redefine the balance of power within Malaysia’s federation. Sarawak, flush with resource wealth and emboldened by a growing sense of regionalism, is making demands that could alter the federal landscape. 

While Putrajaya has tried to manage these tensions with a series of concessions, Sarawak’s escalating ambitions suggest that more significant battles lie ahead.

Sarawak’s “wish list”:

Autonomy over education – Sarawak seeks control over its education system, aiming to reinstate English as a medium of instruction and tailor curricula to local needs.

Autonomy over healthcare – The state wants to manage healthcare services independently, addressing its unique geographic and demographic challenges.

Autonomy over environmental matters – Sarawak aims for control over environmental policies, balancing economic development from resource extraction with conservation.

A larger share of parliamentary seats – Sarawak is pushing for one-third of Parliament seats to ensure greater representation and safeguard its interests, as originally promised under MA63.

Greater autonomy over tourism – The state wants control over tourism to develop its eco-tourism sector and boost local revenues from its rich natural and cultural heritage.

Full authority over water supply and projects – Sarawak seeks control over water infrastructure to address local needs, particularly in rural areas.

Financial control for autonomous areas – Sarawak wants tax exemptions, such as SST on electricity, to support local industries and reduce costs.

Transfer of gas aggregator rights – The state demands control over gas resources, with Petros managing production and distribution instead of Petronas.

Control over oil and gas resources – Sarawak challenges the 1974 Petroleum Development Act and has already imposed a 5% sales tax on petroleum, generating RM3.2 billion in 2022.

Increased financial control – Sarawak acquired a 30% stake in Affin Bank, seeking more influence over financial institutions to support its economy, though it was blocked from gaining a controlling interest.

At the core of Sarawak’s demands lies the historical Malaysia Agreement of 1963 (MA63), which granted the state special autonomy when it joined the federation.

Petroleum

However, the extent of this autonomy is now being called into question, particularly regarding the 1974 Petroleum Development Act (PDA), which handed Petronas full control over the country’s oil and gas resources.

Sarawak, with its vast oil wealth, has been fighting to reclaim these rights, arguing that its 1958 Oil Mining Ordinance gives it authority over oil within its borders.

In 2020, Sarawak took matters into its own hands by imposing a 5% sales tax on petroleum products, a move that generated RM3.2 billion in 2022. This bold step boosted its per capita revenue to RM4,414—dwarfing the RM550 per capita that Peninsular states receive. Yet, despite already receiving the highest federal allocations per capita, Sarawak continues to press for more control, particularly over its natural resources.

Infra control, fitting for an independent state

Putrajaya, in an attempt to quell these rising tensions, has granted several concessions. Control over Bintulu Port has been handed back to Sarawak, and the state was allowed to acquire MASWings, a regional airline subsidiary. 

But the latest development—the acquisition of a 30% stake in Affin Bank by Sarawak—reveals the extent of the ongoing power struggle. Sarawak had initially aimed for a controlling interest in the bank, but regulators allowed the state only a significant minority stake. 

While this deal provides Sarawak with greater financial clout, it also highlights the federal government’s reluctance to fully relinquish control over key assets.

Sarawak’s demands go beyond corporate acquisitions. The state has called for full autonomy over education, healthcare, and environmental policy, as well as a larger share of parliamentary seats to give East Malaysia greater influence over national decisions. 

These moves would drastically increase Sarawak’s autonomy, effectively creating a state-within-a-state model. And the demands don’t stop there—Sarawak is also pushing for control over gas aggregator rights and further financial autonomy.

With control over oil and gas, Sarawak could significantly boost its already substantial revenue. And yet, Sarawak’s leaders show no signs of slowing down, emboldened by each concession they win from Putrajaya.

Dominoes effect on other states

But the more Putrajaya gives, the greater the risk of fracturing the federation. Johor has already begun demanding a return of 20-30% of the taxes it pays to the federal government, while Sabah is pushing for 40% of the revenue collected by Putrajaya from its own resources. 

If Malaysia continues down this path of appeasement, it could set a dangerous precedent that encourages other states to demand similar powers, leading to a decentralisation wave that would weaken the core of Malaysia’s federal structure.

The recent blocking of Sarawak’s attempt to gain a controlling interest in Affin Bank shows that Putrajaya is still trying to keep some level of control. But as Sarawak’s demands for autonomy grow louder, the federal government’s position becomes increasingly precarious. Each concession gives Sarawak more leverage, not just over its resources but also over the broader political landscape.

Crossroads

Malaysia is now at a crossroads. Continuing to appease Sarawak’s demands may temporarily hold off tensions, but the long-term risks are clear. Other states are watching closely, and any further concessions could embolden them to follow Sarawak’s lead. Yet, reining in Sarawak too harshly risks stoking even greater unrest and potentially pushing the state towards more radical options.

In the end, Putrajaya must decide how much more ground it is willing to give. The stakes are high: the very future of Malaysia’s federal structure could be at risk. Without drawing a clear line, Putrajaya may find itself losing control, not just over Sarawak, but over the unity of the entire federation.