Under such dire constraints, state governments are in no position to resist the temptation to give up some of their powers in exchange for monetary grants. 

Sim Tze Tzin, Hornbill Unleashed 

A major missing link in political discourse in the run-up to the 13th general election is the debate on decentralisation.

The Malaysian polity has been dominated by the process of centralisation or concentration of powers by the federal government for the last 55 years.

In the first part of this article, I will explain the process of centralisation under the federal government; in the second part, I will argue the case for decentralisation.

Constitutionally, Malaysia is a federation where powers are shared between the central government and state governments. The constitution stipulates the different areas to legislate through the Federal List, State List and Shared List in Articles 74-79.

States have legislative powers over very limited matters such as land, forestry and Islam, while the federal government can legislate on almost all matters in areas concerning education, finance, trade and commerce, defence, diplomacy and national security. This has severely clipped state government powers.

The Shared List between the state and federal governments covers social welfare, town and country planning, drainage and irrigation and public health. In this respect, federal law will prevail over state law in the event of any inconsistency. Issues of increasing importance, such as water works, land and local government, which used to be under the state governments, have been moved to the Shared List.

This was implemented through constitutional amendments. In fact, the constitution has seen 42 amendments involving 650 articles. As a result, constitution scholars have often commented that the spirit of the constitution and federation has been seriously diluted.

The centralisation of power is not limited to legislative matters. The federal government has garnered tremendous power through administrative centralisation. Land matters were supposedly under state jurisdiction. However, states are increasingly losing such authority to the federal government.

After Pakatan Rakyat took over Penang, for example, Chief Minister Lim Guan Eng proposed to convert existing landed leasehold houses to freehold status in an attempt to increase quit rent income for the state government. This proposal hit a snag at the federal level. The National Land Council, chaired by Prime Minister Najib Abdul Razak, rejected it.

The federal government also centralised power by means of the privatisation of state assets. For example, local councils used to run the sewerage system. However, when the federal government privatised this service to Indah Water Konsortium, the authority was forfeited and went to a federal-controlled company.

Recent water-supply controversies in Selangor, which involve political and commercial interests, can be viewed as a continuous attempt to centralise power by the federal government. Water has always been under state jurisdiction.

In Selangor, the federal government intervened through the National Services Water Commission, which is chaired by a federal minister.

The previous BN state government lost part of its power by privatising water assets to Syabas, a company controlled by the federal government. The Penang government has been lucky to avoid such a fate because a state-controlled entity operates the waterworks.

Financial constraints

State governments also face fiscal constraints. They can only collect revenue from quit rent, land premiums and timber or oil royalties.

The federal government collects all taxes and the exorbitant Petronas oil money to fund development and operations.

Typically state governments spend less than RM1 billion in the annual budgets. The federal government’s budget, however, has ballooned to more than RM240 billion annually.

States are not allowed to collect any other form of taxes and this has severely curtailed their capacity to do more for the rakyat. The state governments in the past were able to guarantee loans for state-linked companies. Now, the federal government has prohibited such power, further clipping the financial wings of state governments.

Under such dire constraints, state governments are in no position to resist the temptation to give up some of their powers in exchange for monetary grants. A case in point was how state governments lost their local government authority to the federal government, one step at a time.

Read more at: http://hornbillunleashed.wordpress.com/2013/01/31/40956/