Beyond revenue sharing: Building the fiscal and institutional architecture of one Malaysian production economy
Samirul Ariff Othman
Malaysia's federal system must evolve beyond mere revenue sharing to create a cohesive production economy. While debates on constitutional authority and resource distribution remain crucial, true integration requires a focus on how the nation produces together. The three pillars of economic federalism - fiscal, regional planning, and production - must work in tandem.
Fiscal federalism provides the financial means, regional planning connects geography, and production federalism links economic activity. Transfers alone, however, cannot bridge economic gaps. Malaysia must strengthen its production capacity through better policies, infrastructure, and skills development. To achieve this, the government should introduce intergovernmental transfers with clearer criteria based on population, fiscal capacity, infrastructure deficits, and service delivery costs.
It should also create Regional Development Compacts, focusing on specific economic goals for specific regions. Furthermore, federal incentives should reward states for cooperating on cross-border projects, encouraging them to consider the wider economic impact of their decisions. This requires better measurement tools, such as regional Input-Output analysis, to understand how production in one region depends on another.
By strengthening these connections, Malaysia can move towards a more integrated and prosperous production economy.
Written by urgent.news from New Straits Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
