Complex landscape of electricity funding

Published on: Sunday, December 10, 2023

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Last week, I wrote about the federal government’s responsibility to finance the administration of electricity supply in Sabah because electricity is a federal matter under the federal constitution.

In the said article I used the word assigned to describe the federal government decision to allow Sabah to continue administering electricity supply for 19 years from 1963 to 1982. The use of the word assigned caught the attention of a friend, who is a practicing lawyer.

He said the appropriate word would have been “delegated” because that is the word used by MA63 in particular the Inter Government Committee (IGC) report. In other words when it comes to electricity matters right from the outset there has been the thought of devolution from the federal to the state.

Be as it may, I do not have to elaborate that electricity is much more than just energy security, it is also a matter of national security. It is amongst the lists of what we call Critical National Infrastructure (CNI). Therefore, the federal government is obligated to provide the necessary funds to ensure stable electricity supply in Sabah.

In a stark contrast to Sabah, Peninsular Malaysia’s Lembaga Letrik Negara (LLN) received federal funding right from the independence of Malaya in 1957. Sabah, under the stewardship of Lembaga Letrik Sabah (LLS), had a different tale to tell. Despite being under federal governance, Sabah did not receive the direct financial support it needed for electrification for 19 years after independence.

During the 14 years of LLS directly under federal administration, beginning 1983 the much-needed transmission and distribution grids to connect the various townships was not built other than the commissioning Tenom-Pangi Run Off River Hydroelectric and its associated transmission line in 1984.

And yet when LLS was privatized in 1998, funds were provided for in the form of loans to SESB, setting the stage for a fiscal dance that continues to reverberate through the corridors of time.

At the heart of this historical financial puzzle lies the fact that currently TNB owned 80% of Sabah Electricity Sdn Bhd (SESB), with the Sabah government holding a mere 20%.

Fast forward to the present, and the repercussions of this historical financial dance are palpable. SESB, the torchbearer of Sabah’s electrification, finds itself operating in the red. It is a widely acknowledged fact that this utility company has been grappling with financial challenges, operating in an environment where losses outweigh gains.

To truly fathom the depth of SESB’s financial problem, one must draw a correlation with the special grant to Sabah under Article 112C read together with Section 2(1) Part IV Schedule Ten of the federal constitution, which is the right of Sabah to receive two fifth or 40% of total federal collection from Sabah. This revenue sharing agreement, if given the recognition it deserves, could not only transform the trajectory of electricity matters in Sabah but also extend its impact to crucial sectors like water and logistics such as ports harbour, roads and railways.

The recent controversy surrounding a government gazette under Article 112D detailing a RM300 million interim special grant payment to both Sabah and Sarawak only adds layers to this financial saga.

The right of Sabah and Sarawak when it comes to Article 112D of the federal constitution are not the same. Only Sabah was accorded the right to receive the 40% but not Sarawak. Therefore, from the Sabah perspective, Article 112D must be treated and interpreted by reading it together with Article 112C and Section 2(1) Part IV of the Ten Schedule.

I echo the suggestion that the state government should come up with a necessary formula to fulfil some of the concerns expressed in Article 112D. And the Sabah State government should immediately hire a team of legal and tax consultants to assist them in their negotiations with the federal government. Voluntary submission from various parties on the kind of acceptable formula of implementation should be welcomed and encouraged.

During the recent parliamentary sitting the Finance Ministry’s promise of a written reply to question raised on the status of the 40% Sabah’s right signifies the gravity of the matter, yet it is disconcerting how the issue of Sabah’s 40% is not accorded the seriousness it warrants.

In my quest for answers, I found myself posing a question during the tabling of the financial bill, seeking the Finance Ministry’s stand on Sabah’s 40%. Instead of receiving a concrete response, I was applauded for my passion on the issue, with the deputy minister promising a written reply.

Much more than being passionate, I share the frustration of all Sabahans who have been yearning for a right that should be recognized, honored and implemented as part of the effort to build a strong and united Malaysia.

It is the federal government’s obligation to honour the 40% revenue-sharing agreements as per MA63. What we witness today in SESB’s financial struggles and the inability of the state government to sustain funding for basic necessities is a manifestation of past leadership decisions. If we fail to address this historical economic lapse, the repercussions will continue to echo through the lives of the people.

The impact of insufficient funds is not confined to SESB; it sprawls across, port and harbours, railways, bridges, jetties, telecommunications, infrastructure related to fisheries and agriculture, water supply and road developments.

The state government, grappling with a lack of financial resources, finds itself unable to meet the demands for these fundamental needs. The consequences are felt by the people—water shortages, inaccessible roads, and the incessant ordeal of blackouts. It is a scenario that contradicts the very essence of a progressive Sabah.

As we collectively yearn for a Sabah that aligns with its motto, “Sabah Maju Jaya,” the current state of affairs paints a stark contrast. We envision a Sabah where water supply is abundant, roads are in pristine condition, and electricity is a constant companion, illuminating the path to prosperity.

I firmly believe that the rightful honouring of the 40% revenue-sharing formula could be the catalyst for change. It has the potential to unravel the financial knots that have bound Sabah for years, providing a lifeline to SESB and breathing life into water and road development projects.

The 40% is not just a percentage; it is the key to unlocking Sabah’s economic potential and steering it towards a future where the dreams we’ve harbored for years can gradually metamorphose into reality.

I must congratulate the state government and Sabahan representatives at the federal level for getting the federal government to agree on a timeline for the implementation of the 40% state right. By July 2024 it must be implemented. I am confident the state government will do much better with the services of legal and tax consultants.

In conclusion, the narrative of Sabah’s electricity funding is not merely a historical anecdote but a living saga that continues to shape the present and future of the state.

The federal government’s recognition of its obligation to honour the 40% revenue-sharing formula is not just a legal mandate; it is a commitment to the prosperity and well-being of the people of Sabah. It is time for this commitment to be acknowledged and fulfilled, for in doing so, we pave the way for a Sabah that truly stands tall in the tapestry of Malaysian progress.

Datuk Seri Panglima Wilfred Madius Tangau

Sabah Electricity Sdn. Bhd. Chairman

Member of Parliament for P170 Tuaran

Honorary President of UPKO